Banks lend 200% of road project costs, govt worried

NEW DELHI: If you were to buy a house, banks would give you a loan of 80-85% of the value of the property. If you were to build a road, though, you could get double the project cost computed by the highways authority.

On an average, banks lend 39% more than the project cost arrived at by the National Highways Authority of India, the agency that hands out bids across the country. A key reason is the huge gap between the cost arrived at by NHAI and the estimate drawn up by developers who bag the contracts.

With private developers bidding aggressively for highway contracts and willing to fork out a significant premium (an annual amount paid upfront to National Highways Authority of India), the road transport and highways ministry decided to examine 66 projects where funding has been tied up.

Source: indiatimes.com

Milton, Ontario project affects abandoned industrial property

One of the largest road projects ever undertaken by the Town of Milton has also been the catalyst for the remediation of a brownfield site which will eventually be turned into housing.

The $49-million Main Street underpass is designed to reduce vehicle idling times and safety concerns at the point where that street crosses the heavily used four-track CP rail line.

At the same time, its construction will create an S-curve realignment of the street which means it will have a major impact on a long-abandoned industrial property on the south side.

“The project requires a deep slice though the property to allow the street to pass underneath the rail line,” says Derek Stewart, associate partner, Ecoplans Ltd.

As a result, the rail separation is intertwined with the remediation of the three-hectare industrial site, says Stewart, whose firm is the environmental consultant for both the remediation and the underpass.

McCormick Rankin Corp. is the overall detailed designer and contract administrator.

The property was the location of a zinc-oxide manufacturing plant from the early 1950s to the early 1990s and was once occupied by several buildings including the main manufacturing plant, a baghouse, a furnace production and storage building, as well as underground storage tanks.

An investigation of the site by Ecoplans, which included drilling 31 boreholes and a comprehensive sampling and analysis, showed large areas of contaminates such as heavy metals.

“Most (of the contaminants) were in the top metre and a half of soil, although some went deeper.”

A number of remedial options including encapsulation were proposed. “But the town was concerned about liability and rejected that option.”

There was also certain urgency. As the west half of the municipally owned site will be the area most directly impacted, the town decided to sever the land. It has retained ownership of the west parcel, but has sold the east half to a developer who has proposed using it for a mixed-used commercial/residential development.

So, a more traditional remediation method was chosen. Over a two-month period, Hazco Environmental Services Ltd. excavated and hauled away approximately 5,500 tonnes of hazardous soils and 28,000 tonnes of non-hazardous soils. The Hamilton-based firm also trucked in and applied 15,000 tonnes of clean backfill and then lined the property limits with a PVC geothermal membrane to prevent migration of contaminants which had been detected on adjacent properties, says Stewart.

Despite the amount of truck traffic entering the site on a daily basis, every effort was made to minimize the project’s impact.

“The streets were kept clean by the contractor using a sweeper and water truck and dust levels were controlled by the application of water using a water truck.”

Traffic control was also managed by the contractor. Site egress and exit were strictly controlled through a traffic management plan agreement with the town.

The east half of the site — the parcel which will eventually house the condominium — is now being used as a staging area by BOT Construction, the grade separation contractor.

At this point, the rail grade separation is in a very preliminary stage. BOT has moved rails to accommodate a temporary detour and is now in the process of removing the contaminated soil beneath those tracks.

It will take four years to fully complete the underpass, says John Brophy, the town’s senior manager of infrastructure. “However, after two years we will be able to direct two lanes of traffic under the rail bridge.”

The catalyst for the project is the heavy amount of road and rail traffic at the crossing. Its daily “exposure index” is 300,000. The index is the term used by the Canadian Transportation Agency to gauge road and rail traffic.

“The trigger limit when a grade separation is warranted is 200,000, so this location is warranted to be grade-separated.”

Compounding the potential safety hazards of that high traffic are poor sightlines and the fact the tracks are at an extreme angle to the road, says Brophy.

Source: dcnonl.com

Cabinet Committee on Infrastructure okays 15 highway projects

The Cabinet Committee on Infrastructure approved 15 projects for highway construction of about 1,814 kilometres at an estimated cost of Rs 15,680 crore.

