The Republic of Turkey has been undergoing a largescale reform in the healthcare sector in the past decade, spearheaded by the Ministry of Health under its Health Transformation Program which was launched in 2003. The EUR 20 billion investment pipeline for construction of around 40 “integrated healthcare campus projects” through public private partnership model, the largest pipeline of hospital PPPs in the world, has been a major component of this program. With over 20 projects already tendered and nearly 10 having reached financial close, the government is now considering to revisit the risk allocation provided under the existing legislation.

Currently, sponsors and lenders are offered particularly more bankable terms then elsewhere in Western Europe with the Ministry of Health undertaking 100 % termination compensation to the lenders and equity investors under a direct agreement.

Main changes under consideration are:

• additional tax exemptions for project sub-contractors;
• greater flexibility in the approval process for contract variations; and
• possible reductions in the amount of termination compensation payable to the lenders and sponsors in the event of a project company default and force majeure.

If the proposed changes go ahead (particularly those relating to compensation termination regime), lenders will look to reassess the overall risk profile in future projects and the potential effect of such changes to domestic and international investor appetite remains to be seen.