Trans-harbour link: Mah govt says ready to cover revenue gap

August 29, 2011

Mumbai, Aug 28 (PTI) In a bid to attract more bidders for the ambitious Rs 10,000 crore Mumbai Trans-Harbour Link project connecting Sevri in the northeastern part of the city with Nhava Sheva (JNPT Port area), the Maharashtra government has proposed to cover the revenue risk of the BOT operator.
“We cannot take construction risk, but we can definitely cover the revenue risk of the BOT operator. We plan to offer a long, soft loan to the BOT operator and also compensate the second and third lowest bidders (L2 and L3 bidders) for the cost of bidding,” Mumbai Metropolitan Regional Development Authority (MMRDA) Commissioner Rahul Asthana has said.
The government started the bidding process in 2004, but it has not been able to make any progress so far.
“This move will encourage more developers, including from overseas, to bid for the ambitious project. We believe that by the third quarter of 2012, we will be able to award the contract,” Asthana said.
MMRDA, the nodal government agency for infrastructure development in the city, is also ready to compensate the BOT operator in case of lower toll collection vis-a-vis projections, he said.
“However, in the case of higher toll collection, the BOT operator needs to share the benefits with MMRDA,” he added.
Maharashtra State Road Development Corporation Limited (MSRDC) — the state road development body that was earlier handling the project — made several attempts to invite bids in 2004 on a BOT basis and in 2008 on a design-build-contract basis.
In June, 2008, separate bids by the Ambani brothers were found unrealistic. Reliance Industries had bid for a 75-year concession period on the project, while the ADA Group quoted only a 10-year concession period. .

Source: http://news.in.msn.com

Written by ITW Editor · Filed Under BOT, Default

Smooth rides in store: Jaya promises better roads in 3 yrs

August 29, 2011

CHENNAI: The government is planning to spend Rs 2,400 crore on upgrading roads over the next three years.

Chief minister J Jayalalithaa told the assembly on Friday that the state would convert 963km of state highways into double-lane roads and 3,700km of major district roads to intermediate-lane roads. “Give us time and see the changes in three years,” she said to thunderous applause from the treasury benches.

The government will take up major road projects under a Build Operate and Transfer (BOT) basis with private participation. In the second phase of the Tamil Nadu Road Sector project, 2,500km of roads under the highways department will be improved at a cost of Rs 5,000 crore, Jayalalithaa said. Financial support will come from the World Bank, she said.

Source: timesofindia.indiatimes.com

Written by ITW Editor · Filed Under BOT, Road

Supreme Infrastructure: Concrete structure

August 23, 2011

The company, which is present in railways, bridges, buildings, power, sewerage, irrigation and roads, is looking to expand its capabilities in marine projects and deepen vertical strength in various states
Supreme Infrastructure India (SIIL) is one of the few listed infrastructure companies that is doing extremely well. SIIL is present in seven verticals—railways, bridges, buildings, power, sewerage, irrigation and roads—across Maharashtra, Haryana, Punjab, Rajasthan, Uttar Pradesh and West Bengal. Each vertical functions as a business unit, thus increasing focus on execution as well as order book growth. SIIL started with executing orders of Mumbai’s municipal corporation and the public works department of Maharashtra and, when the infrastructure boom started in India in the mid-1990s, it expanded its activities by procuring contracts of urban development and municipal authorities in various cities.

SIIL’s construction business has an integrated business model with in-house asphalt, ready-mix concrete, crusher and wet-mix plants, ensuring timely supply of construction material and saving of tariffs & taxes due to captive material transfers. This also ensures lower costs.

For the financial year ended 31 March 2011, SIIL’s total income jumped 72% to Rs918.70 crore from Rs534.10 crore, while net profit surged by 91% to Rs74.80 crore from Rs39.20 crore in FY09-10. Its net profit for the March 2011 quarter zoomed 148% to Rs27.40 crore from Rs11 crore in the corresponding period last year on an 88% rise in total income to Rs328 crore from Rs174.30 crore.

