Project Finance Lawyer in Istanbul, Turkey

Project Finance Law in Türkiye

There is no single Turkish statute that answers every legal question arising from a project finance transaction.

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Instead, the legal framework may involve several areas of Turkish law depending on the nature of the project. Banking and finance rules, company law, contract law, security interests, tax, environmental requirements, public procurement, sector-specific regulation and administrative law can all become relevant.

 

The Turkish project finance framework can therefore be better understood as a combination of legal regimes working together.

 

For public-private partnership projects, for example, the Republic of Türkiye Investment Office's official PPP guide explains that Türkiye does not have one comprehensive PPP framework law and that different legislation may apply depending on the project model.

 

That makes early legal analysis particularly valuable.

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What Makes Project Finance Different?

In a conventional corporate loan, a lender may primarily assess the borrower's overall balance sheet and existing business.

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Project finance works differently.

 

The lender may instead focus heavily on the project's:

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• Expected cash flow

• Assets

• Contracts

• Licences and permits

• Revenue arrangements

• Construction programme

• Operating performance

• Security package

• Sponsor support

• Regulatory environment

 

A project company may be established specifically to develop and operate the investment. Its ability to repay financing can then depend substantially on the successful completion and operation of the project.

 

This makes the legal structure just as important as the financial model.

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How a Project Finance Structure Works

A typical project finance transaction can involve several groups of participants:

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• Sponsors or shareholders

• A project company or SPV

• Domestic or international lenders

• Institutional investors

• Contractors

• Operators

• Suppliers

• Offtakers

• Government bodies

• Insurers

• Technical advisers

• Financial advisers

• Legal advisers

 

Each participant has a different interest.

 

The sponsor wants the project to be commercially successful. The lender wants predictable repayment and enforceable protections. The contractor wants a clearly defined scope and payment mechanism. The government or public authority wants the project delivered in accordance with the relevant public framework.

 

The legal documentation has to bring these interests together without leaving critical gaps.

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Special Purpose Vehicle

A special purpose vehicle, commonly called an SPV, may be established to own and operate the project.

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The SPV can enter into the principal project agreements, receive project revenues, incur project debt and provide security to lenders.

 

Its legal structure may address:

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• Share ownership

• Sponsor obligations

• Capital contributions

• Corporate governance

• Share transfers

• Share pledges

• Management rights

• Dividend restrictions

• Reserved matters

• Related-party transactions

• Financing restrictions

 

The SPV should not be viewed simply as a company incorporated for administrative convenience. Its ownership, contractual rights and financing obligations can form the foundation of the entire project.

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Turkish Banking and Finance Law

Project finance transactions commonly involve substantial debt financing.

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Depending on the project, financing may come from Turkish banks, international banks, development finance institutions, export credit agencies, institutional investors or a combination of sources.

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The financing documentation may include:

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• Facility agreements

• Term loan agreements

• Common terms agreements

• Sponsor support agreements

• Intercreditor agreements

• Hedging documents

• Guarantees

• Security documents

• Direct agreements

• Account arrangements

• Assignment agreements

 

Turkish banking and finance considerations should be reviewed together with the project's wider contractual and security structure.

 

The Banking Regulation and Supervision Agency (BDDK) and the Central Bank of the Republic of Türkiye (TCMB) are among the official institutions whose rules and published materials may be relevant depending on the transaction.

 

For cross-border financing, foreign exchange and capital movement rules can also become important. The TCMB's official foreign exchange legislation materials provide access to relevant current regulatory materials.

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Project Finance Due Diligence

Before lenders or investors commit substantial capital, they normally need a clear picture of the project's legal position.

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A proper due diligence exercise is not simply a search for problems. It should help identify which risks matter commercially, who bears them and whether they can be managed contractually.

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Corporate Due Diligence

The review may cover:

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• Project company incorporation

• Shareholding

• Corporate authorities

• Existing debt

• Existing security

• Share transfers

• Material litigation

• Insolvency risks

• Related-party transactions

• Corporate approvals

 

Where an SPV has been established specifically for the project, its contractual and financial history should also be examined.

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Regulatory Due Diligence

The project may require licences, permits, approvals, registrations or other regulatory rights before construction or operation can begin.

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The legal review may consider:

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• Existing licences

• Pending applications

• Licence conditions

• Renewal requirements

• Regulatory restrictions

• Administrative approvals

• Sector-specific obligations

• Compliance history

 

The applicable regulator will depend on the project.

 

For example, energy projects may involve the Energy Market Regulatory Authority (EPDK), while capital markets aspects may fall within the authority of the Capital Markets Board of Türkiye (SPK).

