TURKEY'S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM - by Burak ISIK, Investment Development ...
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TURKEY’S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM by Burak ISIK, Investment Development Manager ICA, Istanbul, Turkey September 6, 2018
Agenda ICA About The Project New Pearl of Bosphorus Turkish Motorways before PPP’s Turkish PPP Framework Turkish Motorways with PPP’s Tolling before PPP’s Tolling after PPP’s Future of Private Motorways in Turkey 2
ICA at a Glance Essential Infrastructure “Where Europe Meets Asia” ICA: The Concessionare of 3rd Bosphorus Bridge (which is named as Yavuz Sultan Selim Bridge) and 160 km. Northern Ring Motorway of Istanbul connecting 3 Airports of Istanbul. Tendered in 2012 with a PPP structure, investment of 3.5 Billions USD Modern Motorway Strategically Located in the Region from 2013-2016, started operation in August 2016. Under Operation for the last 2 years. Started from 250.000 users/day and recently reached to 350.000 daily users. Favorable location in Istanbul and at Crossroads of Passenger and State-of-the-Art Infrastructure and Equipment Freight Flows, Linking Asia to Europe The opening of the Largest Airport of Europe (New Istanbul Airport) is to be opened later this year, to further boast the daily traffic. ICA became the 23th ASECAP full member by January 2018 3
New Pearl of Bosphorus “Where Europe Meets Asia” Iconic Bridge: the World’s Longest, Highest and Widest Suspension Bridge with a Railway on the Same Deck 7
Pre-PPP (till 2016): KGM All Motorway Investments and Operation by KGM (the Government Entity) All Investments: Funded by the Government All Operations were done by KGM (the General Directorate of Highways) PPP Investments to boast the Motorways under operation Started with the tenders in 2013, the first PPPs of Turkish Motorway Industry has started. The first Motorway PPPs started operations in 2016. Evaluation of Turkish Motorways Before 2016 600 4,000 3,500 The Toll Level was at 1USc/km level 500 3,000 The collection was at 80%, and there were minimal enforcement for non-payers. 400 2,500 300 2,000 The level of Motorway Service was minimal 200 1,500 1,000 100 500 - - 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 KGM PPP Total Motorways KGM Managed Motorways PPP Motorways Under Operation PPP Motorways Under Investment 8
Turkish Motorways PPP Framework Risks shared by Public and Private Stakeholders There is revenue guarantee: KGM to compensate the deficit revenue amount if the actual toll revenues Risk and Responsibilities collected are less than the guaranteed traffic revenues calculated using the guarantee structure •Project Finance Although there is the revenue guarantee Private Investors have the collection risk and this risk is not able to be passed to O&M Co. fully. •Design Private •Engineering Procurement Construction Financing is the sole responsibility of Private Investors Hgh Level O&M is the sole responbility of the Private Investors. Investors •Operation & Maintenance Debt Assumption •Handover of Facilities in good Agreement condition at the end Lenders •Project Finance Debt Assumption •Design •Engineering Procurement KGM Construction Loan •Operation & Maintenance Agreement •Handover of Facilities in good condition at the end O&M Public Authority Agreement Project Company O&M Company Implementation Contract EPC Shareholders’ Agreement Agreement EPC Sponsors Contractor 9
Attractive PPP Framework Well-Developed Regulatory Framework with Favorable Concession Terms Traffic guarantee • Based on fixed AADT for the Bridge and the Motorway separately • KGM to compensate the deficit revenue amount if the actual toll revenues collected are less than the guaranteed traffic revenues calculated using the guarantee structure • Guarantee payment shall be paid annually by end of April of the following fiscal year Toll tariffs adjustment Guarantees defined in USD terms Annual FX and USD inflation adjustments for toll tariffs Tariffs are adjusted for CPI in January when official information is released Financing guarantee • Turkish State Treasury provides guarantees on loans and related financial obligations for c.90% of senior debt amount 10
