The art of making a € 2.6 billion rail­way bank­able

Snow-capped mountains, deep valleys and harsh winters have shaped eastern Türkiye for centuries. They have also made transport infrastructure both costly and complex to build.

Now, one of the country’s most ambitious railway investments is set to transform the region. The EUR 2.6 billion Kars–Iğdır–Aralık–Dilucu (KIAD) High Standard Railway will create a 224-kilometre link between Türkiye’s eastern provinces and the Nakhchivan Autonomous Republic, strengthening trade routes towards the South Caucasus, the Caspian region and Central Asia.

More than just a railway, the project represents a strategic investment in regional connectivity, supply chain resilience and economic integration.

A financing structure built for scale

The KIAD project is remarkable not only for its engineering complexity but also for its financing structure.

Coordinated by MUFG, the transaction combines a commercial facility, support from EKN and four other European export credit agencies, as well as financing from multilateral institutions including ICIEC (Islamic Corporation for the Insurance of Investment and Export Credit) and the OPEC Fund for International Development.

The borrower is the Turkish Ministry of Treasury and Finance, and the transaction was carried out in close cooperation with MUFG, Business Sweden and SEK with the latter participating in the project financing. The transaction is EKN’s first 22-year repayment financing under the OECD Arrangement’s Climate Change Sector Understanding (CCSU). The EKN and Austrian OeKB facilities carry tenors of up to 26 years door-to-door.

EKN and OeKB act as lead ECAs, supported by reinsurance partners from Spain, Italy and Switzerland.

“The structure enables a sizeable financing package that attracts participants with different risk appetites,” says Anna Flock Hedin, Client Executive at EKN. “By working closely with other ECAs, we can optimise the financing structure and create opportunities for Swedish exporters to participate in projects of this scale.”

Making complex projects bankable

For MUFG, the challenge was not simply raising capital but creating a structure that multiple institutions could readily understand and support.

“In order to attract a wide range of financing partners, you have to make the risks transparent and understandable,” says Christopher Marks, Head of Growth Markets, Global Blended Finance and ECA EMEA at MUFG Bank.

“Investors want a framework they recognise. EKN’s leadership role in distributing risk among participating ECAs created a strong foundation that made the transaction easier to syndicate and ultimately more attractive.”

As a result, MUFG was able to syndicate several tranches to commercial banking partners and institutional investors. Building that coalition, however, required time and flexibility.

“You need partners who are comfortable with the architecture and willing to join as the structure evolves,” says Marks. “Once the framework was established, adding lenders, insurers and development finance partners became significantly easier.”

The result is the largest infrastructure financing completed in the region in more than two decades.

The growing role of ECA collaboration

As infrastructure projects become larger and more complex, cooperation among export credit agencies is becoming increasingly important.

“In today’s environment, ECA-to-ECA reinsurance structures play a strategic role in supporting international trade and investment,” says Irene López García, International Relations and Reinsurance Advisor at Cesce, Spain’s export credit agency.

“This collaborative model helps diversify risk, expand financing capacity and simplify execution for exporters, buyers and banks. Reinsurance is no longer simply a technical tool – it has become a key instrument for international success.”

“ICIEC’s participation reflects our mission to support long-term infrastructure investments aligned with Islamic finance principles. This project strengthens regional trade and contributes to sustainable development across Eurasia,” an ICIEC representative said.

According to EKN, the structure also strengthens the project’s sustainability credentials.

This is both a Green Export Credit Guarantee and a Green Loan, benefiting from the extended tenors made possible under the OECD’s climate-related financing framework.

Swedish technology takes on challenging terrain

The demanding geography of eastern Türkiye places exceptional requirements on equipment, engineering and project execution.

For Swedish supplier Volvo Construction Equipment (VCE), participation in the project highlights Sweden’s strengths in sustainable infrastructure development.

“Sweden has strong capabilities in sustainable infrastructure and railway solutions, and it is encouraging to see several Swedish companies contributing across different phases of the project,” says Hanna Ihnatovich, Head of Sales Region International at VCE.

The scale of the project requires close coordination between contractors, suppliers and financiers.

“We have worked closely with contractors from the earliest planning stages to understand their requirements and deliver the right combination of equipment and services,” she says.

Ihnatovich also highlights the importance of EKN’s involvement.

“Their structured assessment process provides confidence in complex projects of this nature. EKN’s participation gives us assurance that key risks have been carefully evaluated and managed.”

A model for future infrastructure financing?

For Marks, the transaction illustrates a broader shift in international project finance.

“At a time when development assistance budgets are under pressure across much of Europe, export credit agencies have become increasingly important,” he says.

“ECA-backed financing is politically sustainable, commercially attractive and capable of mobilising capital at a scale that many governments can no longer provide through traditional development assistance alone.”

As countries seek to modernise transport networks, strengthen supply chains and accelerate the energy transition, projects like KIAD may offer a blueprint for how large-scale infrastructure can be financed in the decades ahead.