Description
financing infrastructure projects in India, approaches to financing infrastructure projects in India, Peculiarities of Infrastructure Projects, Issues in Infrastructure Projects, Concerns of Debt Providers, PPP in India - Policy Initiatives, Delhi Metro - Financing Structure, Bandra Worli Sea link funding.
Trends in Financing Infrastructure Projects
Financing Infrastructure Projects
• Traditionally governments have built and maintained infrastructure • Will the government be able to able to garner this magnitude of funds? – obviously not ! • The last two to three decades have witnessed an increasing trend in Public Private Partnership
01 Sep 2010 Trends in Financing Infrastructure Projects 2
Public Private Partnership
PPP has become feasible because of technological change that allows unbundling of infrastructure, so that the public and the private sectors can take up the components most suited to their capacities.
01 Sep 2010
Trends in Financing Infrastructure Projects
3
Why PPP in Infrastructure?
• Why Private Sector?
• Govt does not have money?? • Private sector has expertise?
• Technical? • Managerial? • Project Management?
• Why not completely Private?
01 Sep 2010
Trends in Financing Infrastructure Projects
4
Approaches to Financing Infrastructure Projects in India
• • • • • Government Owned Company BOO, BOOT, BOLT, BOT Joint Venture with Private Sector Private sector on its own Private Investment including funds from general public
All arrangements involving private sector are referred to as PPP
01 Sep 2010 Trends in Financing Infrastructure Projects 5
Issues
• Which is the best way of financing Infrastructure? • What do private investors want? • How is financing infrastructure projects different from traditional projects? • What structures have been tried? • What has been the experience in India?
• What factors would make infrastructure projects attractive to Private Sector?
01 Sep 2010 Trends in Financing Infrastructure Projects 6
Private investment
• Share holders
• Dividend • Capital gains – share price depends on future
• Debt Providers–
• Bonds – interest (coupon) • Loans - interest
• Companies
• Business expansion • Market share • Strategic reasons
01 Sep 2010 Trends in Financing Infrastructure Projects 7
Financing Decision
•Equity •Debt
Shareholder’s Returns •Dividends •Capital Gains WACC Shareholders’ Value
Investment Decisions
•Fixed Capital •Working Capital
Cash-flow from Operations
Operating Decisions
•Sales & Growth •Operating Margin • Income Tax
•Duration of Value Growth
Peculiarities of Infrastructure Projects • Huge funds requirement • Long gestation periods • Asset created generally does not have any market value • Public goods • Public property – ownership issues • Revenues?
01 Sep 2010 Trends in Financing Infrastructure Projects 9
Issues in Infrastructure Projects
• High Risk • Equity providers would require higher than normal returns (higher EPS) • Higher EPS can be achieved with high Leverage or Debt / Equity Ratio • Projects should attract debt funds • Projects should be so designed that concerns of debt providers are addressed
01 Sep 2010 Trends in Financing Infrastructure Projects 10
Concerns of Debt Providers
• Basic concern – the debt should be serviced as per agreed terms • DSCR • Uncertainty of Revenues • Uncertainty of Expenses • Uncertainty of Managerial decisions
• Operating decisions • Dividend Decisions
01 Sep 2010 Trends in Financing Infrastructure Projects 11
Project Company
• SPV created - Ring Fenced • Pre-contracting all expenses • Locking-in revenues
• Agreement for 100% pay-out • Cash-flow modeling • Agreement on cash-flow utilization – Cash “Waterfall” • Full involvement of lenders right from planning
01 Sep 2010 Trends in Financing Infrastructure Projects 12
• Annuity, Shadow tolls, Pre-sales
Financing Decision
•Equity •Debt
IRR of equity cash flows
Dividends
Investment Decisions
Interest
Shareholders’ Value •Fixed Capital Net Revenue from Operation s
•User Charges •Revenue Growth •Income Tax •Duration
Financing Infrastructure -Indian Scenario
• Power, railways, roads, ports, airports and telecommunications were the exclusive domain of the government. • Rising gap between demand and supply had made private sector role essential • Government continues to invest significant sums in areas where private participation is minimal or not forthcoming.
