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MPRDC
11
PPP in Road Sector
ECONOMIC & RISK ANALYSIS
Vivek Aggarwal MD, MPRDC
Connecting People Through Quality Infrastructure
MPRDC
22
Incorporated as wholly owned State Govt. Company under Companies Act 1956, in July 2004.
‘Highway Authority’ for State Highway.
Upgrades, Constructs and Strengthens the total length of State Highways.
Develops projects in the State on Public Private Partnership basis.
The Hon’ble Chief Minister of Madhya Pradesh is the chairman, Hon’ble Minister of Public Works Department & the Chief Secretary are the Vice Chairmen, the Principal Secretaries of the Finance dept., Forest Dept., Urban Administration & development and Mining Dept. are the members of the Board.
MD, MPRDC is also one of the director.
Madhya Pradesh Road Development Corporation
MPRDC
33
Invite private investment by providing grant / premium to / by the concessionaire on competitive bidding
Our Projects
Our Projects
MPRDC
44
Category/Model Cost (Crores)
BOT (Toll) 16094
BOT (Toll + Annuity) 3260
BOT (Annuity) 4578
ADB 4159
Regular Contract 1427
ROB/RUB 1645
Border Checkpost 1094
OMT 45
Building Works 165
Grand Total 32467
Our Projects: Cost Share in Crores of Rupees
MPRDC
55
• Viability Gap Funding.
• Premium
• Concession Fee.
• Independent Engineer.
• Financial Closure.
• Appointed Day.
• Concession Period.
• User Fees.
• Commercial Operation Date.
• Schedule of standards and specifications.
Standard terms for PPP
MPRDC
66
Financial Models
MPRDC
77
2. BOT (Toll + Annuity) Model
3 BOT (Annuity) Model 4. Deemed Shadow Fee Model
5. OMT Model
1. BOT (Toll) Model
Principles of Economic Analysis
• Assessment of cost (Feasibility Study)• Addition on account of Financing cost, Price contingencies
etc.• Demand assessment & user charge.• Assessment of growth of demand.• Prevailing rate of interest.• NPV of future cash flows on the basis of industry standards
on IRR.• Assessment of Social Impact.• Concession Period.• Viability Gap Funding.• Impact of Inflation.
MPRDC
88
MPRDC
99
Case Study-IEconomic Analysis of Mhow-Ghatabillod
RoadKey Assumptions:
• Total Project Cost: 177.26 Crores• Length: 26.9 Km.• VGF: Nil• Equity: 30%• Debt: 70%• Concession Period: 23 Years• Tenure of Debt: 12 Years• Repayment starts: 3rd Year• No. of yearly installments: 10• No. of Toll Plaza: 1• Construction Period: 24 Months• Tolling starts: 3rd Year• Annual Toll fee increase: 5%
1010
MPRDC
Economic Analysis of Mhow-Ghatabillod Road
Traffic Count Summary:
Traffic Retention rate: 90% Traffic Growth: 5%
CATEGORY NO. OF VEHICLE
S
BASE TOLL
RATE AS ON 2011
TOLL RATE
Car 1880 0.44 11.83
Minibus/LCV 826 1.07 28.77
Bus 318 2.19 58.88
MAV-3 Axle 4711 5.29 142.23
2- Axle Truck 2704 2.65 71.25
Economic Analysis of Mhow-Ghatabillod Road
• Operation Parameter
• Price Inflation: 5%
Routine maintenance(Rs ‘000/Km, start yr)
50.0
Operations/toll (Rs lac, start yr) +EMP
24.0
Periodic maintenance (Rs lac/km) 20.0
Periodic maintenance frequency (Yr)
5
Insurance (% project cost) 0.20 %
Toll days per year 360MPRDC
1111
MPRDC
1212
Economic Analysis of Mhow-Ghatabillod Road
• Other Macroeconomic Assumptions:
Corporate income tax rate: 35.88% Depreciation: 10.0% Interest rate (per annum): 12.0% Tax holiday:10 Years
• Construction Cost:
1st Year: 40% 2nd Year: 60%
MPRDC
1313
Economic Analysis of Mhow-Ghatabillod Road
• RESULTS:
Financial Analysis based on assumptions envisages project viability on nil VGF.
IRR suggests the possibility of premium.
• OUTCOME:
On bidding, the project was awarded on Premium@
14.58 Crores which is to be increased 5% per
year. Project is completed 14 months ahead of Schedule Completion Date.
