Highways Ministry can award PPP projects of Rs 500 cr

July 30, 2013

MAMUNI DAS

(For projects implemented on public-private partnership basis, which involved investments

from the private sector, the Highways Ministry had to wait for approval from the Cabinet

Committee on Economic Affairs.)

NEW DELHI,

The Cabinet Committee on Economic Affairs (CCEA) has delegated powers to the Highways Ministry to approve all road projects of up to Rs 500 crore irrespective of the mode of implementation.

At present, there is dichotomy in the approval process followed for award of projects of up to Rs 500 crore.

For those projects which were implemented on an engineering procurement contract (EPC) basis, which are entirely funded by the Government, the Highways Ministry had power to approve projects of up to Rs 500 crore.

But for projects implemented on public-private partnership basis, which involved investments from the private sector, the Highways Ministry did not have similar powers.

According to an official release, “At present, projects of Rs 500 crore or above require investment approval of the Cabinet Committee on Economic Affairs (CCEA) but projects below Rs 500 crore have varying appraisal and approval levels, depending on the source of funding and mode of implementation of projects.”

The CCEA approved the proposal for a change in the delegation of powers for appraisal and approval of National Highways projects. This will simplify the appraisal and approval of the National Highway projects, it added.

Source -http://www.thehindubusinessline.com

(This article was published on June 13, 2013)

Written by ITW Editor · Filed Under PPP, Road Transport and Highways (Ministry)

Road projects: Exit norms can bring in funds, cut debt, say infra firms

July 30, 2013

V. RISHI KUMAR

A toll plaza on the Chennai-Bangalore National Highway. – Bijoy Ghosh

HYDERABAD, JUNE 22:

Companies doing sizeable business in the infrastructure space have welcomed the Government’s move to bring in flexibility in the roads sector, including revised norms that permit stake sale in projects right after commissioning.

The move is expected to accelerate the rate of churn of projects, increase the size of disinvestment, bring about liquidity, aid in debt swap and infuse fresh equity into new projects.

R. Balarami Reddy, Executive Director, Finance, IVRCL, told Business Line that the decision will help accelerate the process of exits and give more flexibility to the developer.

EASING DEBT BURDEN

Until now, a developer of road projects under the National Highways Authority programme could divest up to 74 per cent stake in the project two years after the date of commissioning. The developer had to retain the rest during the concessional phase.

Now, the Cabinet Committee of Economic Affairs has permitted infrastructure companies to sell their stakes soon after the date of commissioning. This could be in tranches or for the entire project value , Reddy explained.

Sridhar Cherukuri, Chairman and Managing Director of Transstroy (India) Ltd , said, “These changes bring in flexibility to developers to divest stake and redeploy funds into new projects. We are at an advanced stake of concluding deals.”

T. Adibabu, Chief Operating Officer, Finance, Lanco Infratech Ltd, said the infrastructure sector has been waiting anxiously for regulatory changes as it would help infuse liquidity for developers.

“By disinvestment of stake in mature projects, companies can pass on debt to the buyer. It releases the promoter’s equity, which can be redeployed into new projects. The developer can strike new loan contracts, freeing up high-cost debt,” Adibabu said.

Several pension funds and overseas investors are keen to invest in completed road projects. The Government move will pave way for such investment. Internal rate of return on investments too will go up, he said.

‘A SETBACK’

M. Gautham Reddy, Executive Director of Ramky Infrastructure, said, “While the norms help in infusing liquidity, other critical elements relating to premium has been deferred. This is a setback. But for the buyer, it helps in gaining management control by taking up to 51 per cent stake.”

IVRCL had to re-negotiate and tweak a stake sale deal with TRIL, a Tata Group entity, for divesting stake in three road projects for Rs 2,200 crore, in keeping with existing divestment norms.

Companies such as Madhucon Projects, IVRCL, Transstroy, Lanco and NCC Ltd are all in the process of divesting stakes in completed projects.

