Introduction
Project finance in Turkey is a major legal and financial mechanism used for infrastructure, energy, transportation, healthcare, ports, airports, industrial facilities, mining, logistics, renewable energy and public-private partnership projects. Unlike ordinary corporate lending, project finance is primarily based on the cash flow, assets, permits, contracts and risk profile of a specific project rather than the general creditworthiness of the sponsors.
Turkey has a long and active project finance market. Large-scale projects in Türkiye have frequently been structured through public-private partnership models, including build-operate-transfer, transfer of operating rights, build-lease-transfer and build-operate models. According to Türkiye’s 2026 Infrastructure Industry Report published by the Investment Office, the Turkish PPP market reached USD 228 billion across 279 projects between 1986 and 2025, with transportation and energy infrastructure representing a major part of the PPP market.
Project finance is attractive because it allows large projects to be funded with a combination of equity, long-term debt, contractual revenue streams and security packages. However, it is legally complex. A successful project finance structure in Turkey requires careful drafting of project documents, loan agreements, security documents, direct agreements, public authority approvals, risk allocation provisions, step-in rights, insurance obligations, dispute resolution clauses and enforcement mechanisms.
This article provides a comprehensive guide to project finance in Turkey, focusing on legal structure, security packages and risk allocation.
1. What Is Project Finance?
Project finance is a financing method where lenders rely mainly on the future cash flows of a project for repayment. The project is usually developed through a special purpose vehicle, commonly called an SPV or project company. The SPV enters into project contracts, obtains permits, owns or operates project assets, borrows from lenders and receives project revenues.
In a typical project finance structure, lenders do not rely solely on the balance sheet of the sponsors. Instead, they assess whether the project itself can generate sufficient revenue to repay the debt. This makes due diligence more detailed than ordinary lending. Lenders examine construction risk, operation risk, market demand, concession rights, regulatory permits, land rights, environmental obligations, offtake contracts, tariff mechanisms, foreign exchange risk, insurance coverage and enforcement options.
In Turkey, project finance is commonly used in sectors requiring large capital expenditure and long repayment periods. These include highways, bridges, tunnels, airports, hospitals, ports, power plants, renewable energy projects, industrial zones, mining facilities and logistics infrastructure.
2. Why Turkey Is an Important Project Finance Market
Turkey’s geographical position, industrial base, growing infrastructure needs and history of PPP projects make it an important market for project finance. The Investment Office states that Türkiye has investment opportunities from transportation to healthcare and energy, and that PPP investments may be realized through models such as build-operate, build-operate-transfer, build-lease-transfer and transfer of operational rights. It also notes that domestic and international laws protecting investments and international arbitration strengthen Türkiye’s investment climate.
This is important for foreign investors and lenders because project finance depends heavily on legal certainty. Lenders want to know whether project contracts are enforceable, whether public authority obligations are reliable, whether revenues can be assigned, whether collateral can be perfected, and whether disputes can be resolved efficiently.
Turkey’s project finance market also benefits from the participation of Turkish banks, foreign banks, export credit agencies, development finance institutions, international financial institutions and institutional investors. However, every financing structure must be tailored to Turkish law, especially where project assets, land, permits or receivables are located in Turkey.
3. Core Legal Framework for Project Finance in Turkey
Project finance in Turkey does not depend on a single statute. It is governed by a combination of banking law, contract law, company law, collateral law, foreign investment law, public procurement and PPP laws, administrative law, energy law, environmental law, tax law and enforcement law.
The banking side is shaped by Banking Law No. 5411, which regulates banks, banking activities, credit transactions, internal systems, supervision and risk management. The law includes cash and non-cash lending among banking fields of activity and establishes the broader regulatory framework for Turkish banks participating in project finance transactions.
Foreign investors are protected under Foreign Direct Investment Law No. 4875, which aims to encourage foreign direct investment, protect foreign investors’ rights, establish a notification-based system and define investment and investor concepts according to international standards. The law also recognizes foreign investors’ ability to transfer abroad net profits, dividends, proceeds from sale or liquidation, compensation payments, license and management fees, and reimbursements and interest payments arising from foreign loans through banks or special financial institutions.
PPP and infrastructure projects may additionally involve sector-specific legislation and public authority contracts. In practice, build-operate-transfer, build-operate, build-lease-transfer and transfer-of-operating-rights models are particularly important in Turkish infrastructure finance.