01 Sep 2010 Trends in Financing Infrastructure Projects 14
PPP in India - Policy Initiatives
• Policy and regulatory environment more sectors opened up • Viability Gap Funding scheme
• Standardized Agreements
Model Concession Agreement
01 Sep 2010
Trends in Financing Infrastructure Projects
15
Delhi Metro - Financing Structure
• 30% Equity : •15% Govt of India •15% Govt. of Delhi • 56% Loan from OECF (Japan) Soft Loan • 8% Subordinated Debt from Govt of India & Govt of Delhi • 6% from Property Development
01 Sep 2010 Trends in Financing Infrastructure Projects 16
Delhi Metro -Other Support
• Loan repayment : partly from surpluses & partly through levies / taxes in Delhi
• Exchange Rate risk underwritten by government • DMRC exempted from all duties and taxes • Dividends only after loan repayment
01 Sep 2010 Trends in Financing Infrastructure Projects 17
01 Sep 2010
Trends in Financing Infrastructure Projects
18
Delhi Metro - Learnings
• • • • • • Absence of government interference Transparency & brand building Sensitivity to public inconvenience Dialogue with stake holders Communications Revenue Management
Fares, technology, educating users
• Achieving “buy-in”/“ownership” of people
01 Sep 2010 Trends in Financing Infrastructure Projects 19
01 Sep 2010
Trends in Financing Infrastructure Projects
20
Hyderabad Metro
• Akhileshwar Sahay, the president of infrastructure consultancy Feedback Ventures, who say that there is no example of a successful privatelyfinanced metro rail project in the world. • ???
01 Sep 2010
Trends in Financing Infrastructure Projects
21
Shreedharan on Hyderabad Metro Sreedharan agrees. He says that except of specific lines like the Delhi downtown-to- airport link, where high fares can be charged, private-partnership metros are not viable.
01 Sep 2010
Trends in Financing Infrastructure Projects
22
DMRC recommendations
• Private participation only in the Hyderabad metro because it is an overhead line (lowering cost) where high usage is expected as it passes through the densest parts of the city. • But still a subsidy of 40 per cent was factored in to make the project viable.
01 Sep 2010 Trends in Financing Infrastructure Projects 23
What happened?
• Maytas Infrastructure consortium that won the concession has offered to pay the government Rs 35,311 cr over a 35-year period • The money will come from rentals of 18 million square feet of commercial space at depots and station • ??
01 Sep 2010 Trends in Financing Infrastructure Projects 24
Bangalore Metro
• Bangalore Mass Rapid Transit Limited • Equity GOI GOK Total • Subordinate Debt • Senior Debt • Total CAPEX :
01 Sep 2010
1223.70 (15%) 1223.70 (15%) 2447.40 (30%) 2039.50 (25%) 3671.10 (45%) 8158.00 (100%)
25
Trends in Financing Infrastructure Projects
Delhi Airport Metro Express
• On Jan 23, 2008, the DMRC awarded a 30 year BOT contract to the Reliance Energy – CAF consortium • ?Concessionaire? approach • Delhi Airport Metro Express Pvt. Limited, a subsidiary of Reliance Infrastructure Limited
01 Sep 2010
Trends in Financing Infrastructure Projects
26
DAME Specfics
• Underground tunnel and the associated stations will be constructed by DMRC using the EPC contract route • Laying of railway track and management of the railway service will be done by a private sector concessionaire—a consortium headed by Reliance Infrastructure Ltd and partnered by CAF of Spain. • Work split into 6 parts - Indian, foreign & JV companies involved
01 Sep 2010 Trends in Financing Infrastructure Projects 27
Financing Dame
• Cost Rs 2,885 crore • Debt to Equity Ratio of 70:30 • Funding at 255 points lower than prime lending rate of Axis Bank, which is the lead banker for the deal • India Infrastructure Finance Company Ltd (IIFCL) Bank of India, Canara Bank, Central Bank of India, Andhra Bank, Allahabad Bank, Dena Bank, Punjab & Sind Bank, and UCO Bank
01 Sep 2010 Trends in Financing Infrastructure Projects 28
Tehran Metro
• Efforts on for a long time • 1985 - Metro Company formed • The company has also been granted the concessions for exploitation of iron ore mines in Bandar Abbas (Hormuzgan Province), exploitation and sale of Moghan iron ore mine in Azarbaijan Province, export of fuel oil from Isfahan oil refinery as well as tar form Isfahan steel mill and so on.