At present, SIIL has five BOT (build, operate, transfer) projects in Maharashtra. These include Kasheli Bridge which is expected to be complete by Q2FY11-12, while the Panvel-Indapur and Manor-Wada-Bhiwandi projects are expected to be completed by July 2013 and the Ahmednagar-Karnala-Tembhurni project is expected to finish by March 2014. The Haji Malang project is a ropeway project having a construction period of two years. The Manor-Wada-Bhiwandi project—an industrial belt connecting Gujarat and Maharashtra—is the company’s first BOT road project.

The company has also won contracts in the irrigation, railways, building and power sectors. Its Osmanabad (Andhra Pradesh) irrigation project is scheduled to be completed by June 2012. SIIL, in a joint venture with Patwari Electricals, is executing turnkey power projects for Maharashtra State Electricity Distribution Co Ltd. In the railways segment, SIIL has won many orders from Mumbai Railway Vikas Corporation. Also, in the building segment, the company has won several orders from government agencies as well as private companies. Some of the major projects include construction of Edge Towers worth Rs255 crore at Ramprastha City, Gurgaon, construction of Hexcity worth Rs138 crore for Armstrong group at Navi Mumbai.

The company is looking to expand its capabilities in the marine projects segment and deepening vertical strength in each state. In Kolkata, it has joined hands with Bengal Tools to undertake orders in the industrial infrastructure space.

However, currently, most of the company’s orders are from Maharashtra (around 76%). Any slowdown in the order book from this state may affect the cash flows of the company. SIIL has a track record of timely completion of projects. But, being a new player in the BOT segment, there could be a potential execution risk. Land acquisition is also another problem—any delay in project execution would affect the revenues of the company, going forward.

Over the past five quarters, SIIL has reported an average growth in revenues and operating profit of 59% and 56%, respectively. Its average operating margin is 17% and return on net worth is 29%. Its market-cap to revenues is 0.33, while its market-cap to operating profit is 2.16 times. The stock is an attractive buy at the current market price.

Source: moneylife.in

Written by ITW Editor · Filed Under BOT, Infrastructure, Supreme Infrastructure India Ltd.

Ramky Infrastructure sees Rs6,000 cr orders till March

August 23, 2011

Ramky Infrastructure Ltd, a South-based construction and infrastructure development company, is expecting an additional order inflow of about Rs6,000 crore in the rest of the current fiscal.

At present, the company’s order book has been pegged at about Rs12,000 crore in the engineering, procurement and construction arm, in addition to about 16 build-own-transfer (BOT) projects under execution.

In the first quarter ended June 2011, the company recorded fresh order inflows worth about Rs1,600 crore. “There is a strong pipeline of another Rs1,200-1,300 crore. Bids worth about Rs11,000-12,000 crore are yet to be opened. So, we are confident of getting another Rs6,000 crore worth orders during the year,” M Gautham Reddy, executive director of Ramky Group, said.

However, he said, the company was not aggressively looking at piling up the orders. “We are not aggressively pursuing orders. We have a philosophy of making optimum use of men, material and capital. We will follow that. We have not set any target for order-book expansion,” he said.

The current order book is dominated by three sectors with roads & bridges contributing about 35% followed by water and waste water management (22%) and buildings (16%). While the company expects the average earnings before interest, tax, depreciation and amortisation (Ebitda) margins to hover between 11% and 11.5%, what is likely to impact is the interest rate burden.

Currently, the company’s debt carries an interest of about 12%.

“There is a possibility of these rates going further up by 0.50%. But, that’s where the rates are expected to peak out,” he said.
In the BOT segment, Ramky currently has five road projects including four annuity projects and one toll project. “Our exposure to NHAI projects is not much. One of the four annuity projects is a Hyderabad outer ring road project offered by the state government. We have already achieved

COD for the project. The other is a Gwalior bypass of the NHAI. This is yet to achieve the COD. The other two projects in Jammu and Kashmir and Assam have achieved financial closure,” he said.

The only toll project — a state road between Narketpally and Addanki in AP connecting to a Chennai road — is still being developed.

Meanwhile, the company is gearing up to replicate its prestigious integrated industrial park concept in Africa. The company has developed a pharma city near Visakhapatnam to cater to the needs of the pharmaceutical sector.