PROJECT IRR
Post-tax IRR 28.18 %
Equity IRR 32.14 %
NPV @ 12% discounting Rs 470.07
MPRDC
1414
Case Study-II Economic Analysis of Satna-Chitrakoot Road
Key Assumptions:
• Total Project Cost: 121.78 Crores• Length: 73.8 Km.• VGF: 40 % of TPC• Equity: 30%• Debt: 70%• Concession Period: 25 Years• Tenure of Debt: 12 Years• Repayment starts: 3rd Year• No. of yearly installments: 10• No. of Toll Plaza: 2• Construction Period: 24 Months• Tolling starts: 3rd Year• Annual Toll fee increase: 5%
1515
MPRDC
Economic Analysis of Satna-Chitrakoot Road
Traffic Count Summary:
Traffic Retention rate: 90% Traffic Growth: 5%
Section Toll Plaza
CATEGORY NO. OF VEHICLES
BASE TOLL RATE AS ON
2013
TOLL RATE
1
42.0
Car 995 0.37 15.54
Minibus/LCV 197 0.91 38.22
Bus 130 1.87 78.54
MAV-3 Axle 81 4.50 189.00
2- Axle Truck 135 2.26 94.92
2 31.8
Car 673 0.37 11.77
Minibus/LCV 88 0.91 28.94
Bus 82 1.87 59.47
MAV-3 Axle 75 4.50 143.10
2- Axle Truck 101 2.26 71.87
Economic Analysis of Satna-Chitrakoot Road
• Operation Parameter
• Price Inflation: 5%
Routine maintenance(Rs ‘000/Km, start yr)
50.0
Operations/toll (Rs lac, start yr) + EMP
17.0
Periodic maintenance (Rs lac/km) 10.0
Periodic maintenance frequency (Year)
5
Insurance (% project cost) 0.20 %
Toll days per year 360
1616
MPRDC
MPRDC
1717
Economic Analysis of Satna-Chitrakoot Road
• Other Macroeconomic Assumptions: Corporate income tax rate: 35.88% Depreciation: 10.0% Interest rate (per annum): 12.0% Tax holiday:10 Years
• Construction Cost: 1st Year: 40% 2nd Year: 60%
MPRDC
1818
Economic Analysis of Satna- Chitrakoot Road
• RESULTS:
Financial Analysis based on assumptions envisages project viability on 40% VGF.
• OUTCOME:
On bidding, the project was awarded on 38.94% VGF. Project is Under implementation.
PROJECT IRR
Post-tax IRR 15.88%
Equity IRR 17.13 %
NPV @ 12% discounting 98.09
MPRDC
1919
Risk Apportionment
Conditions Precedent to be fulfilled by the Concessionaire
Submission of Performance Security within 180 days from the date of signing of contract.
Execution of the Escrow Agreement. Execution of the Substitution Agreement. Procurement of all Applicable Permits relating to
environmental protection and conservation of the Site. Execution of Financing Agreement. Legal opinion of the Legal Counsel on the
concession. Upon failure to meet any of the Conditions Precedent,
damages @ 0.2 % of the Performance Security, subject to a maximum of 20% of Performance Security.
MPRDC
2020
Risk Apportionment
Conditions Precedent to be fulfilled by MPRDC
Procurement of Right of Way to the site. Procurement of Environmental Clearance. Procurement of GAD from Railway.
Upon failure to meet any of the Condition Precedent, damages @ 0.1 % of the Performance Security, subject to a maximum of 20% of Performance Security.
MPRDC
2121
Risk Apportionment
Force Majeure
Act or event whichi. is beyond the reasonable control of the affected party.ii. Affected Party is unable to prevent by exercising due
diligence & Good Industry Practice.iii. has Material Adverse Effect on the Affected Party.
Types of Force Majeure:
i. Non-Political Event:ii. Indirect Political Event.iii. Political Event.
MPRDC
2222
Risk Apportionment
Effect of Force Majeure on Concession.
Prior to Appointed Date-
period for achieving Financial Closure shall be extended by a period equal to the duration of Force Majeure event.
After Appointed Date-
• Before COD- Concession Period & Project Completion Schedule shall be extended
• After COD- Concession Period shall be extended in proportion to the loss of fee on a daily basis, if daily toll collection is less than 90% of average daily fee.
