UK Export Finance (UKEF), the UK government’s export credit agency, has underwritten $866 million of financing – equivalent to £680 million – to support construction of a 286-kilometer high-speed electric railway in southern Turkey, according to a press release from the UK government on Monday.
With financing provided through UKEF’s Buyer Credit Facility, Rönesans Holding will finish construction of the Mersin-Adana-Gaziantep High Speed Railway on behalf of the Turkish Ministry of Transport.
The deal is expected to create new, multimillion-dollar export contract opportunities for the UK’s infrastructure, engineering and project management sectors, supporting UK Prime Minister Rishi Sunak’s priority of growing the UK economy, the press release said, adding that this signals key future opportunities for UK exporters, with Rönesans Holding – one of Europe’s 10 largest construction companies – intending to use the high-speed rail project to build its wider relationships with the UK supply chain.
Rönesans Holding is a pro-government company that previously undertook the construction of Erdoğan’s presidential complex in Ankara and the Okluk State Guesthouse in western Turkey, commonly known as Erdoğan’s “summer palace.”
On July 18 the UK and Turkey announced plans to begin talks on an updated free trade agreement (FTA).
The deal would replace the existing UK-Turkey FTA, which was rolled over from when the UK left the European Union and does not cover key areas of the UK economy such as services, digital and data.
The announcement followed a call between UK Business and Trade Secretary Kemi Badenoch and Turkish Minister for Trade Ömer Bolat earlier this month, where they committed to negotiating a new deal and deepening the trade relationship between the two countries.
Turkish Finance Minister Mehmet Şimşek, who spoke about the rail project, said Mersin, Adana and Gaziantep are among the most highly industrialized and important cities of the region with their deep-rooted cultural heritage, noting that this project will ensure a reduction in transportation costs, decrease travel time between Mersin and Gaziantep and strengthen railway connectivity in Turkey.
“In this regard, this project is crucial for economic, social and environmental integration. We are very grateful to our trading partner UKEF for their contribution to this important project, which will expand the national railway network,” he said.
According to Şimşek, the most important aim of the project is to improve rail connectivity and create a sustainable alternative transportation scheme, adding that the UKEF-backed project for completing the railway will also contribute to reconstruction in Gaziantep, Osmaniye and other areas of southern Turkey that were hit by two powerful earthquakes in February which claimed more than 50,000 lives and led to massive destruction.
Lord Malcolm Offord, the UK parliamentary undersecretary of state for exports, said the UK-Turkey trading relationship is going from strength to strength with plans about an updated trade deal with Turkey and the railway project a step further.
“UK Export Finance’s backing for this transformative high-speed railway adds to this success story. This deal shows that the UK, home to the world’s first railway system, still moves full steam ahead with its export of railroad innovation and expertise,” he said.
Offord said UKEF’s backing – which has been given on the condition that UK exporters supply the project – will support continued economic growth in the UK, in line with the British government’s priorities and that Rönesans Holding has already engaged with UK suppliers to negotiate contracts for electronic infrastructure, ESG consultancy services and catenary and mechanical components.
Dr. Erman Ilıcak, president of Rönesans Holding, said his company is thrilled to be working with UKEF, JP Morgan, ING and BNP to secure a deal that will enable a landmark shift in the Turkish construction of rail links and the high-speed railway project.
“By upgrading the existing railway line to a high standard railway line, we will be actively reducing negative environmental impact while offering a lower-carbon travel alternative and significantly enhancing the region’s industrial connectivity and trade. Rönesans Holding takes immense pride in contributing to Turkey’s national environmental goals and infrastructure advancement,” he said.
For his part, John Meakin, global head of export and agency finance at J.P. Morgan, said his company is honored to have the responsibility of delivering the financing for “this impactful project” while supporting UK exporters providing goods, services and notable technical expertise.
He said in replacing the current railway, which relies on diesel locomotives, the electrified line will provide a lower-carbon alternative to existing routes between Mersin and Gaziantep. Based on project forecasts, Meakin said the completed route will save 157,000 tons in CO2e emissions in its first year alone.
“The UKEF-backed project will also contribute directly to Turkey’s objective of increasing high-speed railway coverage to 10,000 kilometers, by creating a rail link greater than the distance between Cardiff and London,” he added.