Risk Management in Transport PPP Projects
In the Islamic Countries
235
The coupling of road infrastructure development and urban expansion represents a market
opportunity for toll roads as traffic and revenues are likely to increase, especially if associated
with economic growth.
Risks are also present in the PPP Turkish market which at least for road PPPs relate to currency
risks both at the construction and operation and maintenance phases (also considering that
demand revenue guarantees for road projects are paid to the private on a 16 months basis).
69
2014.pdf
70
debated-toll-roads-115067
Box 44 Currency risks: the Osmangazi Bridge case
The Osmangazi Bridge is a 2,682 m long bridge in the Izmit Bay, interconnecting the city of Gebze
with the Yalova Province. It was opened in 2016, after 42 months of construction works, and it is
part of the O-5 motorway (Gebze – Orhangazi – Izmir, 421 km). Thanks to the bridge, the crossing
time of the bay decreased from 1 hour and 20 minutes to 6 minutes. The whole motorway project,
that has been completed in August 2019, will shorten total travel time between Istanbul and Izmir,
two of the main economic centers of Turkey, from 8-10 hours to 3-4 hours. Indeed, the motorway is
divided into 4 sections, with different operation start dates69. The operator of the motorway and
bridge is OTOYOL A.Ş., that will operate the bridge until 2043 (Özcan, 2016; 2018).
In order to mitigate the risks related to local currency the economic terms of the concession were
negotiated in US currency. Initial toll rates were determined in 0.05 USD/km for the motorway
and a maximum of 35 USD (about 64 Turkish Liras) for the crossing of the bridge (2008 base,
excluding VAT). The crossing of the bridge was not very high compared to the competing ferry
service in the bay (50 Turkish Lira), much slower than the road crossing alternative. The significant
depreciation of the Turkish Lira in 2015 had however a significant effect on traffic: in 2016, 35
USD were worth around 120 Turkish Liras, with a 60% increase compared to previous tolls.. Given
that the remuneration scheme of the contract foresees a demand guarantee KGM had to
compensate the private operator70 for the gap between real traffic and guaranteed demand.
Each section has a traffic guarantee expressed in car equivalent vehicles/day (40,000 for the
Osmangazi Bridge section) (Özcan, 2016; 2018).
Concerning the low traffic levels, it should be highlighted that the whole O-5 motorway project was
completed only in August 2019. Additionally, the minimum goal of 40,000 car equivalent
vehicles/day is expected to be reached within the first 3 years of operation, according to the
feasibility studies.
According to this example whereas the use of international currencies (e.g. USD and EUR), may
reduce the risks associated with local currency, the use of such measures should be closely
monitored for the impacts these may have on state budget and socio-economic impact of the
projects.