MPRDC
2323
Risk Apportionment
TYPES OF FORCE
MAJEURE
ACTS ALLOCATION OF COST AFTER APPOINTED DATE
TERMINATION PAYMENT
Non-Political Event
Act of God, epidemic, adverse weather conditions, earthquake, landslide, cyclone, flood, strikes, boycotts etc.
Party shall bear their respective Force Majeure Cost & neither party shall require to pay to the other party any cost.
90% of debt due less insurance cover payable to the concessionaire
Indirect Political Event
Act of war, industry or state wide strike, civil commotion, political agitation
Force Majeure cost not exceeding insurance cover shall be borne by the concessionaire & one-half be reimbursed to the concessionaire.
i. Debt due less insurance cover.
ii. 110% of adjusted equity.
Political Event
Change in Law, unlawful revocation of any clearance, license, permit, authorization, NOC, consent, approval of exemption required by the concessionaire.
Force Majeure cost not exceeding insurance cover shall be borne by the concessionaire & reimbursed to the concessionaire fully.
i. Debt dueii. 150% of
adjusted equity.
MPRDC
2424
Risk Apportionment
Termination & Termination Payment
Termination Termination Payment
Termination for Concessionaire Default
i. Prior to COD- No termination payment
ii. During Operation Period- 90% of debt due less insurance cover.
Termination for Authority Default
i. Debt dueii. 150% adjusted equity.
• Pioneer in road sector development through PPP in the country.• Adopted DBFOT Model of Tendering based on Model Concession
Agreement of Planning Commission.• First agency in the country to get VGF from GOI.
• Under VGF scheme of GOI– 40 % of project cost is sanctioned to make projects viable.– 20% is given by GOI.– 20% is given by the State Government.
• In several Projects MPRDC receives Premium.• VGF/Premium is the bidding Criteria.• Distance based user fee (Toll).
MPRDC
2525
Our Strengths
• Concessionaire’s faith in MPRDC due to transparency in bidding process.
• Lender’s faith in MPRDC ensuring Financial Closure of BOT Projects.
• Deployment of Supervision and Quality Control Consultants with international expertise.
• Deployment of capable construction agencies with introduction of advance machineries and equipments.
• Adequate Budget provision for Annuity &VGF payments by the
State Government.
• Annuity payment along with bonus on due date.
MPRDC
2626
Our Strengths• Outsourcing of Expertise.
• Consultants are appointed for Feasibility Report/DPR and Supervision of Construction.
• Experts like Legal Advisor, Chartered Accountant, Company Secretary, Environment expert, MIS expert, Road Data System Engineer are engaged in house.
• In-house financial analysis.
• Planning is done well in advance at the head office level.
• Fast decision making.
• Political commitment & support.
• Concessionaires are treated as partner.
• Bills are cleared in 2 to 4 working days.
• All Stake holders are facilitated.
MPRDC
2727
Accident Response System
• Implementation of ARS system on PPP mode is probably a first in the world.
• State wide implementation of ARS will be first in country.
• ARS to address safety requirements in the larger perspective.
• Technical Assistance through ADB for capacity building in road safety.
• Accident Response System & Traffic Management Centre in Madhya Pradesh including operation & maintenance for 5 years with estimated cost of Rs.12.50 crores has been proposed.
• A Road Safety Cell is created in MPRDC.
• MPRDC has engaged an agency for ARS on Annuity basis.
• ARS includes centralized call centre, GIS based automatic vehicle tracking system (AVTS), Computer aided dispatch system, Traffic Management Centre.
MPRDC
2828
State Highway Fund
MPRDC
2929
GoMP has enacted the Madhya Pradesh Rajmarg Nidhi Adhiniyam 2012 to provide for the establishment of a Fund for investments in the highways & infrastructure projects of the State.
Corpus of the Fund is 125 Crores (approx).
Executive Committee under the Chairmanship of Chief Secretary to administer the fund.
Sources of Fund Application of FundAll payments of Premium For Maintenance and Repair
of Highways
Proceeds towards encashment of Performance Security or Bid
Security
For Meeting any Development Cost of Highway or
Infrastructure Project
All returns on investments made out of
the Fund
For Project Preparation, Pre Tender Activities, Cost
towards Utility Shifting ,Land Acquisition
MPRDC
3030
A country has to pay for its roads. Whether it has them or not, it pays more for those it does not have.
So Lets Have them…..
Connecting People Through Quality Infrastructure