YOG INFRA Q2 2023 insights
INDIA's transport and urban infra sector has an expoential investment potential wherein PPP modality is being used across the spectrum - roads; ports (captive berths, crusie terminals); multi-modal logistics parks; ropeways; bus terminals etc. An enhanced focus on logistics conectivity remains the cornerstone of planned investments, with a strong private sector interst for developing these projects, and government taking relevant steps to ensure success (e..g, threhold of minimum credit rating for bidders).
Read more in our latest insight for the country.
This is second publication on a 2-part insight series on India
INDIA ROADS MINISTRY MANDATES BBB RATING FOR BOT BIDS
As per recent notification from Ministry of Road, Transport and Highways (MoRTH), Indian highway developers must be rated at least BBB by a credit rating agency to be eligible to bid for projects in the build, operate, transfer (BOT) and hybrid annuity models. The bidder shall have BBB and above credit rating given by credit rating agencies authorized by the Securities and Exchange Board of India. In case a company is unable to procure the rating, it will need to submit a comfort letter from its bankers/financial institutions along with its bid, saying they will provide credit facilities to meet the project cost, excluding grant.
Many small developers and contractors have been winning projects but are struggling to secure financing. The new clause may provide the government with some certainty, but a BBB rating will attract higher interest rates of more than 10%, while an A rated project can secure financing at 8.75% - 9%.
INDIA TO TWEAK CONCESSION CONTRACTS FOR CAPTIVE BERTHS
Cargo runs by port dependent industries for their captive use at state-owned major ports will be allowed to extend their contract beyond the original time frame a right of first refusal (RoFR) mechanism when such facilities are put to re-tender on completing the term, according to a proposal drafted by the Ministry of Ports, Shipping, and Waterways. The existing captive policy does not have the provision for extension of the agreement.
The extension of the concession period for captive berths will be on a bidding basis to factor in the changes that have taken place since the facility was first awarded, both trade wise and tariff regime wise. The aim is to go for a fresh price discovery for the facility taking contemporary issues into consideration. On completing the duration, a captive berth will be re-tendered wherein the existing operator will be given the first right of refusal to match the highest bid and continue running the berth.
INDIA’S RAJASTHAN STATE PLANNING AIRSTRIP PPPS
The Rajasthan government is planning to develop 23 old airstrips on a public-private partnership mode where chartered and smaller flights can land. A proposal has been made to develop these airstrips on a PPP mode, wherein the investment will be from the private sector and state will take a certain percentage of the landing and taking off charges.
INDIAN FREIGHT AUTHORITY CHOOSES EPC AS PRIVATE SECTOR DISINTERESTED
The 568 km line to connect Sonnagar in Bihar to Dankuni in West Bengal will be developed under EPC mode by the government. The Indian government has opted in favour of a turnkey contract over a public-private partnership (PPP) amid no interest from investors to build and operate a freight rail line. The reason for the lack of interest is because the project stretch that was offered - running largely through eastern India -was considered too risky from a commercial perspective.
The project between Sonnagarh and Dankuni is part of a 1,875km dedicated freight line connecting with Ludhiana in Punjab. The remaining 1,337 km is being implemented on a turnkey basis and funded jointly by the World Bank and the Indian Railways.
GOVERNMENT OF INDIA PLANS TO DEVELOP MORE THAN 250 ROPEWAY PPPS
The Government of India plans to develop more than 250 projects with a Ropeway length of more than 1,200 km in the next 5 years, in the public-private partnership (PPP) method. The PPP contracts will be structured in the hybrid annuity model, with 60% contribution support by Government of India.
INDIAN MINISTRY SEEKS SUGGESTIONS TO IMPROVE BOT HIGHWAY CONTRACTS
India’s Ministry of Finance is seeking suggestions on how to improve the model concession agreement (MCA) for build-operate-transfer projects in the highways sector. The ministry's Infrastructure Policy and Planning Division has held discussions with the World Bank, the Ministry of Road Transport and Highways and the National Highways Builders Federation, recommendations were sought with the intent to increase the number of greenfield BOT contracts.
Some of the highlighted risks include:
Lack of clarity on repayments to lenders and developers under a termination event
Lack of an enabling provision in the MCA to renegotiate contracts in case of unforeseen events;
Loss of revenue from traffic diversion due to competing roads;
No consistency in implementation of contractual clauses by all states;
Delays in handing over land;
Resistance of local traffic to pay toll and circumvention of tolled routes;
Multi-layered approval processes for utility shifting;
Delays in regulatory approvals for asset sales; and
Lack of a definite timeframe for settling disputes
The NHAI - the country’s central roads agency - awards more than INR 1 Trn (USD 12 Bn) of greenfield contracts annually. Projects in the BOT model are less than 5% of the total, with the hybrid annuity, as well as the engineering, procurement and construction methods being the dominant models.
