Notice

Category A project supported: Mersin-Adana-Osmaniye-Gaziantep (MAG) high speed railway project, Turkey

Published 30 June 2023

1. Project description

UK Export Finance has agreed to provide support to the Ministry of Treasury and Finance, Turkey, in relation to the supply of goods and services by REC ULUSLARARASI İNŞAAT YATIRIM SANAYİ TİCARET A. Ş (REC) to the Ministry of Transport and Infrastructure (MoTI) for the construction and operation of the Mersin to Gaziantep high-speed rail (HSR) (the Project). The 286 km HSR will pass through Adana, Toprakkale, Bahçe, Nurdağ and Baspinar, on the outskirsts of Gaziantep City.

The MoTI have delegated construction responsibilities to the Directorate-General of Infrastructure Investments (AYGM) (the Project owner). Operations will be managed by the State Railways of the Republic of Turkey (TCDD), a government-owned national holding company under the MoTI, responsible for ownership and maintenance of the railway infrastructure in Turkey.

A key aim of the Project is to improve the efficiency and adequacy of the transport system in the region by addressing poor rail connectivity and lack of sustainable alternative transport modes. It is designed to ease road traffic congestion and promote socio-economic development by connecting airports, ports and industrial zones in the hinterland.

The Project includes:

• Renovation of existing lines;
• Construction of new lines, including electrification, signalisation and telecommunication;
• Construction of underpasses and overpasses;
• Construction of bridges, tunnels and viaducts;
• Construction of stations and sidings;
• Temporary worker accommodation; and
• Associated facilities (quarries).

2. Project sector

The Project is in the transport sector.

3. Project sponsors

The Project is being developed by the MoTI.

4. UK exporters

RC Infrastructure Construction Ltd.

5. Export Credit Agent Bank

J.P. Morgan SE.

6. Amount of export finance support

The principal value of the support is approximately EUR€ 780 million.

7. OECD common approaches and equator principles

UK Export Finance categorised the Project as Category A i.e., having potentially significant environmental, social and human rights (ESHR) impacts in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the Equator Principles (2020).

As required by the OECD Common Approaches, UK Export Finance disclosed its possible involvement in the Project. A notification was posted on the UK Export Finance web site on 1 December 2021, which directed interested parties to the contact from where published ESHR information can be sourced. UK Export Finance did not receive any comments from interested parties.

8. Environmental, social and human rights standards

Project-related ESHR documentation was reviewed for its alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and relevant World Bank Group Environmental, Health and Safety (EHS) Guidelines.

The applicable IFC PS were:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts;
• PS2: Labour and Working Conditions;
• PS3: Resource Efficiency and Pollution Prevention;
• PS4: Community Health, Safety and Security;
• PS5: Land Acquisition and Involuntary Resettlement;
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources; and
• PS8: Cultural Heritage.

The applicable World Bank Group EHS Guidelines were:

• General EHS Guidelines (2007);
• EHS Guidelines for Construction Materials Extraction (2007);
• EHS Guidelines for Railways (2007); and

The review also considered the IFC / EBRD Guidance Note on Workers’ accommodation: processes and standards (2009).

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

• physical and economic displacement;
• critical habitats;
• occupational health and safety;
• emissions to the atmosphere (including land, air and water);
• air and noise impacts;
• wastewater treatment;
• waste and hazardous material management;
• emergency planning and response;
• construction camp conditions;
• grievance mechanisms; and
• community engagement.

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed.

Ramboll was appointed as independent environmental and social consultant (IESC) with a duty of care to the Lenders and was commissioned to undertake an environmental and social due diligence (ESDD) of the Project against the above-listed international standards.

The review included:

• Site visits undertaken from 29 to 30 September 2021 and 28 February to 3 March 2022;
• Desk-based review of project-related documentation: Environmental and Social Impact Assessment (ESIA); Climate Change Risk Assessment; Critical Habitat Assessment; Environmental and Social Management Plans (ESMPs), including a Resettlement Action Plan and a Stakeholder Engagement Plan; and
• Follow-up meetings and interviews with relevant Project representatives.

The results of this review formed the basis for UKEF’s evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

Taking account of the review, the Project was deemed to have potential to cause a number of adverse environmental and social impacts both during construction and operation. However, the proposed suite of controls as part of the Project’s environmental and social management systems should adequately manage these impacts.

11. Climate change considerations

UKEF considered the potential direct and indirect green house gas (GHG) emissions of the Project and effects of climate change factors on the Project as part of its ESHR review.

A climate change risk assessment for the construction and operation of the Project was undertaken. The assessment included identification of relevant climate change trends, their potential impacts and existing design and mitigation measures. Estimated emissions are considered reasonable; whilst the Project will produce more than 25,000 tonnes of CO2e emissions per year during construction, this will be limited to the 34 months period of construction. During operations the Project will support a shift to low-carbon public transport, which is anticipated to have a positive impact through avoided GHG emissions.

The physical risks of climate change relevant to the Project were identified and it was confirmed in the review that relevant adaptation measures are integrated into the Project design process.

12. Decision

Various actions have been agreed between the Project developer, operator, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. UKEF has therefore decided to provide its support in respect of the supply of goods and services by UK exporters to the Project.

A condition of support is that Project will be subject to monitoring and reporting in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

UK Export Finance

27 June 2023