Translated version of this PSD: Turkish
The EBRD together with the World Bank's Multilateral Insurance Guarantee Agency ("MIGA") has provided a joint credit enhancement scheme to enable the issuance of the first greenfield infrastructure project bond in Turkey.
ELZ Finance S.A. (the "Issuer") issued EUR 288 million of privately placed, euro-denominated senior secured bonds and on-lent the proceeds to its sister company ELZ Saglik Yatirim A.S. (the "Project Company").
The Project Company was awarded the 28 year concession by the Turkish Ministry of Health to design, build, fi ance, equip, and maintain an integrated hospital campus in Elazig with 1,038 beds - Elazig Integrated Health Campus PPP (the "Project"). The Project is part of the Hospital Facilities
Management PPP Programme ("Programme") developed by the Turkish Government.
The investment grade enhanced project bond tranche benefits from the support of two unfunded subordinated liquidity facilities provided by EBRD combined with political risk insurance ("PRI") policy provided by MIGA.
The credit enhancement scheme has enabled Moody's to assign a Baa2 rating, two notches above the current sovereign rating of Turkey. The issuance has also been certified as "green and social bond" by Vigeo EIRIS.
The International Finance Corporation ("IFC"), a member of the World Bank Group, has invested on a parallel basis in an unenhanced tranche of the bond.
EBRD is demonstrating new ways of financing by promoting the participation of untapped investor classes in the sector, thereby enabling the diversification of funding sources and providing depth to the Programme. EBRD is also promoting the introduction of non-conventional funding solutions to finance infrastructure projects in the Bank's region, in particular debt capital market financing.
EBRD is also assisting in increasing private sector participation in the hospital infrastructure sector in Turkey. In response to the need for large capacity investments in healthcare systems, governments are seeking to tap private sector resources and know-how to construct and manage infrastructure
related facilities more rapidly and more efficiently, while medical service provision remains under the responsibility of the State.
The Project's transition impact stems from the following key areas:
1. Demonstration effect of new ways of financing, procuring and operating hospital infrastructure: The projects under the Programme are structured on a Design-Build-Finance-Lease-Transfer ("DBFLT") basis with strong demonstration effects for the rest of Turkey and other countries in the region, by promoting the use of PPP contracting, and demonstrating good practice in international PPP standards.
2. Demonstration effect of better value all-in cost service than a public sector alternative: The Project is expected to deliver better value from an all-in cost service perspective when compared to the public sector alternative, providing a high value for money to the Ministry of Health. Following a review of the tender documentation and the template PPP contract, the Programme is seen as effective in procuring hospital infrastructure services.
3. Setting new business standards: The Project is expected to achieve high standards of business conduct by the construction of a modern hospital infrastructure based on international standards, implementing performance based compensation scheme and monitoring quality.
4. Demonstration effect of new ways of financing by promoting the participation of untapped investor classes (institutional investors, strategic investors) in the Programme: The EBRD involvement is focused on supporting the entry of untapped investor classes (international and local institutional investors, international strategic investors) into the financing of the on-going hospital PPP programme in Turkey (which to date has largely been dominated by Turkish investors, IFIs and commercial banks). EBRD aims to help the Programme gain recognition from institutional investors, which will be important for its sustainability. By doing so, EBRD will have an instrumental role to the credibility of Turkish market by attracting sustainable and diversified funding sources and providing depth to a maturing PPP programme.
Bond Issuer: ELZ Finance S.A. is a public limited liability company incorporated under the laws of the Grand Duchy of Luxembourg and issued the senior secured Bonds. The Issuer on-lent the proceeds to the Project Company.
Project Company: ELZ Saglik Yatirim A.S., a special purpose company that will supply and maintain hospital facilities in Elazig under the PPP scheme, while the provision of medical care will remain the responsibility of the Ministry of Health. The Project Company is owned by Ronesans Holding A.S, Ronesans Saglik Yatirim A.S., Meridiam Eastern Europe S.a.r.l., Sila Danismanlik Bilisim Egitim Insaat Taahhut Ticaret ve Saglik Hizmetleri Ltd. Sti , TTT Saglik Hizmetleri Egitim Insaat Sanayi Ticaret A.S., and S.A.M. Yapi Sanayi ve Ticaret Ltd. Sti.