INDIAN PORT AUTHORITY INVITES EOIs FOR CRUISE TERMINAL PPP
The Cochin Port Authority, in India’s Kerala state, is seeking an investor to refurbish, operate and manage a cruise terminal, as well as build new tourism-related infrastructure. The project involves the construction of facilities for recreation, leisure and entertainment, events and exhibitions. The eligible projects include development of real estate for high-end retail and office space, hospitality, food and beverage, airline and cruise catering, resorts, and conference facilities. These are proposed to be located within the precincts of the Sagarika Cruise Terminal. An estimated project cost and concession period have not been disclosed.
INDIA CONSIDERS REDEFINING INFRASTRUCTURE TO DRAW INVESTORS
The Government of India is looking into redefining infrastructure and drawing up a new framework that can facilitate investments. A committee led by the Economic Advisory Council to the Prime Minister, has been tasked by the finance ministry with assessing the parameters and characteristics of the definition of infrastructure and its funding framework. The committee will look into the existing strategy for financing infrastructure and analyze the share of the public and private sectors.
The committee is expected to recommend measures to boost funding, especially through increased participation of the private sector, as well as draw up a mechanism for collecting data on infrastructure financing.
PRAKASH ASPHALTINGS WINS GREENFIELD INDIA MULTIMODAL PARK CONTRACT
Prakash Asphaltings & Toll Highways (India) has won a 45-year concession for a greenfield multimodal logistics park near Bengaluru city in Karnataka state. The company offered a revenue share of 5.29%, beating two other proposals - of 5% each - by Reliance Logistics and Warehouse, and Bansal Construction Works.
The contract is in the design, build, finance, operate and transfer model and requires the winning bidder to build a multimodal park at Muddalinganahalli village, with an investment of about INR 9.3 Bn (USD 113 Mn). The concession period is 45 years.
INDIAN PORT RECEIVES 7 BIDS FOR LIQUID BERTHS PROJECT
7 companies have submitted bids to equip, operate and maintain two liquid cargo berths at Indian government-owned Jawaharlal Nehru Port Authority (JNPA).
The companies are:
Integrated oil, gas and chemical logistics company Aegis;
Indian-government owned oil refiner Bharat Petroleum Corporation;
JSW Infrastructure, a subsidiary of Mumbai-headquartered steel conglomerate JSW Group;
Privately-held ports and logistics major JM Baxi;
GBL Infra Engineering, a subsidiary of chemicals manufacturer Ganesh Benzoplast;
Chennai-based liquid and dry cargo terminal operator IMC Group; and
Mumbai-based maritime contractor Amma Lines;
The contract will be awarded as a 30-year concession for the berths numbered LB3 and LB4.
INDIA’S KERALA STATE TO ISSUE USD 121.5 MN GREEN BONDS
The infrastructure fund of the state government of Kerala in India is to raise INR 10 Bn (USD 121.5 Mn) from a green bond issue. The Kerala Infrastructure Investment Fund Board’s bonds, guaranteed by the state government, will have a 10-year tenure and a quarterly coupon of 8.49%. The Kerala Infrastructure Investment Fund Board (KIIFB) has invited a request for proposal (RfP) for the appointment of merchant bank/arranger for the proposed fund mobilization.
IFC AND NABFID TO BOOST INFRA PPP IN INDIA
The International Finance Corporation (IFC) and the Indian government-backed National Bank for Financing Infrastructure and Development (NaBFID) are planning to jointly help develop investment-ready public private partnerships (PPPs) in infrastructure sector. Initial projects are expected to mobilise close to USD 2 Bn in private investment over the next few years in priority segments such as renewables, energy storage and urban infrastructure.
Projects developed through this collaboration will be critical to mobilising private funding to meet India’s infrastructure investment needs of around USD 1.4 Trn, including USD 290 Bn through the private sector, as estimated by the government’s National Infrastructure Pipeline (NIP). The IFC and NaBFID will also work with state governments and project implementation agencies to identify and screen PPP projects requiring transaction advisory support.