01 Sep 2010 Trends in Financing Infrastructure Projects 29
Tehran Metro - 2008
• A pilot plan • Under the scheme, the Government buys land and sells it to companies at discounted prices • The contractors can develop the land as they wish but they need to include a metro station into the work • & agree to share profits from their project on a short-term basis.
01 Sep 2010 Trends in Financing Infrastructure Projects 30
Bandra–Worli Sea Link (BWSL)
• 6km long road which connects Bandra Reclamation to Worli Seaface • Rs. 1634 /- Crore project of MSRDC • Owned by MSRDC • executed by Hindustan Construction Co design and project management by DAR Consultants • Toll Collection Concession given to Mumbai Entry Point Private Limited (MEPL)
01 Sep 2010 Trends in Financing Infrastructure Projects 31
01 Sep 2010
Trends in Financing Infrastructure Projects
32
01 Sep 2010
Trends in Financing Infrastructure Projects
33
Mumbai Entry Point Toll Ltd (MEPTL) • 34.2 crores for one year • Only cars Toll=Rs 50 • 70,000 vehicles a day was far off the mark, with actual traffic averaging only 37,500 vehicles a day • ??
01 Sep 2010
Trends in Financing Infrastructure Projects
34
01 Sep 2010
Trends in Financing Infrastructure Projects
35
Sea Link Phase II
• Reliance Infrastructure has bagged the Rs 5K cr deal to construct the Mumbai Sea-link. The sea link will be built between Worli and Haji Ali • Rel Infra will pay Rs 5,100 crore for the freeway sea link including the Bandra Worli Sea Link (BWSL).
01 Sep 2010
Trends in Financing Infrastructure Projects
36
01 Sep 2010
Trends in Financing Infrastructure Projects
37
Cochin International Airport Ltd
• First PPP initiative in airport • Incorporated as an SPV- 1994 • Involvement of users was a pioneering concept of this project • Project was conceived even while policy on private participation in airport infrastructure was being debated
01 Sep 2010 Trends in Financing Infrastructure Projects 38
CIAL - Equity
Project cost - Rs 2300 million Equity -Rs 900 million
• 35 % • 16 % • 49 % Kerala State Government State enterprises Consortium of bank ,public sector companies NRI‘s & general public
People of Indian origin invested because of the hope of reducing travel cost and time besides avoiding inconvenience being faced during air travel
01 Sep 2010 Trends in Financing Infrastructure Projects 39
CIAL - Debt
• Rs. 1400 million : Term loan • Provided by :
• The Housing and Urban Development Corporation • State Bank of Travancore • Federal Bank
01 Sep 2010
Trends in Financing Infrastructure Projects
40
DND Flyway
• Noida Toll Bridge Company Ltd (NTBCL)
• Bridge connecting Delhi and NOIDA, satellite town across the river Yamuna
• 552.5 meters long ,8 lanes- capacity 222,000 vehicles per day
• IPO in 1999 • Bridge opened in 2001
01 Sep 2010 Trends in Financing Infrastructure Projects 41
DND Flyway- Project Structure
• Rs. 4082 million (US$ 100m) • 30-year BOOT concession • Equity Rs. 1224 million (US$ 30m) • Debt of Rs. 2858 million (US$ 70m)
• Term loans Rs. 2358 mln (US$ 58m) • Deep discount bonds Rs. 500 mln
01 Sep 2010
Trends in Financing Infrastructure Projects
42
DND Flyway – Concession Agreement
• 30 years or till such time the designated return is recovered, whichever is earlier • The rate of return is computed with reference to the project costs, cost of major repairs and the shortfall in the recovery of the designated returns in earlier years. • Transfer after full recovery of the total cost of project and 20% return
01 Sep 2010 Trends in Financing Infrastructure Projects 43
DND Flyway - Equity
Promoters
• IL&FS Transportation Networks Ltd 25.35%
• ILF&S 1.02 %
• Public Shareholding
