Welcome to boom town. Istanbul’s economy expanded by 5.5 per cent on a per capita basis, and employment rose an astonishing 7.3 per cent between 2009 and 2010.

The Washington-based Brookings Institution, in a joint investigation with the LSE Cities project, judged that Istanbul had beaten Beijing and Shanghai to claim the title of 2010’s most dynamic city.

To maintain this astonishing economic growth rate, Istanbul must invest in what has for centuries been a mainstay of its fortunes – its role as a main transit route for trade between Europe, the Middle East and Asia.

Investments designed to create new transit routes, or to alleviate pressures on existing ones, are coming thick and fast.

Turkey’s largest transport project at the moment is Istanbul’s USD 3bn Marmaray rail scheme, a project featuring the world’s deepest undersea immersed tube underneath the Bosphorus, in addition to TBMs, NATM and cut and cover being used on other sections of the 13.6km tunnel.

This project is due to complete in 2014, having passed the half-way point for construction early last year.

Following on from Marmaray, Turkey’s Ministry of Transport has awarded the contract for the USD 8bn Istanbul-Izmir motorway tunnel, which will include the world’s second-longest suspension bridge, while tenders for construction of a third bridge across the Bosphorus and a third airport for Istanbul are expected to be invited in the coming year.

However, being the world’s most dynamic city, Istanbul is not ending its tunneling ambitions with the Marmaray project.

Financing is currently being finalised for a road tunnel to be built under the Bosphorus. This project is expected to go even deeper than Marmaray, as its main submarine section is planned to be built using TBMs rather than immersed tubes.

Scheme outline
The project, officially known as the Istanbul Strait Road Tunnel, will connect Kazlicesme region on the European side with Goztepe road crossing on the Asian side. The tunnel will be a two-deck twolane link for light vehicles only, including a 3.3km undersea section and 2.1km of connecting roads, with tolls on the Euopean side of the tunnel.

Following a tender launch in 2007, two consortiums made offers for the Build Operate Transfer (BOT) concession contract for the project.

A Turkish-French consortium formed by Cengiz, Makyol, Dogus and Vinci offered the lowest bid and a concession period of only 19 years – six years for investment and construction, 13 years for operation.

However, they were beaten by a Turkish-Korean joint venture proposing a 30.5 year concession allowing four years, seven months for construction and 26 years for operation.

The Turkish-Korean JV were awarded the concession in summer 2008 by the Ministry of Transport’s General directorate of railways, harbours and airports (DLH). The JV comprises Turkey’s Yapi Merkezi and the South Korean Engineering Companies (SKEC) consortium, which consists of Samwhan, Hansin, Namkwang Engineering & Construction and Kukdong.

Since the award of the concession the JV has been carrying out advanced engineering studies, geological work, and designing the scheme.

It will have two levels of traffic and two lanes per direction. Each level will be dedicated to one direction of traffic. Located on an alignment south of the Marmaray tunnel, like its predecessor the project is expected to comprise several tunnelling methods such as advanced TBM technology for the parts under the Bosphorus and open cut and NATM for other parts.

The crossing will have a total length, in three sections, of 14.6km. The central submarine duplex tunnel section, 5.4km long, will be operated under a 30.5 yearlong concession, while the non-tunnel road sections at each end will be returned to the public authorities on construction completion.

The 5.4km central section includes connecting roads. The length of the TBM tunnel will be 3.34km, with internal diameter of 11.4m and external diameter of 12.4m. The NATM cross-section will be 15m wide and 22m high, whereas the open cut cross-section will be 10m wide and 6m high.

The group has also completed an environmental impact assessment, carried out by Environmental Resources Management. The firms involved in the project have declined to release maps or diagrams until all financing has been scecured.

Financing
In addition to the designing the scheme, much of the work over the past two and half years has been focused on getting the financing in place.

The project is being financed as public private partnership, with the bulk of the funds likely to come from private sector equity, provided by the sponsor firms, and debt provided by a combination of commercial and development banks.

Upon award of the concession the Turkish-Korean JV formed a special purpose vehicle (SPV) company, or concessionaire, to arrange an arm’s length project financing for the scheme on behalf of the sponsors.

The project SPV, Eurasia Tunnel Operation Construction and Investment (ATAS), is making a total investment of USD 1.2bn.

The total debt package involved is likely to range anywhere between USD 800M and USD 1.1bn, and will be confirmed when the project reaches financial close, expected by the end of the first quarter of 2011.

As with Maramaray, the European Investment Bank (EIB) will be making a sizeable loan commitment to the scheme – it lent EUR 450M (USD 610M) to Istanbul’s rail tunnel and is now considering lending up EUR 250M (USD 340M) to the road tunnel scheme. The European Bank for Reconstruction and Development (EBRD), which focuses on financing projects in Eastern Europe, Russia and Central Asia, is also likely to lend to the scheme, with its investment decision due February.

Also like Marmaray, where the Japan Bank for International Cooperation (JBIC) supported the scheme thanks to the involvement of Japanese contractor Taisei, so has the prominent role of SKEC on the road crossing ensured support from South Korean financial institutions.

Both K-Sure (Korea Trade Insurance Corporation) and KEXIM (Export-Import Bank of Korea) are expected to offer either direct lending or credit guarantees for debt provided by commercial banks.

The commercial banks lending to the scheme are understood to be a mixture of local and international banks, including: Garanti Bank; ING Bank; Isbank; SMBC; Standard Chartered; WestLB; Yapi Kredi.

As well as securing debt for the scheme from the above banks, ATAS is also hoping to attract equity partners and is in discussion with various infrastructure funds over potential investments.

Unicredit is acting as financial adviser to ATAS and structuring the deal, Clifford Chance is the lenders’ legal adviser, while local legal advice comes from Fidan & Fidan.

Financial close is expected by the end of March at the latest, paving the way for early works to begin later this year.