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Land and Real Estate Due Diligence

A project cannot be financed effectively if the project company does not have secure rights over the land or facilities it needs.

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Land due diligence may include:

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• Title ownership

• Mortgages

• Liens and encumbrances

• Easements

• Lease rights

• Zoning

• Development rights

• Allocation arrangements

• Expropriation issues

• Construction permissions

 

For infrastructure and energy projects, land rights can be particularly important because the physical project may extend across multiple parcels or involve different types of ownership and usage rights.

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Contractual Due Diligence

Material project contracts are often at the heart of the financing.

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The legal review may cover:

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• EPC contracts

• O&M agreements

• Supply agreements

• Offtake agreements

• Power purchase agreements

• Concession agreements

• Lease agreements

• Service contracts

• Government agreements

• Insurance arrangements

 

Particular attention may be given to termination rights, assignment restrictions, liability, performance standards, delay, force majeure, change in law and dispute resolution.

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Construction Contracts and Project Finance

Construction risk can determine whether a project reaches commercial operation on time.

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If construction is delayed, the project may not generate expected revenue while interest and other financing costs continue to accumulate.

 

For this reason, lenders commonly pay close attention to the EPC or construction agreement.

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EPC Contract Review

Depending on the project, legal review may address:

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• Scope of work

• Construction timetable

• Completion requirements

• Testing and commissioning

• Delay damages

• Performance guarantees

• Defects liability

• Change orders

• Subcontracting

• Insurance

• Contractor liability

• Force majeure

• Termination

• Parent company guarantees

• Performance bonds

 

The construction contract should also be considered alongside the financing agreement. A project company should not accept contractual risks that it has no practical means of managing or passing through to another project participant.

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Security in Turkish Project Finance

Lenders generally need security that corresponds to the assets and rights supporting the project's cash flow.

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Depending on the transaction and applicable Turkish law, the security package may involve:

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• Shares in the project company

• Bank accounts

• Receivables

• Insurance proceeds

• Contractual rights

• Movable assets

• Immovable property

• Project revenues

• Other project-related rights

 

The legal analysis should consider not only whether security can be created but also how it is perfected, prioritised and enforced.

 

Turkish secured transactions may involve different registration and perfection requirements depending on the type of asset and security interest. These issues should be considered before financial close rather than left until enforcement becomes necessary.

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Direct Agreements and Step-In Rights

A lender may have a strong security package but still face difficulties if the project's most important contracts terminate immediately after a project company default.

Direct agreements can help address this problem.

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A direct agreement may provide lenders with rights concerning:

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• Notice of default

• Cure periods

• Consent to assignment

• Step-in

• Substitution

• Termination

• Contract continuation

• Amendments

• Enforcement-related matters

 

For example, if an EPC contractor or operator has the right to terminate its agreement following a project company default, lenders may seek a contractual opportunity to intervene before termination becomes effective.

 

The exact structure depends on the project and the underlying agreement.

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Project Revenue and Bankability

A project may have valuable physical assets and still be difficult to finance if its future revenue is uncertain.

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That is why the legal review should closely examine how the project is expected to make money.

 

Relevant questions may include:

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• Who pays the project company?

• Is the revenue contractual or market-based?

• Is there a long-term offtake agreement?

• Is the price fixed or variable?

• Is there indexation?

• Is there currency protection?

• What happens if demand falls?

• What happens if the buyer defaults?

• Is there government payment support?

• What happens if the project is terminated early?

 

These questions can have a direct impact on the project's financing capacity.

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Energy Project Finance in Türkiye

Energy is one of the areas in which project finance structures are particularly relevant.

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Renewable and conventional energy projects can involve substantial development and construction costs, long operating periods and detailed regulatory requirements.

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Depending on the project, legal issues may include:

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• Generation licences

• Preliminary licences

• Grid connection

• Land rights

• Electricity sales

• Power purchase arrangements

• Renewable energy support

• Construction

• Equipment supply

• Operation and maintenance

• Environmental approvals

• Regulatory compliance

 

The EPDK electricity market materials provide official information on licensing and other electricity-market matters.

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For renewable energy projects, the EPDK YEKDEM materials are particularly relevant to the regulatory framework surrounding the Renewable Energy Resources Support Mechanism.

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The precise revenue structure and applicable support regime should always be checked against the project's facts and the rules applicable at the relevant time.

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Infrastructure and Transportation Projects

Project finance can also be used for major infrastructure and transportation investments.

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These may include:

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Highways

Highway projects can involve construction, concession or operating rights, toll revenues, availability payments and long-term maintenance obligations.

