December 2016



For further information please contact:

Dr. Çağdaş Evrim Ergün
Partner, Ankara

Ayça Özbek
Associate, Ankara

Ergün Avukatlık Bürosu İstanbul | Levent 199, D: 79/B, Levent
T +90 (212) 280 90 91

Ankara | Next Level, A Blok, D: 33, Çankaya
T +90 (312) 220 30 60



Izmir-Çandarlı Highway Project

The tender process for Izmir-Menemen-Aliağa-Çandarlı Highway Project, which will connect Izmir to Çandarlı Port, has been launched by the General Directorate of Highways.

Project Model and Contractual Structure 

The project model will be build-operate-transfer. The concession period will consist of a construction term of 3 years and an operation term, which will be determined as a result of the tender process, as the bidder which proposes the shortest operation term will be awarded the tender. The concession agreement will be the Implementation Contract (“IC”) to be signed between the General Directorate of Highways (“KGM”) and the project company to be established by the successful bidder. In addition to the IC, a separate agreement will be signed between KGM, the project company and the lenders to regulate the rights of lenders vis-à-vis KGM, such as step-in, substitution, KGM’s representations and undertakings, and the mechanisms for lenders to trigger termination of the IC, as well as the undertaking of KGM to assume the debt to lenders in the event of termination of the IC. 

Debt Assumption by KGM 

Debt assumption basically refers to the assumption of the loan and financing costs by the State or the relevant public entity (i.e., KGM in this project) upon termination of the underlying concession agreement. As per Law No. 4749 on Public Financing and Debt Management, debt assumption is to be made by the Treasury for projects with a total investment amount of more than TL 1 billion only. The total investment amount of this project, which will be determined as a result of the tender process, is expected to be lower than this threshold, in which case the debt assumption would not be made by the Treasury but KGM. In terms of its legal status, KGM is affiliated with the Ministry of Transport, Maritime Affairs and Communications; however, has a separate legal personality and a special budget. Therefore, it does not represent the Turkish State, and its obligations do not constitute obligations of the State. 

Traffic Guarantee 

The project will benefit from a traffic guarantee to be provided by KGM as well as guaranteed minimum tolls for different types of vehicles, which are stated in the tender documentation and will also be provided in the IC. Although the tolls are determined in Euro currency, they be converted in Turkish Liras on January 1st of each year, and such TL equivalent shall be used throughout the relevant year, which causes a certain level of foreign currency risk. In the event that the guaranteed traffic is exceeded, revenues generated from such excess traffic will be shared between the project company and KGM in the ratio of 70:30 respectively. 

Land Expropriation 

KGM will be responsible for expropriation of the land for the project. However, the project company will undertake the expropriation fees to a threshold of TL 150 million. If the expropriation fees exceed TL 150 million, KGM undertakes to pay the exceeding sum. On the other hand, in the event the expropriation fee is less than TL 150 million, the remaining sum will be reflected through shortening of the operation term or additional works shall be requested from the Project Company. 

Next Steps 

There will be a site visit on February 8, 2017, where potential bidders will see the physical conditions of the site and obtain further information from the relevant officials. Potential bidders that do not attend the site visit will not be eligible to submit a bid for the tender. The deadline for submission of the bids is February 15, 2017, and the tender will be conducted on the same day. In the first phase the bidders which fulfill the required qualifications will be selected. In the second phase, the prequalified bidders will compete based on the proposed duration of the operation term. The bidder which proposes the shortest operation term shall be awarded the tender.


This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice. This information is protected by copyright and may not be reproduced or translated without the prior written permission of Ergün Avukatlık Bürosu.