4. Special Purpose Vehicle Structure
Most project finance transactions in Turkey are structured around an SPV. The SPV is established to develop, finance, construct, own or operate the project. It separates the project from the sponsors’ other businesses and allows lenders to focus on the project’s own assets, contracts and revenue.
An SPV structure usually provides several advantages. It isolates project cash flows, simplifies security arrangements, allows clear governance, makes lender monitoring easier and supports limited recourse financing. However, the SPV must be carefully structured from the beginning.
The project company’s articles of association, shareholder agreements, board powers, signing authorities, transfer restrictions and capital obligations should be aligned with financing requirements. Lenders may require restrictions on share transfers, dividend distributions, additional indebtedness, related-party transactions and changes in business activity.
If the project is a PPP or concession-based project, the legal form and ownership requirements may also be affected by tender documents, implementation agreements or sector-specific legislation. Therefore, the SPV should not be incorporated before regulatory, tax and financing structuring is reviewed.
5. Main Project Finance Documents
A project finance transaction involves several categories of documents. The first category is project documents. These may include concession agreements, implementation agreements, public authority contracts, offtake agreements, engineering-procurement-construction contracts, operation and maintenance agreements, land lease agreements, connection agreements, supply agreements, insurance contracts and direct agreements.
The second category is finance documents. These include facility agreements, common terms agreements, intercreditor agreements, hedging agreements, account agreements, sponsor support agreements, equity commitment letters and fee letters.
The third category is security documents. These include mortgages, movable pledges, share pledges, account pledges, receivables assignments, commercial enterprise pledges, insurance assignments, sponsor guarantees and other collateral arrangements.
The fourth category is public law and regulatory documents. These may include licenses, permits, environmental impact assessment decisions, zoning approvals, construction permits, operating permits, tariff approvals, investment incentive certificates and public authority consents.
A weakness in any category may affect bankability. For example, a strong loan agreement will not protect lenders if the project lacks land rights, if the offtake contract is terminable without compensation, or if the security package is not perfected.
6. Loan Agreement Structure in Turkish Project Finance
The project finance loan agreement is usually more detailed than a standard corporate loan. It must regulate the disbursement conditions, project milestones, cost overruns, repayment schedule, cash waterfall, reserve accounts, financial covenants, reporting obligations, construction monitoring, insurance, events of default and enforcement.
Lenders usually require conditions precedent before each drawdown. These may include evidence of permits, equity contribution, EPC contract effectiveness, insurance policies, project budget approval, security perfection, legal opinions, technical adviser reports and no-default certificates.
Repayment is often linked to project cash flow. The agreement may establish debt service reserve accounts, maintenance reserve accounts, revenue accounts and distribution lock-up mechanisms. The borrower may not be allowed to distribute dividends unless debt service coverage ratios and other financial covenants are satisfied.
The loan agreement must also regulate cost overruns. If construction costs exceed the budget, lenders usually require sponsors to provide additional equity, subordinated debt or support before additional senior debt is disbursed.
7. Security Packages in Turkish Project Finance
The security package is one of the most important elements of project finance. Since the borrower is often an SPV with limited assets outside the project, lenders need security over project assets, shares, accounts, receivables, insurance proceeds and contractual rights.
A Turkish project finance security package may include:
Mortgage over project land and immovable assets, movable pledge over machinery and equipment, pledge over shares of the project company, pledge over project bank accounts, assignment of project receivables, assignment of insurance proceeds, assignment of claims under project contracts, sponsor guarantees, shareholder support undertakings, direct agreements with key counterparties and step-in rights.
The exact package depends on the sector. A renewable energy project may rely heavily on licenses, grid connection rights, equipment, land rights and electricity sale revenues. A highway PPP project may rely on concession revenues, availability payments, traffic guarantees and government support. A hospital PPP project may involve availability payments, service payments, land use rights, equipment and public authority undertakings.
8. Mortgages Over Project Land and Facilities
Mortgages are among the strongest security instruments in Turkish project finance. If the project company owns real estate, lenders may require a mortgage over land, buildings, facilities and permanent structures. A mortgage must be established and registered with the land registry to be valid and enforceable.
In practice, mortgage security is especially important in industrial facilities, hotels, ports, factories, logistics centers, energy projects and real estate-linked infrastructure projects. The mortgage documentation should correctly identify the creditor, debtor, secured obligations, mortgage amount, currency, degree and mortgaged property.