EBRD Finance Summary
EBRD has provided two separate subordinated unfunded liquidity facilities for a total of EUR 89 million to support construction and operation phases of the Project.
Total Project Cost
EUR 360 million
Environmental and Social Summary
Categorised B (2008). The Project will be associated with some limited environmental and social issues which can be addressed by adequate mitigation measures. Hospital projects are not subject to an Environmental Impact Assessment (EIA) under Turkish EIA law, however, the Project Company voluntarily carried out a comprehensive Environmental & Social Assessment (ESA), including public disclosure and consultation process, due to public interest in PPP hospital projects. The Bank environmental and social due diligence (ESDD) comprised a site visit and a review of the ESA documentation in February 2015. The ESDD showed that the Project is not associated with significant environmental and social risks and impacts. Mitigation measures to address environmental and social issues during the construction and operation of the hospital have been developed and included in an Environmental and Social Management Plan.
The ESA and site visit examined the following: (i) location and site specific issues; (ii) environmental and social impacts of the construction works over the 3-year construction stage and during operation; (iii) maintenance services of the new hospital by the concessionaire; and (iv) the Project Company's
environmental and social risk management capacities and adequacy of mitigation measures. The ESDD confirmed that the Project is designed to meet Turkish legal requirements and international good practice and that the Project Company has adequate capacity to design/implement the project in compliance with the relevant EBRD Performance Requirements (PRs) and IFC Environmental, Health and Safety Guidelines for Health Care Facilities.
Soil and ground water and technical engineering investigations were carried out in August 2014 and February 2015. No contamination on the site was identified that would require remediation. Elazig is located in the 2nd degree seismic zone and the Project design includes the necessary provisions to satisfy the Turkish regulatory requirements related to seismic design and risk assessment as well as incorporate a required earthquake isolation system in all the buildings. The hospital will be connected to municipal water supply and waste water collection networks. The storm water from the loading dock and parking garages will be routed through an oil interceptor into the municipal storm water collection system. Air quality modelling study showed that the dust emissions during construction and NO2 emissions during operation are in compliance with the national and EU limit values. Excavation waste is anticipated to be approximately 820,000 m3 and 200,000m3 will be used to refill. The remaining excavation waste will be transferred the designated excavation waste disposal site. Hazardous waste will be separated, classified, collected and treated in accordance with Turkish regulatory requirements. Medical waste will be treated in the existing medical waste sterilisation facility in Elazig.
The maximum workforce that is anticipated during the construction phase is 2,000 people. This workforce will be hired locally to the extent possible and from elsewhere in Turkey. During the operation phase, the hospital is expected to employ over 3,000 personnel, including approximately 1,900 health service and administrative personnel employed by the Ministry of Health and 1,250 service and administrative personnel employed by the Project Company and its service providers.
The Project Company will develop an Human Resources (HR) Policy, including workers grievance mechanism, compliant with national law and PR2. The third party employers' performance will be managed and monitored through procurement procedure and performance assessment. The accommodation of workers will be provided in line with the EBRD/IFC guidelines.
The Environmental and Social Action Plan (ESAP) includes mitigation measures for both construction and operation stages, consisting of requirements relating to: HR and Occupational Health and Safety (OHS) management; grievance mechanisms for construction workers, employees, patients and the
public; contractor management; environmental management system; life and fire safety provisions, including an emergency response mechanism; hygiene management; medical waste management; radioactive substance management; and stakeholder engagement.
The Bank will monitor the Project Company's environmental and social performance and implementation of the ESAP through a review of annual E&S reports provided by the Project Company and site visits when deemed necessary.
Company Contact Information
For business opportunities or procurement, contact the client company.
EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
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