• Institutions 28.92% • Non Institutions 39.46 %
( individuals about 20%)
01 Sep 2010 Trends in Financing Infrastructure Projects 44
DND Flyway -Criticism
• Guaranteed returns - 20% high • Returns related to project cost - no incentive to minimize costs • Project cost includes shortfalls in the recovery of returns in previous • Concession not awarded competitively • return high as returns are guaranteed • Multiple role of sponsors
01 Sep 2010 Trends in Financing Infrastructure Projects 45
Ultra Mega Power Plants
• Power Finance Company Ltd (PFC), a government owned company has set up 9 SPV‘s • PFC will get everything in place and sell these SPV‘s to private groups based on international competitive tariff bidding • Convert all the pre-biding expenses into equity
01 Sep 2010 Trends in Financing Infrastructure Projects 46
UMPP – Role of PFC Ltd
• Initiate/ do preliminary studies • Obtain approvals, clearances and fuel tie-ups and acquire land • Do Environmental Impact Assessment
• Sell to private companies • Tariff based International competitive bidding
01 Sep 2010 Trends in Financing Infrastructure Projects 47
UMPP – Concession
• Build, Own, Operate (BOO) basis
• Rehabilitation & Resettlement by State Govt
• Payment security mechanism for off-take Revolving letter of credit (LC)
• Escrow account • Direct supply to HT consumers if default
01 Sep 2010
Trends in Financing Infrastructure Projects
48
UMPP - Lessons
• Innovative idea – Government ?participation‘ for reducing difficulties
• A win-win situation
• However, the response so far indicates that these are seen as fair risks
• Increased transparency in bidding process will reduce controversies
01 Sep 2010 Trends in Financing Infrastructure Projects 49
Lessons
PPP can be a success in India • Private sector has an appetite for public infrastructure projects • All combinations of PPP are possible – JV with one developer, JV with a consortium and entirely private sector & individuals • Depends on the estimated revenues & risk • Proper structuring is necessary
01 Sep 2010 Trends in Financing Infrastructure Projects 50
Lessons
(2)
• Government participation is perceived as protection of public interests • Involvement of private sector has made levy of user charges acceptable • User charges need to be perceived as “fair” • Transparency and ?public‘ participation essential
01 Sep 2010 Trends in Financing Infrastructure Projects 51
Lessons - Concession Agreement A little care goes a long way
• Transparency • Unambiguous clauses • Avoid perception by public that the private party is “looting” or that the politicians have “sold-out” • Transfer to government control after the concession period is perceived well
01 Sep 2010
Trends in Financing Infrastructure Projects
52
Lessons – Image
• Crucial • ?People‘s Project? • Communication
• Transparency -availability of data • Continuous interaction with stake holders • Regular updates
• Employ local unskilled people • Take up social projects
01 Sep 2010 Trends in Financing Infrastructure Projects 53
Lessons from India
• • • • • • Structuring is crucial Reputation and image matters Local stake holder-groups matter Local practices matter Cannot wish away realities Adaptation to local realities crucial
Trends in Financing Infrastructure Projects 54
01 Sep 2010
thank you
01 Sep 2010
Trends in Financing Infrastructure Projects
55
doc_210794760.pptx
financing infrastructure projects in India, approaches to financing infrastructure projects in India, Peculiarities of Infrastructure Projects, Issues in Infrastructure Projects, Concerns of Debt Providers, PPP in India - Policy Initiatives, Delhi Metro - Financing Structure, Bandra Worli Sea link funding.