Source-http://www.thehindubusinessline.com

Written by ITW Editor · Filed Under MORTH, Road, Road Transport and Highways (Ministry)

Road project loans to get secured debt tag

December 10, 2012

Move can cut cost of funds for large projects

The prime minister has moved a proposal that will lead to classifying loans given by banks and financial institutions to road projects as secured debt.

The objective is to reduce the cost of funds for the projects and also encourage banks to take larger exposures in road projects.

To make this possible, prime minister Manmohan Singh has asked the chairman of his economic advisory council, C Rangarajan, to suggest appropriate recommendations. Roads secretary A K Upadhyay has been asked to put together a note to the council for the purpose. On its part, the finance ministry will seek feedback from RBI and banks. Rangarajan will consult RBI before making recommendations.

At a recent review by the prime minister, the ministry flagged the treatment of loans and the cost of money as the biggest limiting factors in mobilising funds for road projects.

The prime minister has asked road minister C P Joshi to ensure that contracts for construction of 8,000 km of roads are awarded by March. But the ministry has said that contracts for 3,000 km under the build operate and transfer scheme would be awarded by then.

The government has also decided to set up an independent rail tariff authority and railway minister Pawan Kumar Bansal will go to the cabinet with the relevant proposal next month. The authority may be announced in the next rail budget.

Also on the directive of the prime minister’s office, the Mumbai elevated rail corridor and locomotive factories in Madhpur (Bihar) and Marhowra (West Bengal) would get support from the railways next year.

PMO wants the Maharashtra government to sign the support agreement for the elevated rail project within a fortnight. The railway ministry has been asked to ensure that bids for the project are opened before the next rail budget.

An inter-ministerial group headed by cabinet secretary Ajit Kumar Seth has suggested that the railway ministry seek approvals from the cabinet committee on economic affairs quickly for both the locomotive factories. Both will come up in partnership with the private sector.

About the dedicated rail freight corridors PMO wants revised estimates and funding arrangements finalised by next week.

Seth will coordinate security clearance before the financial ends for large port projects which plan to expand their combined handling capacity to 245 million tonnes a year.

March is also the deadline by which two major ports projects in Andhra Pradesh and West Bengal will be awarded. The shipping ministry’s proposals for this will go before the cabinet soon.

Loans given to roads, bridges and other public properties like Delhi Metro are considered unsecured as there is no tangible security. Banks recently made a representation to finance minister P Chidambaram to let them classify loans to public property as secured advance.

Banks also said that once revenues began to come in as toll fee for sue of roads ad bridges, loans to them could be used as collateral, making it secured exposure.

Lately banks have been cutting their exposure as many road projects are stuck for want of clearances. Their main complaint is loans to projects delayed by more than two years have to be classified as substandard assets and they have to make higher provisions.

A substandard unsecured loan has a provisioning requirement of 25 per cent of total loans, while a secured loan has only 15 per cent in the first year of classification.

P Sitaram, chief financial officer of IDBI Bank, said, “For loans given to roads bridges and other public property there is no tangible security as these cannot be taken up by banks and sold off. But all these projects have toll collections that can serve as collateral. There is a view that these advances should be considered secured assets.”

Bankers say that even working capital loans given to some debtors are secured as cash receivable from the customer is secured. The same argument can be extended to exposures to public utility infrastructure.

Usually road developers enter into a concession agreement with banks, NHAI and the state concerned. Private companies develop roads on a BOT basis which allows them to run and maintain the road or bridge for 10 to15 years and then transfer it to the government.

source: http://www.mydigitalfc.com

Written by ITW Editor · Filed Under BOT, Projects

Poor market sentiment for slow pace in road project awarding

December 3, 2012

NEW DELHI: The government today said pace of awarding road projects is slow in the current fiscal due to a host of reasons, including poor market sentiment.

“The pace of award of projects is slow due to various constrains like poor market sentiments, shortage of equity of developers, lender’s pre-condition of 80 per cent possession of land…,” Minister of State for Road, Transport and Highways Sarvey Sathyanarayana said in a written reply to the Lok Sabha.