The National Highway Authority Of India (NHAI) will undertake 10 projects whereas implementation of the rest of the projects would be with the Rajasthan and Madhya Pradesh state agencies.

Source: articles.economictimes.indiatimes.com

CDWP approves 79 projects costing Rs343b

The Central Development Working Party (CDWP) in a meeting held here considered and approved seventy-nine projects costing Rs343.470 billion including a foreign aid component of Rs134 billion.

Deputy Chairman Planning Commission of Pakistan, Dr. Nadeem-ul-Haque chaired the meeting of the CDWP, which was also attended by the sponsoring agencies and the representatives from Provincial Governments and Special Areas.

The CDWP after due deliberation approved / recommended 79 projects costing Rs343.470 billion including Foreign Aid component of Rs134.986 billion. Of the 79 projects, 60 projects were related to Infrastructure Sector costing Rs317.863 billion, 17 projects of Social Sector costing Rs22.509 billion and 02 projects in other Sectors costing Rs3.098 billion were approved.

The CDWP is authorized to approve projects costing up to Rs1.0 billion. However, 35 projects, each costing over Rs1.0 billion, were recommended to Executive Committee of National Economic Council (ECNEC) for consideration/approval, says a statement issued by the Planning Commission here.

After 18th Amendment to the Constitution, the Federal Government has focused on implementation of Infrastructure projects, being its primary responsibility. In this sector, important projects of Transport & Communication like “Hasanabdal — Havelian — Mansehra Expressway E-35 (110 KM) ADB” costing Rs 46.8 billion, “Lowari Tunnel and Access Roads Project Modified as a Road Tunnel” costing Rs18.1 billion, “Rehabilitation of Track on Lahore — Lalamusa Section with New Signalling and Telecommunication System” costing Rs18.0 billion, “Modernisation of Gaddani Ship Breaking & Recycling Industry and Development of Allied Facilities at Gaddani” costing Rs11.4 billion and “Improvement and Widening of N-45 (141 KM) Section-1: Chakdara — Timargara Section — 2: Akhagram — Dir Section — 3: Kalkatak -Chitral” costing Rs9.2 billion were considered / recommended by the CDWP.

Similarly, addressing energy crisis the country, important projects like “Tarbela 4th Extension Hydropower Project (90 per cent by World Bank 10 per cent by sponsors own sources)” costing Rs79.488 billion, “Detail Design and Construction of Matiltan Hydropower Project (84 MW) District Swat, Khyber-Pakhtunkhwa” costing Rs15.1 billion, “Detailed Design and Construction of Lawi Hydropower Project Chitral, Khyber Pakhtunkhwa” costing Rs12.2 billion, “Establishment of 48 MW Jagran-II Hydro Electric Power Station (Phase-II), District Neelum in AJK (Revised) (French Loan)” costing Rs7.0 billion and 04 Grid Station located in Balochistan and Punjab were also considered.

These projects will generate about 200 MW electricity after completion. For improving and conserving water resources in the country, nine projects of water sector costing over Rs12.0 billion were considered by CDWP mainly “Bazai Irrigation Project Khyber-Pakhtunkhwa”, “Remodeling of SMB Link Canal and Enhancing Capacity Mailsi Syphon, at Bahawalpur District and “Channelization of Deg Nullah from Muridke Narowal Road to Outfall (Punjab ADP)”. Moreover, CDWP advised the executing agencies to float projects on BoT basis to involve private sector in the development process of the country.

For rehabilitation and reconstruction of flood-affected areas, seven development schemes costing Rs5.5 billion were approved.

Source: www.thenews.com.pk

Roadblocks for NH-widening in Goa

PANAJI: While nationally highways are being added at the rate of 11km-per-day, in Goa the national highways authority of India’s project to widen NH 4-A is yet to take off, a year-and-a-half after it was tendered. In fact, a status update of the project shows it is fast heading towards being re-tendered. The latter is already the fate of Goa’s other national highway-NH 17.

