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GAIT Turkish-EU Partnership for Sustainable Transportation

Massimo d’EufemiaEIB Group Representative in Turkey

Grand Cevahir Hotel and Convention Centre Istanbul, 9 October 2015

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The European Investment Bank (EIB)Long-term finance promoting European objectives

European Union’s long-term lending bank set up in 1958 by the Treaty of Rome.

Shareholders: 28 EU Member States

GovernanceBoard of Governors – EU Finance Ministers

Board of Directors – Member States & European Commission

Management Committee – EIB’s executive body

Audit Committee – independent, non-resident

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EIB’s contribution to further EU policy goals

Within the Union and Pre-accession countries, the Bank has following Public Policy goals:

Increase in Growth and Employment Potential

* Knowledge Economy

* Trans-European Networks (TENs)

* Competitive and secure energy

* Urban renewal and regeneration

* Small and medium-sized enterprises (SMEs) and mid-cap enterprises

Environmental Sustainability

* Environmental protection

* Renewable energy and energy efficiency

* Sustainable transport

Economic and Social Cohesion

Climate Action

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2014 Key figures

European Union: EUR 69 bn

Partner countries: EUR 8 bn

Total lending: EUR 77 bn

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EIB in Turkey: a long-standing partnership

EIB has been lending to Turkey since the mid 1960s; with an overall lending volume of close to EUR 21bn over the last decade.

Step change in lending activity since 2005, given the status of Turkey as Candidate Country for EU Accession.

Turkey ranks first among EIB recipient countries outside EU, with a lending volume of some EUR 2bn annually over the last years. EIB’s role is to support the country’s economic development and assist the country in its pre-accession phase to the EU.

EIB stands for tangible contribution to priority projects that make a difference to the population of Turkey. Lending priorities are set in consultation with the EU and the Turkish Authorities.

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Financing Infrastructure in Turkey

Investing in infrastructure is one of the key priorities for Turkey to underpin its economic growth potential. Transport sector is the main focus in terms of budgetary allocations and investment priorities. Further key priorities include energy, earthquake risk mitigation and the environment.

Over the last decade, EIB has financed some EUR 4.6bn in the transport sector, both for flagship national projects but also local authority investments in Light Rail.

Most infrastructure financing is with the sovereign, or with dedicated financial intermediaries. EIB also made a major contribution to the financing of the Eurasia Tunnel PPP projects.

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Financing Infrastructure in Turkey 2005 – 2014EUR 5.5bn

EIB can finance up to 50% of Project Costs and provide very long tenors, typically required for infrastructure and of particular importance in the Turkish market

- TransportIstanbul – Ankara HSL EUR 1,450m

Bosphorus Railway Tunnel EUR 1,050m

Eurasia Tunnel EUR 270m

Rail rehabilitation (freight) EUR 145m

Light rail, urban transport (Antalya, Samsun, Izmir,

Istanbul and through ILBank) EUR 1,316m

- Environment Wastewater, water (Bursa, Samsun and through ILBank) EUR 255m

Flood Prevention and Protection EUR 100m

Earthquake Risk Mitigation EUR 500m

Afforestation & Erosion Control EUR 420m

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EIB Transport Lending PolicyConsistency with EU Policy

The EIB is the EU bank – The EIB Lending Policy reflects EU policy and EU Directives

For the rail sector, aspects of particular relevance include resource efficiency, sustainability and rail interoperability

The EIB Transport Lending policy is established, following a close consultation with numerous contributions from several EC Services

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EIB Transport Lending PolicyRelevant Aspects – Rail

Funding railways will continue to be a priority, as these are intrinsically the most promising in terms of reducing greenhouse gas emissions per transport unit.

Lending to sound projects in rail will be prioritised, even when they are neither TENs nor located in assisted areas. Efforts will be made to enhance lending to these sectors.

Eligibility categories: TEN-T, economic and social cohesion; external mandates; and environment, i.e. supporting sustainable transport solutions is always applicable for rail projects.

Urban rail: same eligibility and policy as above

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EIB Transport Lending PolicyRequirements for Eligible Projects

Projects to be designed in accordance with relevant standards as applicable, e.g.:

Agreement on Main International Railway Lines (AGC,1985)

Agreement on Important International Combined Transport Lines and Related Installations (AGTC, 1991)

Technical Specifications for Interoperability, TSIs – both for Infrastructure and Rolling Stock

Projects to be technically, economically, environmentally and socially sound.

Financial Sustainability of Rail Sector.

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EIB Transport Lending PolicySome Additional Comments

EIB Cost Benefit Analysis (CBA) takes account of environmental externalities

CO2 emissions are systematically computed into the CBA

For certain projects, other external environmental costs and benefits are also internalised in the CBA analysis, e.g. noise, congestion, overcrowding

Railway projects can take a variety of forms:Rehabilitation or upgrading of existing rail infrastructure including stations, possibly including electrification, re-signalling…

Freight facilities, including intermodal terminals

New lines, including High-Speed Rail

Rolling Stock – both conventional and High-Speed, both freight and passengers, both for incumbent operators and new entrants

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EIB Financing Instruments•EIB has at its disposal a wide and flexible portfolio of financing instruments to support TEN projects

Direct Loans

ProjectSPV

(PPP) Project finance with direct

project risk

Equity through Funds

Standard Loans

“Traditional” EIB lending instrument

Guaranteed basis

Represents the bulk of EIB’s lending volumes

Intermediated LoansBanks

Structured Finance Facility (SFF)

Established in 2001 Expands the ability of EIB to provide financing

Allows lending to projects with higher risk (PPP’s)

Allows for more flexible financing solutions

Public or Private Sector

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EIB Public Transport Lending

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What’s next?

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We are looking at some rehabilitation railway projects (double track, electrification).

We are working with the EUD and the Ministry of Transport on the strategic Halkali-Kapikule line, freight corridor connecting Istanbul with the EU border in Bulgaria.

We continue our support to Istanbul metro project: 4.Levent - Haciosman extension (completed) and Uskudar - Cekmekoy metro (under construction, due for completion in 2H2016).

We just signed on October 6th our second loan to ILBank: 250 m EUR encompassing for the first time urban transport.

We look forward to engaging with the Ministry of Transport and KGM on achieving Turkey’s road safety target in 2023 to reduce Fatality Rate below 1/100MillionVehiclexKm.

European Investment Bank Group

Conclusions

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EIB has a long a very successful track record of lending to Turkey, particularly also in the transport sector.

EIB transport policy is driven by EU policy, including for rail.

EIB lending for high speed and mainline rail projects represents roughly one third of the total EIB lending in the last ten years.

Rail financing has been and will continue to be a priority – but projects must be sound .

EIB is closely involved in the project’s EIAs and procurement (EIB Guide to Procurement).

There are several EIB financing options, but solid financing structure is required to provide the much needed long tenors.

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Thanks for Your Attention

Istanbul office Ankara OfficeBuyukdere Cad. Levent 199 Ugur Mumcu Cad. No: 88Istanbul MNG BuildingPhone:+90 212 3179010 Phone:+90 312 4056050Fax: +90 212 2697777 Fax: +90 312 4468505E-mail: istanbul@eib.org Email: ankara@eib.oeg web site: eib.com/eif.com

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