INDIA’S UTTAR PRADESH STATE CLEARS 5 BUS TERMINAL PPPS
The state government of Uttar Pradesh in India has cleared proposals to develop 5 bus terminals through public private partnerships (PPPs). The terminals will be located in Ghaziabad, Lucknow, Prayagraj and Agra. The government approved the letters of intent to be given to the bidders. The state administration will call for proposals again for 18 other bus terminals.
The Uttar Pradesh State Road Transport Corporation had received proposals for 8 terminals. The state administration plans to develop 23 terminals with private sector participation through the design, build, finance, operate and transfer mode. This plan was cleared by the state cabinet. These terminals will offer upgraded amenities and security arrangements for passengers.
INDIA CONSIDERS AMENDING APPROVALS THRESHOLD TO BOOST INFRA IMPLEMENTATION
The Indian government is considering doubling the upper limit for public-sector projects that need approval from the Cabinet Committee of Economic Affairs to INR 20 Bn (USD 243.83 Mn). The government is looking to expedite the execution of projects, especially those in the infrastructure sector. Concerned ministers have the authority to clear projects worth as much as INR 5 Bn (USD 61 Mn), while projects costing INR 5 Bn (USD 61 Mn)-INR 10 Bn (USD 122 Mn) require approval from the finance minister also.
There are increasing concerns regarding cost delays and overruns in project implementation and faster clearances are likely to help expedite execution.
INDIA PLANS USD 5.5 BN RAISE FROM HIGHWAY CONCESSIONS
The Indian government is looking to raise as much as INR 450 Bn (USD 5.5 Bn) in 2023-24 by monetizing national highways. The target includes INR 150 Bn (USD 1.8 Bn) through the toll-operate-transfer mode and another INR 150 Bn (USD 1.8 Bn) through infrastructure investment trusts (InvITs). The Ministry of Road Transport and Highways (MoRTH) raised approximately INR 170 Bn (USD 2 Bn) in 2022-23. For the current financial year, ending 31 March 2024, the ministry has planned 2 tranches of InvITs and is working on expanding retail investment in the new instrument.
INDIA HIGHWAYS AUTHORITY SEEKS CONCESSIONAIRE FOR 110 KM STRETCH
The National Highways Authority of India (NHAI) is seeking a concessionaire to operate a 110 km stretch in the toll, operate, transfer (TOT) model. The concession will be for 20 years. It involves operating and maintaining the Kota Bypass and cable-stayed bridge connecting the states of Rajasthan and Madhya Pradesh.
The Ministry of Road Transport and Highways has not revealed its estimate for the latest asset on offer, as per a policy decision in 2020. This will be disclosed only after receipt of technical bids and after the NHAI selects the winner.
INDIAN STATE APPROVES USD 78 MN PERSONAL RAPID TRANSIT PROJECT
The state government of Uttar Pradesh in India has cleared the way to float tenders for the country’s first personal rapid transit (PRT) project, estimated to cost INR 6.4 Bn (USD 77.57 Mn). It recently reviewed a plan for connecting an upcoming international airport in Noida with entertainment and business centres located nearby on the Yamuna Expressway with pod taxis.
PRT systems are centrally-controlled small driverless airconditioned cars, which are usually designed to carry 4 to 6 passengers at a maximum speed of about 40 km per hour. Further, the proposed project is expected to open up avenues for tourism and industry, enabling passengers to visit industrial clusters like MSME Park, Apparel Park, industrial units, Toy Park and some proposed projects like International Film City.
BROOKFIELD JV PLANNING USD 250 MN MUMBAI DATA CENTRE
A joint venture (JV) between Digital Realty and Brookfield Infrastructure Partners is investing INR 20 Bn (USD 250 Mn) to construct a data centre in Mumbai, India. BAM Digital Realty, the JV, has acquired 2.15 acres of land for the new asset which will have a capacity of 35 MW of IT load.
The company’s first greenfield data centre in India, located in the city of Chennai, is going to begin operations by the end of year 2023 with a capacity of 20 MW of IT load. The new data centre will increase its total planned capacity in the country to 135 MW.
List of key transactions - Transport and Urban Infra - India Q2 2023
Source: YOG INFRA analysis
ABOUT YOG INFRA
Our objective is to drive economic growth and make positive social impact through sustainable infrastructure development.
YOG INFRA is an infrastructure focused financial advisory firm. We work with Developers and Development Finance Institutions (DFIs) and help them make informed investment decisions across infrastructure development lifecycle.
With our offices in Singapore, India and UAE we work on projects globally, and the team brings strong experience in supporting development of infrastructure projects.
©2023 YOG INFRA. All rights reserved.