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Airports

Airport projects can involve public-sector arrangements, concession rights, construction, operation, passenger-related revenues and aviation regulation.

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Ports

Port projects may require coordination between land rights, maritime regulation, construction, operating rights and long-term commercial arrangements.

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Rail and Urban Transportation

Railways, metro systems and other transportation infrastructure may involve public authorities, contractors, operators, investors and lenders working under interconnected agreements.

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The legal structure should reflect who is responsible for construction, who operates the facility, how revenue is generated and what happens if the project does not perform as expected.

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Public-Private Partnership Projects

Public-private partnerships can create particularly complex financing structures because the project may depend partly on obligations or rights involving a public authority.

 

The official PPP legislation and guidance published by Invest in Türkiye provides useful background on PPP models, financing, guarantees, risk allocation, default, termination and dispute settlement in Türkiye.

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Depending on the project, legal issues can include:

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• Tender procedures

• Concession arrangements

• Public authority obligations

• Government guarantees

• Payment mechanisms

• Demand risk

• Availability payments

• Step-in rights

• Termination compensation

• Change in law

• Force majeure

• Public-sector default

• Dispute resolution

 

PPP financing should therefore be structured around the actual legal relationship between the private project company and the relevant public authority.

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Project Finance and Public Procurement

Where a project involves public procurement, the procurement framework can have a direct effect on the project's legal and financial structure.

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Tender requirements, eligibility, contract terms, performance obligations, guarantees, amendments and termination rights should be considered at an early stage.

 

The Public Procurement Authority of Türkiye (Kamu İhale Kurumu) is the official authority for the Turkish public procurement framework.

 

A financing structure should not assume that a project contract can be amended, assigned or terminated in the same way as an ordinary private commercial contract.

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Foreign Investment and Cross-Border Financing

International sponsors frequently participate in Turkish infrastructure, energy and industrial projects.

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A foreign investor may contribute:

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• Equity

• Shareholder loans

• Guarantees

• Technical expertise

• Equipment

• International financing

 

The legal structure may need to address foreign investment, capital movements, tax, withholding, currency, security, repatriation and regulatory matters.

 

The Republic of Türkiye Investment Office provides official information for international investors, including investment procedures, incentives and sector-specific information.

 

Türkiye's investment framework generally provides equal treatment for international and domestic investors, while particular projects may qualify for different forms of investment support depending on their characteristics.

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Investment Incentives and Project Finance

Investment incentives can affect a project's financial model and therefore deserve attention during the structuring stage.

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The current investment support system includes different programmes based on factors such as the project's sector, location, scale, technology and strategic importance.

 

The official Invest in Türkiye Incentives Guide describes current incentive categories and support mechanisms, including sectoral and regional incentives, strategic investments and project-based incentives.

 

For a project finance transaction, the important question is not simply whether an incentive exists. It is whether the particular project qualifies, what conditions apply, how the incentive affects cash flow and whether the relevant benefit can be relied upon for financing purposes.

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Capital Markets and Project Finance

Not every project needs to rely exclusively on conventional bank debt.

Türkiye's capital markets framework also provides mechanisms relating to project finance funds and project-based securities.

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The Capital Markets Board of Türkiye's project-based securities regulation provides a framework concerning project finance funds and project-based securities, including structures intended to facilitate the use of capital markets for long-term, capital-intensive projects.

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This may be relevant where sponsors or investors are considering alternative or complementary sources of long-term funding.

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The suitability of such a structure depends on the project's assets, expected revenues, investor base and regulatory requirements.

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Islamic and Participation Finance

Türkiye's financial market also includes participation finance institutions and structures.

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Depending on the project, investors may consider financing arrangements compatible with participation finance principles.

 

Possible structures can include:

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• Lease-based financing

• Asset-backed arrangements

• Participation finance

• Sukuk-related structures

• Equity investment

• Hybrid structures

 

The appropriate structure depends on the project and should be assessed alongside Turkish regulatory, tax, security and contractual requirements.

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Environmental and Social Issues

A project's environmental position can become a financing issue as well as a regulatory issue.

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Depending on the nature and location of the investment, legal review may include:

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• Environmental impact assessment

• Environmental permits

• Waste management

• Water use

• Land acquisition

• Biodiversity

• Community impact

• Occupational health and safety

• Labour requirements

 

For projects financed by international institutions, additional environmental and social standards may apply under the relevant financing arrangements.

 

This means that sponsors should identify environmental and social requirements before financial close, rather than treating them as a separate compliance exercise after financing has been arranged.