Trends in Financing Infrastructure Projects
Financing Infrastructure Projects
• Traditionally governments have built and maintained infrastructure • Will the government be able to able to garner this magnitude of funds? – obviously not ! • The last two to three decades have witnessed an increasing trend in Public Private Partnership
01 Sep 2010 Trends in Financing Infrastructure Projects 2
Public Private Partnership
PPP has become feasible because of technological change that allows unbundling of infrastructure, so that the public and the private sectors can take up the components most suited to their capacities.
01 Sep 2010
Trends in Financing Infrastructure Projects
3
Why PPP in Infrastructure?
• Why Private Sector?
• Govt does not have money?? • Private sector has expertise?
• Technical? • Managerial? • Project Management?
• Why not completely Private?
01 Sep 2010
Trends in Financing Infrastructure Projects
4
Approaches to Financing Infrastructure Projects in India
• • • • • Government Owned Company BOO, BOOT, BOLT, BOT Joint Venture with Private Sector Private sector on its own Private Investment including funds from general public
All arrangements involving private sector are referred to as PPP
01 Sep 2010 Trends in Financing Infrastructure Projects 5
Issues
• Which is the best way of financing Infrastructure? • What do private investors want? • How is financing infrastructure projects different from traditional projects? • What structures have been tried? • What has been the experience in India?
• What factors would make infrastructure projects attractive to Private Sector?
01 Sep 2010 Trends in Financing Infrastructure Projects 6
Private investment
• Share holders
• Dividend • Capital gains – share price depends on future
• Debt Providers–
• Bonds – interest (coupon) • Loans - interest
• Companies
• Business expansion • Market share • Strategic reasons
01 Sep 2010 Trends in Financing Infrastructure Projects 7
Financing Decision
•Equity •Debt
Shareholder’s Returns •Dividends •Capital Gains WACC Shareholders’ Value
Investment Decisions
•Fixed Capital •Working Capital
Cash-flow from Operations
Operating Decisions
•Sales & Growth •Operating Margin • Income Tax
•Duration of Value Growth
Peculiarities of Infrastructure Projects • Huge funds requirement • Long gestation periods • Asset created generally does not have any market value • Public goods • Public property – ownership issues • Revenues?
01 Sep 2010 Trends in Financing Infrastructure Projects 9
Issues in Infrastructure Projects
• High Risk • Equity providers would require higher than normal returns (higher EPS) • Higher EPS can be achieved with high Leverage or Debt / Equity Ratio • Projects should attract debt funds • Projects should be so designed that concerns of debt providers are addressed
01 Sep 2010 Trends in Financing Infrastructure Projects 10
Concerns of Debt Providers
• Basic concern – the debt should be serviced as per agreed terms • DSCR • Uncertainty of Revenues • Uncertainty of Expenses • Uncertainty of Managerial decisions
• Operating decisions • Dividend Decisions
01 Sep 2010 Trends in Financing Infrastructure Projects 11
Project Company
• SPV created - Ring Fenced • Pre-contracting all expenses • Locking-in revenues
• Agreement for 100% pay-out • Cash-flow modeling • Agreement on cash-flow utilization – Cash “Waterfall” • Full involvement of lenders right from planning
01 Sep 2010 Trends in Financing Infrastructure Projects 12
• Annuity, Shadow tolls, Pre-sales
Financing Decision
•Equity •Debt
IRR of equity cash flows
Dividends
Investment Decisions
Interest
Shareholders’ Value •Fixed Capital Net Revenue from Operation s
•User Charges •Revenue Growth •Income Tax •Duration
Financing Infrastructure -Indian Scenario
• Power, railways, roads, ports, airports and telecommunications were the exclusive domain of the government. • Rising gap between demand and supply had made private sector role essential • Government continues to invest significant sums in areas where private participation is minimal or not forthcoming.