The delays in both projects are courtesy the state government’s demand for flyovers, realignments, toll exemptions for light motor vehicles, and overall delays in handing over the required land. These demands, in fact, led to the cost of widening NH 17, estimated and tendered in 2010 at 3,100 crore, to shoot up by over 806 crore. NHAI sources say the project may be retendered.

Similarly, when IRB Infrastructure Developers Ltd, Mumbai, was awarded the contract to widen the 65km-long NH 4-A in early 2010, the cost was estimated at 471 crore. Now, additional demands by the state government to construct more flyovers, more underpasses and change the alignment has raised the project cost by 106 crore, sources said. “The work is already awarded and there is no way the NHAI is going to bear such a high additional burden,” sources in the authority told TOI.

Incidentally, the land for widening the highway that connects the state to Karnataka via Ponda has also yet to be handed over to NHAI in both, North and South Goa.

Sources in the land acquisition section of the South Goa collectorate confirmed non-acquisition of land in the district. Clearances from the state wildlife board for the 10km-stretch that falls in deeply forested areas between the Mollem National Park and Bhagwan Mahavir Wildlife Sanctuary are also pending.

The lack of clearances led to the NHAI proposal being sent to the ministry of environment and forests in May 2007, only to be returned without approval. “The project was initiated by NHAI in 2003 and is only 65km long. But it is still dragging,” sources lamented.

From P1

The last nail in the NH 4-A coffin is probably the demand by the state government that non-commercial LMVs should be exempted from toll. “This demand cannot be accepted. Toll policy on national highways is finalized by the central government. This is a BOT (build-own-transfer) project being built under the public-private-partnership model. Toll is the only source of revenue for the contractor. If it is exempted, nobody will want to come to Goa,” said an NHAI source.

Sources in the authority further added that the economic evaluation of the project showed benefits that include reduction in vehicle operation cost, reduction in travel time and reduction in accident cost. Analysis period was taken as 30 years from the date of operation.

The Goa-Belgaum road is considered very important. There is a substantial movement of iron ore on the road. Other necessities like vegetables, fruits, etc, from Karnataka to Goa are also transported via this route. The road witnesses about 50 or 60 accidents every year due to mining traffic. If it is widened, this will stop, sources said.

The NH 17 widening project connecting Patradevi to Polem has long been bogged in controversy and delayed over proposed demolitions along the route in Goa. As reported earlier, the land acquisition procedure for widening NH 17 lapsed in the first week of April. tnn

Source: timesofindia.indiatimes.com

Higher qualification bar lowers bid response for UP highway projects

The number of bidders appears to have gone down for two highway development projects in Uttar Pradesh (UP) due to higher qualification and threshold criteria set by NHAI.

A broad indicator of this is the comparison between the number of bidders for these two projects and other projects that have recently been bid out, or are under bidding.

For these two projects, to be implemented on an engineering procurement contract (EPC) model, there are about seven bidders for one project and 10 for the other seeking qualification to be able to submit financial bids.

About 15-50 bidders have qualified to submit financial bids for other highway development projects, for which the earlier qualifying criteria exist.

UP PROJECTS

For developing the 165.5-km stretch between Tanda and Rae Bareilly in UP, the bidders who have applied at the technical qualification stage are HCC, IVRCL, Leighton-Welspun, Isolux, Soma, Alsim Alarko Sanayi and L&T.

To develop the 140-km stretch between Rae Bareilly and Banda, 10 bidders have applied. – GPL-Punj Lloyd, HCC, IVRCL, Galfar, Leighton-Welspun, Isolux, Soma, Alsim Alarko Sanayi, L&T and Gammon.

OTHER PROJECTS

The response is in contrast with other projects to be implemented on build-operate-transfer (BOT) – annuity basis, for which NHAI has invited bids.

This is despite the fact that BOT-annuity projects are usually riskier for a road developer compared to EPC projects. Various factors including project model, time of bidding, geographical location also affect the bid response for projects.

For developing a 289 km stretch on the Jabalpur-Rajmarg Crossing-Bareli-Bhopal section, 14 bidders have technically qualified to submit financial bids.