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Tax Considerations

Tax can materially affect the cost and structure of project finance.

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Depending on the transaction, the legal and tax analysis may include:

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• Corporate taxation

• VAT

• Withholding tax

• Stamp duty

• Customs duties

• Interest payments

• Cross-border payments

• Tax incentives

• Double taxation

• Financing costs

 

The tax structure should be coordinated with the financing structure from the beginning.

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A structure that appears commercially attractive before tax may look very different after considering withholding, transaction taxes or the treatment of financing costs.

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Project Finance Documentation

A substantial project finance transaction may involve a large set of interconnected documents.

 

These may include:

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• Term sheet

• Facility agreement

• Common terms agreement

• Sponsor support agreement

• Shareholders' agreement

• Share pledge

• Mortgage

• Receivables assignment

• Account security

• Direct agreements

• EPC contract

• O&M agreement

• Offtake agreement

• Government agreement

• Hedging documentation

• Intercreditor agreement

• Insurance documents

• Legal opinions

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The challenge is not simply drafting each document correctly.

 

The documents need to work together.

 

For example, an assignment right in the financing documents may be of limited value if the underlying project contract prohibits assignment. Similarly, lender security over project revenues needs to correspond with the contractual mechanism through which those revenues are actually received.

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Financial Close

Financial close is a major milestone in a project finance transaction.

 

Before funding becomes available, lenders may require evidence that agreed legal and commercial conditions have been satisfied.

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These conditions may involve:

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1. Corporate approvals

2. Regulatory approvals

3. Land documentation

4. Material project contracts

5. Financing documents

6. Security documents

7. Insurance

8. Legal opinions

9. Government or third-party consents

10. Satisfaction of other conditions precedent

 

The purpose is to ensure that the project is legally ready to move into the next stage.

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Refinancing and Restructuring

Project finance continues after financial close.

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A project may later require refinancing because:

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• Interest rates have changed

• Construction has been completed

• The project has become operational

• New lenders are available

• The original maturity is approaching

• Sponsors want to change the capital structure

• Additional investment is required

 

Restructuring may also become necessary following financial stress, delays, cost overruns or changes in the project's commercial assumptions.

 

Legal counsel may assist with amendments, waivers, security restructuring, debt extensions, additional financing and negotiations with lenders and project counterparties.

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Project Finance Disputes in Türkiye

Large projects involve numerous contractual relationships, and disputes can arise even where the transaction was carefully planned.

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Common areas of disagreement include:

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• Construction delays

• Defective works

• Cost overruns

• Payment disputes

• Contract termination

• Regulatory decisions

• Performance failures

• Force majeure

• Change in law

• Financing defaults

• Security enforcement

• Shareholder disputes

• Public authority actions

 

The appropriate dispute resolution mechanism depends on the relevant agreement and the nature of the parties involved.

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Arbitration and International Dispute Resolution

International project finance transactions frequently require careful attention to arbitration and jurisdiction clauses.

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The parties may need to consider:

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• Governing law

• Seat of arbitration

• Arbitration institution

• Tribunal composition

• Language

• Interim measures

• Enforcement

• Multi-party disputes

 

An arbitration clause should be designed for the actual transaction rather than copied from another agreement.

 

Where a project includes international sponsors, lenders, contractors and public entities, inconsistent dispute resolution provisions across different contracts can create unnecessary complexity.

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Istanbul Project Finance Market

Istanbul remains an important commercial and financial center for transactions involving Türkiye.

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Even where the physical project is located elsewhere in the country, financing negotiations, sponsor decisions, lender discussions and legal work may be coordinated through Istanbul.

 

A project located in another Turkish province may therefore still involve:

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• Istanbul-based lenders

• International financial institutions

• Investment advisers

• Legal advisers

• Sponsors

• Contractors

• Financial consultants

 

This makes Istanbul particularly relevant to international project finance transactions involving Turkish assets or project companies.

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Turkish Project Finance Lawyer for International Investors

International investors often need Turkish legal advice that goes beyond reviewing a financing agreement.

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They may need advice on how the financing interacts with:

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• Turkish corporate law

• Banking and finance

• Foreign investment

• Real estate

• Construction

• Energy regulation

• Public procurement

• PPP structures

• Tax

• Environmental law

• Commercial contracts

• Arbitration

 

The objective is to identify legal issues early and incorporate practical solutions into the transaction.

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How Kurucuk & Associates Assists With Project Finance

Kurucuk & Associates advises sponsors, investors, lenders, project companies and other participants on the Turkish legal aspects of project finance transactions.

