Introduction
As Türkiye continues to expand in energy, infrastructure, transportation, and real estate, project financing has become one of the most significant tools for funding large-scale investments. Turkish Project Finance provides a specialized legal and financial framework that allows investors, banks, and sponsors to structure long-term projects while minimizing risks.
This article examines the legal framework, financing structures, regulatory authorities, security mechanisms, and compliance practices governing project finance in Türkiye.
Legal Framework of Turkish Project Finance
- Turkish Commercial Code (Law No. 6102)
- Governs corporate structures used in project finance (joint stock and limited liability companies).
- Provides legal rules on shareholders, governance, and contracts.
- Banking Law (Law No. 5411)
- Regulates lending by Turkish and foreign banks.
- Defines rules for syndications and participation loans in project finance.
- Capital Markets Law (Law No. 6362)
- Governs bond issuances, securities, and capital market instruments used in financing structures.
- Energy Market Laws (Electricity Market Law, Natural Gas Market Law, Renewable Energy Law)
- Provide sector-specific regulations for financing energy projects.
- Public-Private Partnership (PPP) Laws
- Infrastructure projects (hospitals, airports, highways) are regulated under PPP models such as build-operate-transfer (BOT) and build-own-operate (BOO).
- Foreign Direct Investment Law (Law No. 4875)
- Ensures equal treatment of foreign investors in project finance transactions.
- International Conventions
- Türkiye is a member of the ICSID (International Centre for Settlement of Investment Disputes) and has signed multiple bilateral investment treaties (BITs), giving foreign investors additional protection.
Financing Structures
- Non-Recourse or Limited Recourse Financing
- Lenders rely primarily on project revenues, not sponsors’ balance sheets.
- Syndicated Loans
- Multiple banks pool resources to fund large projects.
- Export Credit Agencies (ECA) Support
- International institutions provide financing for projects involving foreign contractors.
- Islamic Finance (Sukuk, Murabaha, Ijara)
- Increasingly used in Türkiye, especially for infrastructure and energy projects.
- Bond Issuances and Capital Market Instruments
- Project companies may issue project bonds under Capital Markets Law.
Security Packages in Turkish Project Finance
To protect lenders, security packages typically include:
- Share Pledges – over project company shares.
- Assignment of Receivables – including future project revenues.
- Pledges over Bank Accounts – cash flow control.
- Mortgage over Immovable Properties – land, power plants, or facilities.
- Commercial Enterprise Pledges – covering business assets.
- Step-in Rights – allowing lenders to take control if sponsors default.
Regulatory Authorities
- Banking Regulation and Supervision Agency (BDDK): Oversees banking and lending.
- Energy Market Regulatory Authority (EPDK): Regulates electricity, natural gas, and renewable projects.
- Capital Markets Board (SPK): Supervises bond issuances and securities.
- Ministry of Treasury and Finance: Manages PPP guarantees and sovereign guarantees in mega-projects.
Key Sectors for Turkish Project Finance
- Energy Projects
- Renewable energy (solar, wind, hydro) projects are major recipients of project finance.
- LNG terminals and natural gas storage facilities also attract foreign investment.
- Infrastructure Projects
- Airports, bridges, tunnels, ports, and highways often financed via BOT models.
- Healthcare Sector
- PPP model hospital projects financed through syndicated loans and international funding.
- Real Estate and Construction
- Mixed-use developments and commercial complexes financed through project-based lending.
Enforcement and Dispute Resolution
- Turkish Courts have jurisdiction over local disputes but often parties choose international arbitration.
- Türkiye is party to the New York Convention (1958), ensuring enforcement of foreign arbitral awards.
- ICSID arbitration is commonly used in disputes involving foreign investors and state entities.
Compliance and Risk Management
- Due Diligence: Comprehensive legal and financial due diligence before financing.
- Environmental and Social Compliance: Projects must comply with Turkish environmental law and international ESG standards.
- Foreign Exchange Risks: Hedging mechanisms due to volatility in TRY exchange rates.
- Political and Regulatory Risks: Mitigated through BIT protections and sovereign guarantees.
Conclusion
Turkish Project Finance provides the foundation for developing large-scale energy, infrastructure, and healthcare projects in Türkiye. With strong alignment to international practices, project finance in Türkiye offers opportunities for both local and foreign investors.
For sponsors and lenders, working with experienced legal advisors is essential to structure financing agreements, manage risks, and ensure compliance with Turkish law. As Türkiye continues to pursue ambitious infrastructure and energy projects, project finance will remain a cornerstone of the country’s economic development.
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