For developing a 66 km stretch on the Jhalawar-MP/Rajasthan border section in Rajasthan, 52 bidders have qualified.

Similarly, for developing the Dahod-Padhi section in Rajasthan, 49 bidders have qualified to submit financial bids.

In fact, the highway builders lobby – National Highways Builders Federation — which has 70 contractors as its members has represented to the Highways Ministry and Competition Commission of India against various clauses in the new ‘model concession agreement’ for EPC projects.

These clauses limit competition by raising the bar for qualifying norms, NHBF had contested.

Source: www.thehindubusinessline.com

PINC recommends `Buy` on Ashoka Buildcon

PINC Research has recommended `Buy` on Ashoka Buildcon with a price target of Rs 363 as against the current market price (CMP) of Rs 240 in its report dated Oct 14, 2011. The broking house gave the following rationale:

What`s the theme:

Ashoka Buildcon (ABL), with an experience of ten years in BOT road projects, currently has 23 projects in its portfolio, with 16 projects being operational. The company is among the few BOT developers that has seen a complete life cycle of a project and has handed over four BOT assets back to the government. ABL also has a strong in-house EPC arm, which executes in-house and third-party contracts.

What will move the stock:

1) Post the IPO, ABL is aiming for the next league with an aggressive but calculated bidding strategy. In FY11, the company won projects of more than Rs 30 billion. We expect it to maintain a market share of 3.5% in NHAI bidding in FY12-13. 2) No dilution likely in the medium term; ABL would require equity of Rs 8 billion in the next three years, which is likely to be met from internal accruals and securitization of the existing projects.

Where are we stacked versus consensus:

Our FY12 and FY13 earnings estimates are Rs 21.6 and Rs 25.7, 12.1% and 15.3% lower than consensus estimates respectively. We expect top-line growth of 12.5% and 19% to Rs 20.1 billion and Rs 23.3 billion in FY12 and FY13 vs. consensus forecasts of 46.8% and 21.5% to Rs 19.1 billion and Rs 23.2 billion, respectively. We value BOT (on a DCF basis) at FY12E and FY13E equity multiples of 1.6x and 1.1x, respectively. Our SOTP-based target price is Rs 363, where BOT is valued at Rs 208 and EPC at Rs 155 (9x FY12E earnings). The stock offers an upside potential of 51% at our SOTP-based target price of Rs 363 vs. consensus target of Rs 344.

What will challenge our target price:

1) Lower IRR owing to further increase in interest rates; 2) Lower traffic growth; 3) Slowdown in execution of current orders; and 4) Adverse impact on tolling charges from any changes in government policy.

Source: www.myiris.com

Sadbhav Engineering: Low debt, consistent growth record make the company an attractive investment option

Ahmedabad-based Sadbhav Engineering is a diversified construction company, with projects related to construction of roads and highways, irrigation and mining. It has completed over 48 projects across these sectors. A substantial portion of the company’s revenues — around 70% –comes from road projects, while the remaining comes from mining (17%) and irrigation (13%) projects.

INVESTMENT RATIONALE : Sadbhav Engineering’s ability to maintain margins consistently makes it a good investment prospect. In the last five financial years, the company has been able to maintain its operating profit margin at 11-12% and net profit margin at 4-5%. This seen in the light of the changing interest rate scenario indicates the company’s sound project execution ability. Another factor that has helped the company maintain margins is its low debt and interest expense. Even as interest rates have increased over the last year-and a-half to June 2011, the company’s interest expense as a percentage of net sales has stayed in the 1-2.5% range, while the company’s net sales have grown by 34% to Rs 612 crore in the same period. It has an order book of Rs 6,586 crore, a big chunk of which comes from build-operate-transfer (BOT) projects.

Source: indiatimes.com

Expressway project costs shoot up to Rs 45-50 cr a km

The Union road transport ministry is finding it difficult to adopt a viable economic model for access-controlled expressways. The current cost estimates have shot up to Rs 45-50 crore per km against Rs 10 crore a km needed for six lane highways.