01 Sep 2010 Trends in Financing Infrastructure Projects 14
PPP in India - Policy Initiatives
• Policy and regulatory environment more sectors opened up • Viability Gap Funding scheme
• Standardized Agreements
Model Concession Agreement
01 Sep 2010
Trends in Financing Infrastructure Projects
15
Delhi Metro - Financing Structure
• 30% Equity : •15% Govt of India •15% Govt. of Delhi • 56% Loan from OECF (Japan) Soft Loan • 8% Subordinated Debt from Govt of India & Govt of Delhi • 6% from Property Development
01 Sep 2010 Trends in Financing Infrastructure Projects 16
Delhi Metro -Other Support
• Loan repayment : partly from surpluses & partly through levies / taxes in Delhi
• Exchange Rate risk underwritten by government • DMRC exempted from all duties and taxes • Dividends only after loan repayment
01 Sep 2010 Trends in Financing Infrastructure Projects 17
01 Sep 2010
Trends in Financing Infrastructure Projects
18
Delhi Metro - Learnings
• • • • • • Absence of government interference Transparency & brand building Sensitivity to public inconvenience Dialogue with stake holders Communications Revenue Management
Fares, technology, educating users
• Achieving “buy-in”/“ownership” of people
01 Sep 2010 Trends in Financing Infrastructure Projects 19
01 Sep 2010
Trends in Financing Infrastructure Projects
20
Hyderabad Metro
• Akhileshwar Sahay, the president of infrastructure consultancy Feedback Ventures, who say that there is no example of a successful privatelyfinanced metro rail project in the world. • ???
01 Sep 2010
Trends in Financing Infrastructure Projects
21
Shreedharan on Hyderabad Metro Sreedharan agrees. He says that except of specific lines like the Delhi downtown-to- airport link, where high fares can be charged, private-partnership metros are not viable.
01 Sep 2010
Trends in Financing Infrastructure Projects
22
DMRC recommendations
• Private participation only in the Hyderabad metro because it is an overhead line (lowering cost) where high usage is expected as it passes through the densest parts of the city. • But still a subsidy of 40 per cent was factored in to make the project viable.
01 Sep 2010 Trends in Financing Infrastructure Projects 23
What happened?
• Maytas Infrastructure consortium that won the concession has offered to pay the government Rs 35,311 cr over a 35-year period • The money will come from rentals of 18 million square feet of commercial space at depots and station • ??
01 Sep 2010 Trends in Financing Infrastructure Projects 24
Bangalore Metro
• Bangalore Mass Rapid Transit Limited • Equity GOI GOK Total • Subordinate Debt • Senior Debt • Total CAPEX :
01 Sep 2010
1223.70 (15%) 1223.70 (15%) 2447.40 (30%) 2039.50 (25%) 3671.10 (45%) 8158.00 (100%)
25
Trends in Financing Infrastructure Projects
Delhi Airport Metro Express
• On Jan 23, 2008, the DMRC awarded a 30 year BOT contract to the Reliance Energy – CAF consortium • ?Concessionaire? approach • Delhi Airport Metro Express Pvt. Limited, a subsidiary of Reliance Infrastructure Limited
01 Sep 2010
Trends in Financing Infrastructure Projects
26
DAME Specfics
• Underground tunnel and the associated stations will be constructed by DMRC using the EPC contract route • Laying of railway track and management of the railway service will be done by a private sector concessionaire—a consortium headed by Reliance Infrastructure Ltd and partnered by CAF of Spain. • Work split into 6 parts - Indian, foreign & JV companies involved
01 Sep 2010 Trends in Financing Infrastructure Projects 27
Financing Dame
• Cost Rs 2,885 crore • Debt to Equity Ratio of 70:30 • Funding at 255 points lower than prime lending rate of Axis Bank, which is the lead banker for the deal • India Infrastructure Finance Company Ltd (IIFCL) Bank of India, Canara Bank, Central Bank of India, Andhra Bank, Allahabad Bank, Dena Bank, Punjab & Sind Bank, and UCO Bank
01 Sep 2010 Trends in Financing Infrastructure Projects 28
Tehran Metro
• Efforts on for a long time • 1985 - Metro Company formed • The company has also been granted the concessions for exploitation of iron ore mines in Bandar Abbas (Hormuzgan Province), exploitation and sale of Moghan iron ore mine in Azarbaijan Province, export of fuel oil from Isfahan oil refinery as well as tar form Isfahan steel mill and so on.