However, not all project assets can be freely mortgaged. Publicly owned land, concession assets, treasury land, leasehold structures or assets subject to public service restrictions may require special legal analysis. In PPP projects, the project company may operate public assets without owning them. In such cases, lenders may need alternative security, such as assignment of receivables, direct agreements and step-in rights.
9. Movable Pledges Over Equipment and Project Assets
Project assets often include movable property such as machinery, turbines, equipment, vehicles, inventory, spare parts, technical systems, production lines and operational assets. In Turkey, movable pledges are especially relevant for project companies that need to use assets during operations while still granting security to lenders.
Law No. 6750 on movable pledges in commercial transactions introduced a non-possessory pledge system designed to expand the use of movable assets as security and facilitate access to finance. The law allows certain movable assets to be pledged through registration without transferring possession to the creditor.
This is useful in project finance because the project company must continue using the assets to generate revenue. However, lenders should carefully identify the pledged assets, registration requirements, insurance obligations, replacement rules and enforcement procedures.
10. Share Pledges
Lenders usually require a pledge over the shares of the project company. A share pledge gives lenders indirect control over the SPV if an event of default occurs. It may allow lenders to enforce against the sponsors’ ownership interest and transfer control to a substitute investor, subject to legal and contractual restrictions.
The perfection method depends on the legal form of the SPV and the type of shares. If the project company is a joint stock company, the share type and whether share certificates exist become important. If it is a limited liability company, notarial and registry issues may arise.
In PPP projects, share transfers may be restricted by the implementation agreement or require public authority approval. Therefore, a share pledge may not be fully enforceable without considering public law restrictions. Lenders should obtain necessary consents or ensure that enforcement mechanics are compatible with project documents.
11. Assignment of Receivables
Assignment of receivables is central to project finance. Since lenders rely on project cash flow, they usually require security over revenues arising from offtake agreements, concession payments, lease payments, availability payments, service payments, insurance claims and termination compensation.
The assignment agreement should clearly cover present and future receivables. It should also define when the lender may notify the debtor and collect receivables directly. In some cases, notice to the debtor is necessary for practical effectiveness.
In PPP projects, the receivable debtor may be a public authority. Assignment of public authority payments may require approval, and the underlying contract may restrict assignment. Therefore, receivables security must be coordinated with the concession or implementation agreement.
12. Bank Account Pledges and Cash Waterfall
Project finance relies heavily on controlled bank accounts. Lenders often require that all project revenues flow into pledged accounts. These accounts may include collection accounts, operating accounts, debt service reserve accounts, maintenance reserve accounts, tax accounts and distribution accounts.
The cash waterfall determines the order of payments. Typically, project revenues are first used for taxes, operating expenses, insurance, senior debt service, reserve funding and finally distributions to sponsors if financial covenants are satisfied.
A bank account pledge gives lenders security over project cash. However, practical control depends on account bank acknowledgments, account control agreements, withdrawal restrictions and default triggers. If the account bank is not a lender, it should acknowledge the pledge and agree to follow the account control provisions.
13. Direct Agreements and Step-In Rights
Direct agreements are key lender protection tools. They are usually signed among the lenders, project company and key project counterparties, such as the public authority, offtaker, EPC contractor, O&M contractor, land lessor or insurance provider.
A direct agreement may give lenders notice of defaults, cure periods, consent rights, assignment acknowledgments and step-in rights. Step-in rights allow lenders or their nominee to step into the project company’s position to cure defaults or preserve the project before termination.
This is especially important in project finance because termination of a key project contract may destroy the project’s value. Lenders need time to cure defaults, replace contractors, restructure the project or transfer the project company to a new sponsor.
In PPP projects, step-in rights must be carefully negotiated with the relevant public authority. Public authorities may accept lender protections, but such rights must remain compatible with public service obligations, tender rules and administrative law principles.
14. Public-Private Partnership Projects in Turkey
PPP projects are a major part of project finance in Turkey. Türkiye’s official investment materials state that PPP investments may be realized through models such as build-operate, build-operate-transfer, build-lease-transfer and transfer of operational rights.
The 2026 Infrastructure Industry Report states that build-operate-transfer and transfer of operating rights are the main contract models in the Turkish PPP market, and provides data on the Turkish PPP market between 1986 and 2025.
PPP structures are legally complex because they combine private finance with public service delivery. The project company may build and operate an asset for a concession period and then transfer it to the public authority. Alternatively, it may provide services to the public authority and receive availability payments.
