|Isil Ökten||Tolga Çabakli|
In March 2013, Act 4749 on Public Finance and Debt Management (the Public Finance Act) has been amended by Law 6428. The new article (8/A) of the Public Finance Act enables a treasury debt assumption mechanism for certain PPP projects on the following conditions:
(i) Investments must be carried out by the private sector under one the following legislations;
(a) Investments carried out under Law 3996 (1994) on Realisation of Certain Investments and Services under the BOT Model with a minimum investment amount of TRY1 billion ($505 million);
(b) Investments carried out under Law 6428 (2013) on Construction and Renewal of Facilities and Purchasing of Services by the Ministry of Health through the PPP (BLT) Model with a minimum investment amount of TRY500 million; and
(c) Investments carried out under Decree 652 (2011) on Organisation and Duties of Ministry of Education under the BLT Model with a minimum investment amount of TRY500 million;
(ii) There must be a specific clause in the relevant implementation agreement allowing the contracting authority to assume the facilities upon an early termination; and
(iii) The treasury's affirmative opinion must have been obtained in respect of clauses concerning debt assumption in the implementation agreement prior to publication of tender specifications, as well as prior to the execution of the implementation agreement.
For investments meeting these conditions, it is possible to use a treasury debt assumption mechanism, which may cover the foreign financings and derivative transactions entirely or partially, but may not exceed $3 billion for a project, as per the Central Administration Budget Act of 2013 (subject to the Council of Ministers' authority to double the ceiling).
Considering the conditions set out by the applicable legislation, lenders and sponsors to a PPP project should negotiate for the inclusion of certain matters in the relevant implementation agreement, as required, and be aware of other conditions in order to benefit from a debt assumption mechanism.
Isil Ökten and Tolga Çabakli