International interest in Istanbul airport tender reportedly peters out

By bne IntelliNews April 22, 2013

bne -

Despite claims of huge interest, international bids for the tender to build Istanbul's third airport are expected to be limited due to the size and financing needs of the €7bn project, according to unnamed sources.

Alongside an expected bid from Turkish builder IC Ictas and its German partner Fraport, a consortium of Turkish construction companies Cengiz, Kolin, Limak, Mapa and Kalyon is set to bid in the May 3 tender. Turkish giants Sabanci Holding and Enka Insaat are also working together on a possible bid, unnamed sources told Dunya Gazetesi. Meanwhile, TAV - which operates Istanbul's current main airport Ataturk - is widely expected to win the competition. "We think it would be a surprise if a bid is made by anyone apart from these four groups," one source told Reuters.

Suat Hayri Kozak, an official from the Ministry of Transportation, told that there will be no delays in the tender, and that 17 firms have purchased the specifications. He also insists that environmental objections against the project are pure speculation.

The tender for the build-operate-transfer project, to be conducted in four stages, will be for a 25-year lease. An annual capacity of 90m passengers is planned for the first stage of the facility, which Ankara claims will eventually be the largest airport in the world. The rapid development of Turkey's economy, alongside the government's push to make itself a leader of a region with huge potential, only expands the opportunities.

However, there are high barriers, including the cost of financing and pre-construction expenses of up to €3bn to stabilize the land on which the airport will be constructed. Quarries in the area near the Black Sea on the European side of Istanbul need to be filled with that cash, one source explained. Erste analysts write in a note that they "are not surprised with the limited interest in the tender considering the size of the project as well as difficulties in securing financing."

As the tender was announced earlier this year, airport operators from Singapore, the UK and The Netherlands expressed an interest. However, there is no indication that any will take part, say the sources, who add that it would be difficult for new partners to join the project later.

"We believe that whichever party wins the tender, there will be changes and loosening of the tender requirements as we believe pronounced concerns about construction difficulties are valid arguments," the Erste analysts write, adding that the limited field of runners and riders should offer favorite TAV a boost - ahead of the award of the tender at least. "We expect TAV, our most likely candidate to win the upcoming tender, to be positively affected from such news flow," they write, "which suggests less competition ... [W]e still maintain our cautious view for the stock for the post-tender era," they caution.

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