Heksagon Kati Atik (“HKA”)

HKA2


Country Turkey
Sector Solid Waste Management
Signing Date May 28th, 2015
Total Project Cost $177M
ICF Debt Pool Exposure $33M (€ 30M)
IFI Exposure $75M

Project Description

This project is a loan to Heksagon Kati Atik (“HKA”), the first private solid waste management company in Turkey that collects, sorts, and converts municipal solid waste (“MSW”) mainly into commercial organo-mineral fertilizer (“OMF”). It is an integrated waste management solution that is financially self-sustained through the sale of OMF as well as recyclables, electricity, disposal services and tipping fees.

Financing Structure

Financing Structure comprised of US$ 42M from IFC and US$ 33M (€ 30M) from ICF Debt Pool.

Infrastructure Component

Over the course of the next three years, HKA plans to develop 3 additional greenfield waste management facilities in Turkey.

Investment Rationale

Strong Sponsors and Management: The Sponsor, whose main asset is Karsan, a manufacturer of light commercial vehicles listed on the Istanbul stock exchange (market capitalization of USD 265M) will provide a Project Completion Guarantee. The Sponsors are linked with the largest conglomerate in Turkey who have a reputation in Turkey of actively supporting those businesses in which they are involved to ensure they are on a sound financial footing.

Strong Project Rationale: Today, in Turkey, still about the half of the total population of 73.7M still does not have access to any waste disposal/recovery and waste water treatment services, thereby being exposed to threats to their health and environment. Moreover, 44% of the municipal solid waste is still dumped into open dumping sites of municipalities. Due to Turkey’s expected economic and population growth, the absolute amount of municipal and industrial solid waste are expected to increase substantially in the future.

Development Impact

The Project will contribute towards achieving waste management targets in Turkey's EU accession national program.

The Project fundamentally addresses environmental care and agricultural growth by: a) reducing burden on municipalities by processing MSW and thereby freeing up space from landfills which have limited capacity, b) widening the use of an organic product with soil enriching nutrients, c) supporting smallholders and large farmers to maximize yields and income through increasing availability of a highly productive fertilizer, d) reducing Turkey's dependence on fertilizer imports; and e) prevention of underground water pollution.

The Project will earn carbon credits. It is in the process of being certified against The Gold Standard, an internationally accepted standard for creating high-quality emission reductions projects in the Clean Development Mechanism (“CDM”), Joint Implementation (“JI”) and Voluntary Carbon Market, developed in 2003 by a group of non-governmental organizations including the World Wide Fund for Nature (“WWF”), SouthSouthNorth, and Helio International.

Additionality

No local financing available for the Project at the time; few international commercial banks had appetite for this risk either.