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Project Structuring

We review proposed ownership and financing structures and identify legal and regulatory issues that may affect implementation.

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Legal Due Diligence

We conduct or assist with due diligence covering corporate structure, land, licenses, permits, material contracts, security, litigation and other project-specific matters.

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Financing Documentation

We advise on financing documentation and related negotiations, including facility agreements, security documents, guarantees and intercreditor arrangements.

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Project Contracts

We assist with legal issues arising from EPC, O&M, supply, offtake, concession, lease, service and other material project agreements.

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Regulatory Matters

We advise on Turkish regulatory requirements relevant to the project and help coordinate legal issues arising from sector-specific legislation.

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PPP and Infrastructure

We assist with the legal aspects of infrastructure and public-private partnership projects, including contractual allocation of risk and lender protections.

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Security and Lender Protection

We advise on security structures, assignments, direct agreements, step-in arrangements and related lender protections where appropriate.

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International Investment

We advise international investors on Turkish corporate, regulatory, contractual and financing considerations affecting their projects.

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Dispute Resolution

Where disputes arise, we assist clients with contractual dispute strategy, arbitration and litigation in Türkiye in accordance with the applicable jurisdiction and dispute-resolution provisions.

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A Practical Approach to Project Finance

Project finance works best when the legal structure reflects the commercial reality of the project.

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A project may have a strong financial model but still face financing difficulties if it does not have the necessary permits.

 

A carefully drafted construction contract may not solve the problem if the project company's revenue agreement leaves it exposed to unexpected market risk.

 

Similarly, a detailed security package may provide limited practical comfort if the underlying project contracts cannot be assigned or maintained after a default.

 

For this reason, project finance requires a connected approach.

 

The ownership structure, financing, construction arrangements, regulatory position, land rights, project contracts, revenue model, security package and dispute resolution provisions should be considered together.

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Frequently Asked Questions

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What is project finance in Türkiye?

Project finance is a financing structure in which lenders and investors rely substantially on the project's expected cash flows, assets and contractual rights for repayment. The precise structure depends on the project, sponsors, lenders, sector and applicable Turkish law.

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Is there one project finance law in Türkiye?

No. Project finance transactions can involve several areas of Turkish legislation, including banking and finance, company law, contract law, security, taxation, environmental regulation, public procurement and sector-specific legislation.

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Can foreign investors finance projects in Türkiye?

Yes. International investors can participate in Turkish projects through equity, shareholder financing, bank debt, institutional financing or combinations of these, subject to the applicable legal and regulatory requirements.

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What projects commonly use project finance?

Project finance can be suitable for energy, infrastructure, transportation, healthcare, industrial and other capital-intensive projects where long-term revenues can support substantial financing.

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What is an SPV?

An SPV, or special purpose vehicle, is a company established for a specific project. It may own the project, enter into project contracts, receive project revenues and borrow the financing needed for the investment.

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What security can lenders take?

Depending on the transaction and applicable Turkish law, security may involve shares, accounts, receivables, contractual rights, movable assets, immovable property and other project-related rights.

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What are direct agreements?

Direct agreements create contractual links between lenders and important project counterparties. They may provide lenders with notice, cure, step-in, substitution or other rights following certain events.

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Can project finance disputes be resolved through arbitration?

Yes, where a valid arbitration agreement exists and the dispute is legally capable of being submitted to arbitration. The appropriate mechanism depends on the parties, contracts and applicable law.

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When should a project finance lawyer become involved?

Ideally, Turkish legal counsel should be involved while the project is being structured. Early advice can identify regulatory, contractual, security and financing issues before they become obstacles to financial close.

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Does project finance always require a project company?

No particular structure is mandatory for every transaction. However, an SPV is commonly used because it can separate the project from the sponsors' other businesses and provide a clearer framework for project contracts, revenues, debt and security.

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How important are project contracts to lenders?

They can be extremely important. Construction, operation, offtake, concession, supply and other material contracts may determine whether the project can be completed, operated and generate the revenues needed to service its financing.

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Project Finance Legal Advice in Istanbul, Türkiye

Project finance involves more than raising money for a large investment. It is about creating a legal and contractual structure in which the project can be developed, financed, constructed, operated and, where necessary, refinanced or restructured.

 

For investors entering Türkiye, understanding the interaction between Turkish law, project contracts, regulatory requirements and financing terms can make a significant difference to the transaction.

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Kurucuk & Associates advises clients on the Turkish legal aspects of project finance, infrastructure, PPP, energy, financing and related commercial transactions from Istanbul, with advice tailored to the particular structure, sector and objectives of each project.