The exposure limit of banks for infrastructure projects reaching to its pinnacle and Supreme Court’s ban on quarrying of stones and pure earth, used in road construction, are also posing problems.

The Minister, however, said out of the 6,089 km National Highways targeted to be developed/improved during the current fiscal under NHDP (National Highways Development Project) and non-NHDP schemes, 2,493 km have been developed till September.

Sathyanarayana said 32 projects, aggregating 3,750 km, are proposed to be taken up with 100 per cent Government funding in various states on engineering, procurement and construction mode as these were not viable to be developed on Built Operate Transfer (BOT) mode.

In a separate reply, he said that of the proposed 32 projects, 10 with a total length of 1,010 km are in Rajasthan and six road projects measuring 765 are in Uttar Pradesh among others.

In another reply, Sathyanarayana said that a proposal amounting to Rs 156.79 crore was received for development of the existing four-lane carriageway to six-lane carriageway passing through Ghaziabad on NH-24.

“… the same was returned unapporved as the work was not included in the Annual Plan 2012-13,” he said.

source: http://articles.economictimes.indiatimes.com

Written by ITW Editor · Filed Under MORTH, NHDP

India calls for Malaysia cos in road projects

December 3, 2012

India on Thursday sought investment from Malaysian companies in road-development projects in the country, stating that it had embarked on a massive national highway building programme. Visiting minister of state for road transport and highways, S Sathyanarayana, said India envisaged investment of upto USD 70 billion in the next five years in this field.

“About 50-to-60 percent of this programme is envisaged to be built through public-private partnership (PPP) in different types of concession agreements such as the build, operate and transfer (BoT) on toll basis and design, build, finance, operate and transfer (DBFOT) concept,” he said.

“A balanced programme is envisaged to be taken up on BoT (annuity) and engineering, procurement and construction (EPC) mode with public funding,” the minister said. “We intend to take up mega projects of longer length of about 400 to 500 km estimated to cost about USD 1 billion each and would welcome international participation and foreign direct investment (FDI),” he told reporters at the sidelines of the Asean-India Connectivity Summit.

source: http://www.moneycontrol.com

Written by ITW Editor · Filed Under EPC, PPP

Private Sector Participation In Road Sector

September 6, 2012

Response of private sector to Build-Operate-Transfer (BOT) projects in road sector was overwhelming till 2011-12, but recent response during the current financial year has been comparatively subdued.

A record length of 7957 Kms of roads was awarded for strengthening/upgradation and improvement during the financial year 2011-12. The primary reason is lack of availability of finance, many banks having reached the sectoral ceiling prescribed by the Reserve Bank of India. Infrastructure developers are finding it difficult to raise equity. Delays are also due to delay in land acquisition process and in obtaining environment and forest clearances. Such delay in the actual start of the project adds to the expense of the project cost due to cost escalation and idling of various resources like manpower, plant and machinery etc. Government has taken a number of steps to minimise procedural bottlenecks and delays.

Ministry of Road Transport and Highways has taken up the matter with all the State Governments emphasizing the need to streamline the process of land acquisition and utility shifting etc, by constituting high level committees under the Chairmanship of the Chief Secretary of the respective States.

A Committee of Secretaries has been constituted under Cabinet Secretary to address inter-ministerial and Centre – State issues such as land acquisition, utility shifting, environment approvals, and clearance of Railways Over Bridges (ROBs). Apart from the above, Confederation of Indian Industry (CII) –Ministry of Road Transport and Highways (MoRTH) Joint Task Force on Roads and Highways also meets regularly to find out ways to minimise procedural bottlenecks and delays. Regular interactions are held with the contractors, developers and financial institutions to address and resolve their concerns. Within the Government, meetings are held at the highest levels to simplify and rationalize procedures.

SOURCE :http://logisticsweek.com

Written by ITW Editor · Filed Under News

347 road projects delayed due to delays in green clearances

September 6, 2012

As many as 347 road projects including those pertaining to Border Road Organisation (BRO) are awaiting green clearances, the government said today.