With such a huge investment requirement, the ministry is unsure if the build operate transfer (BOT) model for public private partnership projects (PPP) is viable. If the BOT model is adopted, the toll fees will have to be kept very high to recover the cost over a 30 year period. “State and national highways with lower toll would entice more people to use them,” a senior government official said.

The ministry has drafted a plan to construct 15,600 km of expressways by 2022 and has identified over 40 stretches for the same. The idea is to create an Indian National Expressway Network by the 13th Five Year Plan. The plan is to cover special economic zones (SEZs), industrial corridors, industrial towns and densely populated cities to raise the average distance travelled by a vehicle from 300 km per day to almost 600-800 km a day.

The BOT annuity model, where the government pays annually or bi-annually to compensate the private developers, also appears to be unviable, say officials. The reason is that such high cost of construction will entail huge public expenditure while there are other competing sectors in the economy which are vying for same allocations.

“The third model before us is the engineering procurement construction (EPC). Which is not an option here as that would again imply a huge burden on the government’s exchequer,” the official pointed out.

In developed countries, the first 50-100 km of expressways are built by the government to attract private developer. Once traffic picks up on the route, the developers build the remaining length of the expressway and is allowed to charge toll on the entire length (including the stretch constructed by the government).

The government allows this as an added incentive towards recovering the cost of construction and reaching the targeted internal rate of return.

Source: indianexpress.com

Ramky Infra Bags Orders Orders Worth Rs.1,006 Cr.

(RTTNews) – Ramky Infrastructure Ltd. said it had secured new orders aggregating to Rs.1,006 crore across buildings, industrial, water and waste water, road and power sectors.

Some of the notable projects are given below

Buildings Sector

In Tamil Nadu, the company bagged an order for Rs.207.35 crore from Purvankara Projects Ltd. for residential project PURVA WINDERMERE, Chennai, with a completion period of 21 months.

In Maharashtra, it has been awarded a project for Rs.74.41 crore from River View Properties Pvt. Ltd. for constructing residential township project at Nande-Mahalunge Road, Mahalunge, Pune. The tenure of completion is 2 months.

In Karnataka, the company secured a project for Rs.45.12 crore from National Mantri Dwelling Pvt. Ltd. for main contract works, Mantri Glades-Bengaluru. The tenure of completion is 25 months.

In Haryana, it bagged an order for Rs.31.08 crore from Indiabulls Infra Constructions Ltd. for construction of residential premises.

Industrial Sector

In Madhya Pradesh, the company secured an order for Rs.109.12 crore from Reliance Infrastructure Ltd. for construction of general civil work for coal handling plant at Sasan Ultra Mega Power Project, Sasan, Madhya Pradesh, with a completion period of 20 months.

In Orissa, it has been awarded a project for Rs.59.92 crore from Hindustan Construction Co. Ltd., for general, civil and arch. work for auxiliary buildings, pipe racks, misc. pump houses including CW Pump House and Forebay structure at Lapanga.

In the Gujarat, it had secured a project for Rs.28.83 crore from National Dairy Development Board for civil, structural, water supply, sanitary, internal electrification and street lighting works of 100MTPD dairy whitener powder plant project at Banas Dairy, Palanpur. The completion 18 months.

Water and Waste Water

In Rajasthan, it has secured orders for Rs.219.33 crore for water supply projects in Rajasthan. The completion period is 24 months.

Roads segment

In Madhya Pradesh, the company bagged an order for Rs.91.06 crore from Madhya Pradesh Road Development Corporation Ltd. for strengthening, widening, maintaining and operating of Sehore-Icchawar-Kosmi Road on BOT (Toll + Annuity) basis, with a completion period of 24 months.

In Power segment, the company secured a project for Rs.37.81 crore from M.P. Madhya Kshetra Vidyut Vitaran Co. Ltd., for survey, supply of materials, installation, testing and commissioning of new 33/11kV substations and new 33kv and 11kV lines under are of central Discom Bhopal at Guna, Shivpuri, Sheopur and Hind circle. The completion period is 18 months.

(RTTNews) – At the BSE, Ramky Infrastructure shares are being traded at Rs.231.60, up by 0.46 percent from the previous close.

Source: http://www.rttnews.com

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