UPDATE 2-Funding crunch sinks Turkey mega-highway tender

Tue Jan 10, 2012 12:22pm EST

Related Topics

* Estimated $5 bln tender cancelled after no bids

* Minister says project to go ahead

* Global economic woes drive financing worries (Recasts lead, updates with tender cancellation)

ISTANBUL, Jan 10 (Reuters) - Turkey on Tuesday cancelled a tender for an estimated $5 billion highways project after builders blamed an international funding crunch for scaring off bids for the scheme, which included a third bridge over the Bosphorus strait between Europe and Asia.

Turkey's transport minister said the government would proceed with a back-up plan for the highway looping north of Istanbul but gave no details.

Financing issues have already blighted privatisation projects in power distribution in Turkey with only one in five acquisitions being completed following tenders.

A senior manager at a Turkish company initially interested in the highways scheme said the government might offer the project in parts.

"Financing such a large-scale project is impossible under current market conditions. The project could be divided into a few smaller projects," he said.

UniCredit Securities analyst Sule Kilic said the cancellation was no surprise.

"Investors have to think twice in the face of such high-cost projects," she said.

"It will take around two years to complete the financing of such a big-scale project, plus there are technical details to be clarified on this particular project."

The tender for the 414-km North Marmara Highway project initially drew interest from 18 companies from Japan, Russia, Spain, Austria, Italy and Turkey. The winner would have had operating rights for 25 years.

A senior official from one company said the global financial environment made it hard to line up funding.

"The ongoing crisis in Europe, the slow economic recovery in United States, and the difficult times China and Japan are going through makes financing difficult for this project," he said.

"There's no problem with the tender specifications, but the time to secure financing is limited."

Turkish Transport Minister Binali Yildirim told reporters earlier in the day: "We will put our second plan into action if we receive no bids."

Later Ihsan Akbiyik, tender commission head at the General Directorate of Highways, told reporters in Ankara: "We have received no bids for the tender and thus the tender is cancelled."

INTERESTED PARTIES

Obayashi, Mitsubishi, Itochu and IHI from Japan, Astaldi of Italy, Moskovskiy Metrostroy and NPO Mostovik of Russia, Stradag of Austria, FCC Construction of Spain and Turkey's Mapa, Cengiz, Park, Varyap, Yuksel, Kolin, Nurol, STFA and Gulsan all acquired official documents for the scheme.

The projected highway will connect Adapazari on the Asian side of the Marmara region to the Tekirdag region on the European side.

A third bridge over the Bosphorus, complete with a railway track, was also part of the project.

It would have been Turkey's second largest project under the build-operate-transfer model. ($1=1.8680 Turkish lira) (Reporting by Mustafa Seven and Evren Ballim; Writing by Ece Toksabay; Editing by David Cowell)

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