“A total of 347 cases including those with BRO are pending for environmental and forest clearances,” Minister of State for Road Transport and Highways Jitin Prasada told Rajya Sabha in a written reply.

However, he said the projects do not involve any cost escalation.

“Majority of the projects are being taken up on Built-Operate-Transfer (BOT) basis, which does not involve cost escalation,” Singh said.

Generally projects are started only after obtaining environment clearance, he said adding the Ministry was constantly pursuing such matters with Ministry of environment and Forests ( MoEF).

SOURCE: http://articles.economictimes.indiatimes.com

Written by ITW Editor · Filed Under News, Road

Government Approves Rs 6,429 Cr Road Projects in 4 states including J&K

July 23, 2012

The government has approved eight highways projects worth Rs 6,429 crore in four states including the strategic Z-Morh tunnel in Jammu & Kashmir connecting Leh to Srinagar.

“Public Private Partnership Appraisal Committee in its meeting last night has approved eight highways projects in four states – Jammu & Kashmir, Rajasthan, Karnataka and Uttar Pradesh, mostly to be built under build, operate and transfer (BOT) toll mode,” a Highways Ministry official told PTI.

These eight projects include 6.5 km long Z- Morh tunnel on Srinagar–Leh highway, the fourth strategic tunnel in Jammu & Kashmir to be built at a cost of Rs 773 crore, he said.

The tunnel would provide all-weather connectivity to the people of the Ladakh region, he added.

The other approved projects include three highway schemes in Rajasthan including Rs 668-crore Rajsamand-Bhilwara, Rs 530-crore Rajasthan border-Salasar project and Rs 332-crore Jodhpur-Pali highways scheme.

The official said of the remaining four projects, three schemes — Rs 1,282-crore Chakari-Allahabad, Rs 909-crore Hadia-Varanasi and Rs 605-crore Kashipur-Sitarganj – for widening of roads are in Uttar Pradesh.

Besides, the PPEAC also approved four-laning of Hubri-Hospet 77 km stretch in Karnataka to be built at a cost of Rs 1,330 crore.

SOURCE: http://www.business-standard.com

Written by ITW Editor · Filed Under News, Road

Gammon, IL&FS in race for Rae Bareli-Jaunpur road project

July 23, 2012

Nine firms, including Gammon, IL&FS, Sadbhav Engineering, are in the race to develop the highway connecting Rae Bareli with Jaunpur.

Rae Bareli, in UP, is the constituency of the UPA chief, Ms Sonia Gandhi.

The Rs 570-crore project requires a National Highways Authority of India Board approval as bidders have sought more annuity than what was internally estimated by the Government.

This significance in the backdrop of recent concerns when there was a bleak response for projects. The length of the project is 166.40 km and the concession period is 17 years including the construction time of 24 months.

The project will be implemented on a build-operate-transfer (BOT)-annuity mode.

The project covers the districts of Rae Bareilly, Pratapgarh and Jaunpur.

PROJECTS UP FOR GRABS

Developers can look forward to bid for some large projects.

The Public Private Partnership Appraisal Committee (PPPAC) has approved the Z-Morh Tunnel in Jammu and Kashmir (Rs 2,773 crore), as also the following road projects: Chakeri-Allahbad (Rs 1,283 crore), Hubli-Hopet (Rs 1,330 crore), Rajsamand-Bhilwara (Rs 668 crore), Handia-Varanasi (Rs 909 crore), Kasgipur-Sitarganj (Rs 606 crore) and Jodhpur-Pali (Rs 333 crore). All the projects will be undertaken on a build-operate-transfer (toll) mode except the J&K project, which will be bid out on BOT (annuity) model. Under the latter, mode, the Government pays a certain amount twice a year to the bid winner to develop and operate the project.

The developers compete on the level of annuity they want during the concession period; and developers do not get to keep the toll revenues.

In BOT-toll mode, the developers get to keep the toll revenues for the concession period.