Lenders in PPP projects focus heavily on termination compensation, demand guarantees, availability payment reliability, tariff adjustment, change in law protection, public authority default, political force majeure and debt assumption mechanisms.
15. Treasury Guarantees and Debt Assumption
Certain Turkish PPP projects may involve public support mechanisms, including debt assumption commitments. The Ministry of Treasury and Finance’s economic reform materials explain that Treasury guarantees and debt assumption commitments for PPP projects are explicit contingent liabilities, and that under Article 8/A of Law No. 4749 the Ministry may provide debt assumption commitments for PPP projects. Upon termination of an implementation contract and transfer of facilities to the relevant administration, credit facilities and related financial obligations may be undertaken within the legal framework.
This is important for lenders because debt assumption may significantly improve bankability. If the project is terminated under certain conditions, lenders may have a clearer route to recover senior debt.
However, debt assumption is not automatic for every project. It depends on the relevant law, project documents, approvals, budget limits, termination scenario and conditions stated in the debt assumption agreement. Lenders must review the exact wording and legal enforceability of the support mechanism.
16. Risk Allocation in Project Finance
Risk allocation is the heart of project finance. The project must allocate each risk to the party best able to control or absorb it. Poor risk allocation can make the project unbankable.
Construction risk is usually allocated to the EPC contractor through fixed-price, date-certain, turnkey EPC contracts with delay liquidated damages, performance liquidated damages and parent company guarantees. Operation risk is often allocated to the O&M contractor through performance standards, availability obligations and penalty mechanisms.
Market or demand risk may remain with the project company or be mitigated through offtake agreements, availability payments, minimum revenue guarantees or take-or-pay structures. Regulatory risk may be addressed through change in law clauses. Political risk may be mitigated by public authority undertakings, political risk insurance, international arbitration and termination compensation.
Foreign exchange risk is particularly important in Turkey where project revenues may be in Turkish lira while financing may be denominated in foreign currency. Parties may use indexed tariffs, hedging, reserve accounts, sponsor support or contractual adjustment mechanisms to manage currency exposure.
17. Construction Risk
Construction risk includes delay, cost overrun, defective works, failure to meet technical specifications, contractor insolvency, permitting delays and force majeure. Lenders usually require construction risk to be mitigated before disbursement.
A bankable EPC contract should include a fixed price, clear completion date, performance standards, testing regime, delay damages, performance damages, warranties, insurance obligations and termination rights. Lenders may also require contractor guarantees, parent company support, performance bonds and advance payment guarantees.
The project budget should include contingencies. If costs increase beyond budget, sponsors are usually required to inject additional equity or subordinated debt before lenders provide further funding.
18. Operation and Maintenance Risk
After construction, the project must generate stable revenues. Operation and maintenance risk includes technical failure, equipment breakdown, higher operating costs, underperformance, safety problems, service interruptions and failure to meet contractual availability standards.
An O&M agreement should define service standards, maintenance schedules, reporting obligations, penalties, spare parts management, staffing requirements, insurance and termination rights. For energy projects, plant availability, output, efficiency and grid connection reliability are critical.
Lenders monitor operational performance through technical advisers, periodic reports, financial covenants and reserve accounts. If the project fails to perform, debt service coverage may fall below required levels and trigger restrictions on distributions or default.
19. Revenue Risk and Offtake Structures
Revenue risk depends on whether the project has predictable cash flows. In energy projects, revenue may come from electricity sale agreements, feed-in tariff mechanisms, merchant sales or corporate power purchase agreements. In transportation projects, revenue may come from tolls, availability payments or demand guarantees. In healthcare PPP projects, revenue may come from public authority availability and service payments.
Lenders prefer projects with long-term, creditworthy and enforceable revenue contracts. If revenues depend entirely on market demand, lenders may require stronger sponsor support, conservative financial projections or higher debt service reserves.
The offtake agreement should address price, payment currency, indexation, payment timing, termination, force majeure, change in law, default, assignment and lender step-in rights.
20. Regulatory and Permit Risk
Project finance in Turkey often involves permits and administrative approvals. These may include energy licenses, environmental impact assessment decisions, zoning plans, construction permits, operating licenses, mining permits, port permits, public authority approvals and land use rights.
Regulatory risk may arise if permits are delayed, challenged, cancelled, renewed late or made subject to new conditions. Lenders therefore require a complete permit due diligence before financial close.
