The Turkish Treasury has the ability to grant different types of guarantees in favour of PPP projects, including guarantees of:
- payments to be made by a public authority to the PPP project company;
- full and partial payment to the lenders of subordinated loans;
- lenders for the repayment of senior loans in case of an early transfer of the PPP assets back to the public authority.
In practice, the main guarantees used in Turkey to date are as follows:
Revenue or usage guarantees - The most widely used PPP model in Turkey is the Build Operate and Transfer. In these PPPs, minimum revenue and traffic guarantee schemes are sometimes used, in particular for toll motorways and airports. For instance, in a toll motorway project, the public granting authority would guarantee revenues from a minimum number of vehicles at an agreed toll level.
Debt assumption undertakings - The PPP contracts recently developed in Turkey for infrastructure projects contain a debt assumption mechanism such that upon termination for PPP company default, the company's rights and obligations under the debt facilities are to be assumed by the State.