SOURCE: http://www.thehindubusinessline.com

Written by ITW Editor · Filed Under Gammon, IL&FS, News

Have completed BOT project in MP before time: Valecha Engg

December 26, 2011

Valecha Engineering has been in the red. The company’s recently commissioned build-operate-transfer (BOT) project is facing execution pressure. However, managing director Jagdish K Valecha indicated that the company has been able to commission its first BOT road project in Madhya Pradesh and Indore 11 months ahead of time.

The company also plans to complete the second BOT project before time instead of 24 months. “This will get us the extra revenue stream by way of toll and tax free revenue stream in the SPV,” he added.

Q: How much are you bidding for in terms of future orders? What will be the breakup of the geographical division?

A: We have got projects in North Delhi, Madhya Pradesh, Gujarat and Arunachal. These are the four-five larger areas where we are concentrating. We have got projects down south in Bangalore and Chennai as well.

Q: Is there any reason to concentrate more on the north or has it always been like that? Where is execution the easiest?

A: In the North, before the Commonwealth Games, we were one of the few companies who delivered most of our flyovers before the Commonwealth Games. We have built up a brand equity towards the North for the infra projects and a lot of projects are happening.

The company has also qualified itself and made bid for the underground metro, which is a high tech fish area in Delhi for Delhi Metro Corporation, along with international joint venture partner.

Q: Could you give us an update on the debt on the books? Will you all be pairing down anything in FY12?

A: The debt on the book is comfortable. It’s around 1:1 ratio. We are not over feared as yet. We are taking selective projects, where most of the projects are going at prices that are like premiums.

We have bagged projects with good IRRs. We are keeping an eye on the EBITDA and then bagging the projects, instead of just going behind the project.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying videos.

Q: Could you take us through a couple of these exactions concerns that lots of infrastructure companies are facing at this point in time? How is the situation on the ground looking for you all?

A: There are execution challenges with the other infrastructure companies, who have over bagged the orders and this is the reason they are not able to execute.

The good news in the case of Valecha Engineering is that we have been able to commission our first BOT road project in Madhya Pradesh and Indore 11 months ahead of time. This is a record in the road building exercise that the country has embarked upon.

Q: Coming to the other two BOT projects that you bagged about six to seven months back; you were looking to get financial closure, particularly for the third one. Are there any kinds of delays or stress on that account?

A: All the BOT projects have got the financial closure. The recent one in Gujarat (Bhuj to Bhachau) of nearly Rs 500 crore has also received its financial closure last week. This project will also now kick-start in a faster anvil as such.

Q: Concentrate a bit on your Q2 numbers, your net sales were down 19% for the quarter on a year-on-year basis, but you improved in the margins to 11% versus 7% on a year-on-year basis. What sort of operational efficiencies are you undergoing or implementing at this point in time? What is the outlook for the remaining part of the fiscal in terms of margins?

A: We developed a strategy a year back to have 25% sales out of BOT projects and 25% sales out of budgeted projects. In the budgeted projects, we have a mixed client base and mixed geographical base so that the risk is divided.

The current stress of the management with the team at the project side is to implement the projects ahead of time for the recent projects and concentrate on improving the efficiency by quick delivery and turnaround.

Q: Even for BOT project two and three, will you execute it at a faster clip? When are they likely to get commissioned?

A: The project’s shelf life is 24 months. We are targeting the second BOT project instead of 24 months again like the first BOT project, which will obviously get us the extra revenue stream by way of toll and tax free revenue stream in the SPV. The concentration will be to complete the project ahead of time.

Q: How much are you bidding for in terms of future orders? What will be the breakup of the geographical division?

Q: Is there any reason to concentrate more on the north or has it always been like that? Where is execution the easiest?

The company has also qualified itself and made bid for the underground metro, which is a high tech fish area in Delhi for Delhi Metro Corporation, along with international joint venture partner.

Q: Could you give us an update on the debt on the books? Will you all be pairing down anything in FY12?

We have bagged projects with good IRRs. We are keeping an eye on the EBITDA and then bagging the projects, instead of just going behind the project.

Source: moneycontrol.com

Written by ITW Editor · Filed Under BOT, Valecha Engineering

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