Change in law clauses are also important. If a new law increases costs, restricts operation or changes tariff rules, the project may need compensation, tariff adjustment, extension of term or termination rights.
21. Environmental and Social Risk
Environmental and social compliance is increasingly important in project finance. Lenders, especially international financial institutions and export credit agencies, may require compliance with environmental and social standards in addition to Turkish law.
Environmental risks may include land contamination, emissions, water use, waste management, biodiversity impact, community opposition, expropriation-related concerns and occupational health and safety.
Environmental permits and impact assessments must be reviewed carefully. A project that fails environmental compliance may face fines, suspension, permit cancellation, reputational harm or lender default.
22. Enforcement Risks
Enforcement is a central lender concern. A security package is valuable only if it can be enforced. In Turkey, enforcement may involve execution offices, court proceedings, sale of mortgaged assets, pledge enforcement, receivables collection, account control, share transfer and public authority approvals.
Enforcement risks include borrower objections, valuation disputes, competing creditors, tax liens, insolvency proceedings, public law restrictions, restrictions in project documents and delays in judicial or enforcement procedures.
Lenders should therefore design enforcement strategy at the beginning. The finance documents should include clear default triggers, acceleration provisions, direct agreements, step-in rights, account control, security perfection and dispute resolution clauses.
23. Dispute Resolution in Project Finance
Project finance disputes may involve sponsors, lenders, contractors, public authorities, insurers, operators, offtakers and suppliers. Because many Turkish project finance transactions involve foreign lenders or international investors, arbitration clauses are common.
Foreign Direct Investment Law No. 4875 recognizes international arbitration and other dispute settlement methods for investment agreements subject to private law and investment disputes arising from public service concession contracts where the relevant conditions are met.
However, dispute resolution must be coordinated with enforcement. Even if a foreign arbitral award is obtained, security over Turkish assets may still need to be enforced through Turkish procedures. Therefore, arbitration clauses, governing law provisions and Turkish security documents must be drafted together.
24. Practical Checklist for Project Finance in Turkey
A Turkish project finance transaction should include a structured legal checklist.
First, establish the project company and confirm corporate authority. Second, review the project’s permits, licenses, land rights and regulatory approvals. Third, assess the bankability of project contracts. Fourth, prepare the loan agreement and intercreditor structure. Fifth, design the security package. Sixth, perfect mortgages, pledges, account security and assignments. Seventh, obtain public authority consents and direct agreements. Eighth, review foreign exchange and tax implications. Ninth, prepare environmental and social due diligence. Tenth, finalize insurance, technical reports and financial model assumptions.
This checklist should be adapted to the project sector. An energy project, hospital PPP, airport concession, port project and industrial facility will each require different legal and financial analysis.
25. Why Legal Support Is Essential
Project finance in Turkey requires specialized legal support because it combines corporate law, banking law, secured transactions, administrative law, PPP legislation, construction law, energy law, environmental law, tax law and dispute resolution.
A Turkish project finance lawyer may assist with SPV structuring, project document review, concession agreements, EPC contracts, O&M agreements, loan agreements, security documents, mortgages, movable pledges, share pledges, receivables assignments, direct agreements, public authority consents, legal opinions, enforcement strategy and risk allocation.
Legal support is especially important before financial close. Once financing is disbursed, it may be difficult to correct missing permits, defective collateral, weak direct agreements or unbankable termination provisions.
Conclusion
Project finance in Turkey is a powerful financing method for infrastructure, energy, healthcare, transportation, industrial and PPP projects. It allows large-scale projects to be financed based on project cash flows, contractual revenues, security packages and carefully allocated risks.
However, project finance is legally complex. The success of a Turkish project finance transaction depends on a strong SPV structure, bankable project contracts, valid permits, enforceable security, reliable cash flow, clear risk allocation, effective direct agreements and practical enforcement mechanisms.
Turkey’s PPP and infrastructure market offers significant opportunities for foreign investors, Turkish sponsors, banks, development finance institutions and contractors. Yet these opportunities require careful legal planning. Every project must be tested for bankability, enforceability, regulatory compliance and risk allocation.
In Turkish project finance law, the most successful projects are not only those with strong commercial projections, but those with a complete legal structure capable of surviving construction delays, market changes, regulatory challenges, currency volatility, public authority issues and enforcement scenarios. Professional legal guidance is therefore indispensable for sponsors, lenders and investors seeking to finance projects in Turkey.
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