01 Sep 2010 Trends in Financing Infrastructure Projects 29
Tehran Metro - 2008
• A pilot plan • Under the scheme, the Government buys land and sells it to companies at discounted prices • The contractors can develop the land as they wish but they need to include a metro station into the work • & agree to share profits from their project on a short-term basis.
01 Sep 2010 Trends in Financing Infrastructure Projects 30
Bandra–Worli Sea Link (BWSL)
• 6km long road which connects Bandra Reclamation to Worli Seaface • Rs. 1634 /- Crore project of MSRDC • Owned by MSRDC • executed by Hindustan Construction Co design and project management by DAR Consultants • Toll Collection Concession given to Mumbai Entry Point Private Limited (MEPL)
01 Sep 2010 Trends in Financing Infrastructure Projects 31
01 Sep 2010
Trends in Financing Infrastructure Projects
32
01 Sep 2010
Trends in Financing Infrastructure Projects
33
Mumbai Entry Point Toll Ltd (MEPTL) • 34.2 crores for one year • Only cars Toll=Rs 50 • 70,000 vehicles a day was far off the mark, with actual traffic averaging only 37,500 vehicles a day • ??
01 Sep 2010
Trends in Financing Infrastructure Projects
34
01 Sep 2010
Trends in Financing Infrastructure Projects
35
Sea Link Phase II
• Reliance Infrastructure has bagged the Rs 5K cr deal to construct the Mumbai Sea-link. The sea link will be built between Worli and Haji Ali • Rel Infra will pay Rs 5,100 crore for the freeway sea link including the Bandra Worli Sea Link (BWSL).
01 Sep 2010
Trends in Financing Infrastructure Projects
36
01 Sep 2010
Trends in Financing Infrastructure Projects
37
Cochin International Airport Ltd
• First PPP initiative in airport • Incorporated as an SPV- 1994 • Involvement of users was a pioneering concept of this project • Project was conceived even while policy on private participation in airport infrastructure was being debated
01 Sep 2010 Trends in Financing Infrastructure Projects 38
CIAL - Equity
Project cost - Rs 2300 million Equity -Rs 900 million
• 35 % • 16 % • 49 % Kerala State Government State enterprises Consortium of bank ,public sector companies NRI‘s & general public
People of Indian origin invested because of the hope of reducing travel cost and time besides avoiding inconvenience being faced during air travel
01 Sep 2010 Trends in Financing Infrastructure Projects 39
CIAL - Debt
• Rs. 1400 million : Term loan • Provided by :
• The Housing and Urban Development Corporation • State Bank of Travancore • Federal Bank
01 Sep 2010
Trends in Financing Infrastructure Projects
40
DND Flyway
• Noida Toll Bridge Company Ltd (NTBCL)
• Bridge connecting Delhi and NOIDA, satellite town across the river Yamuna
• 552.5 meters long ,8 lanes- capacity 222,000 vehicles per day
• IPO in 1999 • Bridge opened in 2001
01 Sep 2010 Trends in Financing Infrastructure Projects 41
DND Flyway- Project Structure
• Rs. 4082 million (US$ 100m) • 30-year BOOT concession • Equity Rs. 1224 million (US$ 30m) • Debt of Rs. 2858 million (US$ 70m)
• Term loans Rs. 2358 mln (US$ 58m) • Deep discount bonds Rs. 500 mln
01 Sep 2010
Trends in Financing Infrastructure Projects
42
DND Flyway – Concession Agreement
• 30 years or till such time the designated return is recovered, whichever is earlier • The rate of return is computed with reference to the project costs, cost of major repairs and the shortfall in the recovery of the designated returns in earlier years. • Transfer after full recovery of the total cost of project and 20% return