Toll Collection ICA Toll Plazas & Free Flows OGS • 2.5M Subscribers • Led by 5 Banks • Payment Guarantee by Banks • Active On-Board Unit HGS • 10M Subcribers • Led by PTT & Mastercard • 15 Banks are partners for distribution • Payment Guarantee by PTT • Passive On-Board Unit 11
KGM Toll Collection Post-PPP (by 2016): All Motorway Investments and Operation All Motorway Investments and Operation by KGM (the Government Entity) by Private Investors OGS/HGS: Issuers Gurantees the Payment if the user is not in Black List, hence for All Investments: Funded by Private Investors KGM, no need to check the credit balance All Operation: was done by Private Operators, hence higher Level of Service Closed Systems: Electronic collection with HGS and OGS There is Revenue Guarantee of KGM, but the main funding is the users toll No Barriers and/or Cashiers: Hence no Cash and/or Credit Card revenues The collection was at 80%. The illegal pass is under the responsibility of the Operator, hence collection/ enforcement has been crucial Little enforcement for non-subscribers or black list customers. Each Lane recognize OGS and HGS since Private Investors invested the Each lane recognize either OGS and/HGS since the systems are totally different, hence infrastructure of each system to each lane to minimize the loss of revenue. there is operational confusion and/or malicious usage of car owners. A HGS users, may use OGS lane to use chance of non-payment or vise versa. OGS and HGS Issuers has not guaranteed the credit balance hence On-Line Provision has started. 12
Effect of ICA on Toll Collection Profile Change in Payment Profle: ILLEGAL PASS PROGRESS Active OBU’s gained market share from 36% to 42% 6.54% 6.27% 6.42% 6.23% 6.10% 6.11% 7.00% 5.92% 5.87% 5.78% 5.54% Electronic Collection Improved from 74% to 83% 6.00% 5.12% 4.97% 5.00% 3.87% 4.08% 3.92% 4.01% 3.90% 3.69% 3.66% 3.61% 3.56% 3.70% 3.57% Illegal Pass decreased from 6% to 3% before enforcement 4.00% 2.13% 2.16% 3.00% 1.51% 1.79% 1.75% 1.52% 1.60% 1.30% 1.04% 0.98% 1.13% 1.09% 0.99% 1.23% 1.09% 1.15% 1.29% 1.27% 2.00% 0.90% 0.88% 0.87% 1.00% Illegal Pass Profile: 0.00% 2016/09 2016/10 2016/11 2016/12 2017/01 2017/02 2017/03 2017/04 2017/05 2017/06 2017/07 2017/08 2017/09 2017/10 2017/11 2017/12 2018/01 2018/02 2018/03 2018/04 2018/05 2018/06 Reduced from 6% levels to 3% levels Illegal Pass After Enforcement Illegal Pass Before Enforcement With Enforcement reduced to 1% levels Burder to operators is almost 0% (even positive) with penalty regime on Illegal Pass. Before 2016 After 2016 Strong Enforcement: Max Toll Level 1 Usc /km 8 Usc/km Administrative & Legal Enforcement is in place Administrative enforcement is followed by Professional Collection Collection %20 Less than 1% Agencies. /Illegal Pass Penalties were 10 times of base toll (40% Operator, 60% Goverment) before Enforcement Low Strong which was reduced to 4 times, to Operator, makes the payment for client easier. Service Level Low High 13
Future of Private Motorways in Turkey Growth is expected with PPP 2 projects are already under operation KM 2016 2018 2021 2023 4 Projects are already under investment 2 Projects is under tender (315km) KGM 2.289 2.289 2.289 2.289 It’s expected to have 12 more projects to be tendered soon (3.754km) Private 0 521 1.483 5.552 Total 2.289 2.810 3.772 7.841 Turkish Motorways by 2023 % of 0% 19% 39% 71% Private Existing Motorways Ongoing Projects Upcoming Projects
TURKEY’S DEVELOPMENT OF TOLL ROADS BY PPP STRUCTURE and ITS EFFECT ON TURKISH TOLL COLLECTION SYSTEM by Burak ISIK, Investment Development Manager ICA, Istanbul, Turkey September 6, 2018
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