01 Sep 2010 Trends in Financing Infrastructure Projects 43
DND Flyway - Equity
Promoters
• IL&FS Transportation Networks Ltd 25.35%
• ILF&S 1.02 %
• Public Shareholding
• Institutions 28.92% • Non Institutions 39.46 %
( individuals about 20%)
01 Sep 2010 Trends in Financing Infrastructure Projects 44
DND Flyway -Criticism
• Guaranteed returns - 20% high • Returns related to project cost - no incentive to minimize costs • Project cost includes shortfalls in the recovery of returns in previous • Concession not awarded competitively • return high as returns are guaranteed • Multiple role of sponsors
01 Sep 2010 Trends in Financing Infrastructure Projects 45
Ultra Mega Power Plants
• Power Finance Company Ltd (PFC), a government owned company has set up 9 SPV‘s • PFC will get everything in place and sell these SPV‘s to private groups based on international competitive tariff bidding • Convert all the pre-biding expenses into equity
01 Sep 2010 Trends in Financing Infrastructure Projects 46
UMPP – Role of PFC Ltd
• Initiate/ do preliminary studies • Obtain approvals, clearances and fuel tie-ups and acquire land • Do Environmental Impact Assessment
• Sell to private companies • Tariff based International competitive bidding
01 Sep 2010 Trends in Financing Infrastructure Projects 47
UMPP – Concession
• Build, Own, Operate (BOO) basis
• Rehabilitation & Resettlement by State Govt
• Payment security mechanism for off-take Revolving letter of credit (LC)
• Escrow account • Direct supply to HT consumers if default
01 Sep 2010
Trends in Financing Infrastructure Projects
48
UMPP - Lessons
• Innovative idea – Government ?participation‘ for reducing difficulties
• A win-win situation
• However, the response so far indicates that these are seen as fair risks
• Increased transparency in bidding process will reduce controversies
01 Sep 2010 Trends in Financing Infrastructure Projects 49
Lessons
PPP can be a success in India • Private sector has an appetite for public infrastructure projects • All combinations of PPP are possible – JV with one developer, JV with a consortium and entirely private sector & individuals • Depends on the estimated revenues & risk • Proper structuring is necessary
01 Sep 2010 Trends in Financing Infrastructure Projects 50
Lessons
(2)
• Government participation is perceived as protection of public interests • Involvement of private sector has made levy of user charges acceptable • User charges need to be perceived as “fair” • Transparency and ?public‘ participation essential
01 Sep 2010 Trends in Financing Infrastructure Projects 51
Lessons - Concession Agreement A little care goes a long way
• Transparency • Unambiguous clauses • Avoid perception by public that the private party is “looting” or that the politicians have “sold-out” • Transfer to government control after the concession period is perceived well
01 Sep 2010
Trends in Financing Infrastructure Projects
52
Lessons – Image
• Crucial • ?People‘s Project? • Communication
• Transparency -availability of data • Continuous interaction with stake holders • Regular updates
• Employ local unskilled people • Take up social projects
01 Sep 2010 Trends in Financing Infrastructure Projects 53
Lessons from India
• • • • • • Structuring is crucial Reputation and image matters Local stake holder-groups matter Local practices matter Cannot wish away realities Adaptation to local realities crucial
Trends in Financing Infrastructure Projects 54
01 Sep 2010
thank you
01 Sep 2010
Trends in Financing Infrastructure Projects
55
doc_210794760.pptx