“A similar concept is now being adopted for a project in Africa. We have been asked to develop a timber SEZ, an industrial park to cater to the needs of timber processing in Africa. It is a $89 million project and the works are expected to commence during September-October this year,”he said.

Source: dnaindia.com

Written by ITW Editor · Filed Under BOT, Ramky Infrastructure Ltd.

Supreme Infra Q1 Net up 64 pc to Rs 25.57 crore

August 23, 2011

MUMBAI: Supreme Infrastructure today posted a 64 per cent increase in its net profit for the quarter ended June 30 to Rs 25.57 crore as against Rs 15.59 crore in the year-ago period.

The total sales of the company jumped 78.82 per cent to Rs 330.02 crore during the quarter as against Rs 184.53 crore in the corresponding period last year.

“We have started the year with good execution levels across projects. We have added projects in our BOT portfolio and are confident of ramping up operations to achieve greater results for our stake holders,” the company’s director Vikas Sharma said in a statement issued here

Source: articles.economictimes.indiatimes.com

Written by ITW Editor · Filed Under BOT, Supreme Infrastructure India Ltd.

Union minister”s assurance about putting TAH on fast track

August 23, 2011

Itanagar Aug 19 (PTI) Union Minister of Road Transport and Highways C P Joshi has given an assurance to put the Trans Arunachal Highway (TAH) on the fast track by removing all bottlenecks, particularly the environmental and forest clearance. Joshi�s assurance came after two high-level review meetings on the progress of the ambitious project on August 12 and 17 last at New Delhi, Lok Sabha member from Arunachal Takam Sanjoy said in a press release here today. The review meetings were held against the backdrop of letters written to Joshi recently by Chief Minister Jarbom Gamlin and Sanjoy, seeking the granting of environment clearance for the construction and renovation of the 2,319 km road by the ministry under the Arunachal package of roads and highways. The state PWD has been entrusted the 750 km pre-construction activities of BoT (annuity) projects of the Nechiphu-Hoj and Potin- Pangin roads and bridges across Dibang and Lohit river systems for executing the project. Sanjoy who attended the review meetings said that completion of the project was a top priority agenda for the Centre as it was a part of the PM�s package announced for the state in his maiden visit to the state during 2008. �The road project is very important for national security as the double-lane highway will link 11 of the 16 district headquarters of Arunachal, including Tawang along the Sino-India border,� Sanjoy said.

Source:ibnlive.in.com

Written by ITW Editor · Filed Under BOT, Default

Quit Toll Day on August 9

August 18, 2011

KOCHI: After a short interval, the days of agitation are back at Kumbalam Toll Plaza. With the National Highway Authority of India (NHAI) resuming toll collection, various organisations under the aegis of National Highway Protection Council have commenced an indefinite strike to protest against toll collection along the Aroor-Edappally stretch of NH 47.

On August 9, Quit India Day, the agitators will observe the day as Quit Toll Day. “We have decided to organise an indefinite strike. Today we erected the pole for constructing a tent for the strike near the toll plaza in Kumbalam,” said C R Neelakantan, activist and leader of National Highway Protection Council (NHPC). “People who pay heavy road taxes are being forced to bear the additional burden of toll which is unfair. Our demand is that the Government should construct 30-metre wide NHs. There is no need to construct the 45-metre-wide road,” he said.

“Construction of private NHs or BOT-based NHs are not feasible in the state. Unlike other states where NHs are used by long-distance travellers, here short-distance travellers constitute the major chunk NH users and it is difficult for them to pay toll every day,” Neelakantan said.

Many organisations have already come forward to conduct the strike every day till August 15. “August 15 will be observed as the Right to Travel day. We plan to picket the toll plaza.

We are yet to give shape to the programme,” Neelakantan said. In other states, few roads cut the across NH and that too after 40-50 km interval. But in Kerala, on an average of more than five roads will enter the NH on a one-km stretch. So, it will be very difficult for the locals to pay the toll,” he said. The NHPC argues that elevated roads can be constructed using the subsidy given for BOT roads and the amount used for acquiring land for the widening the road.

Source: http://expressbuzz.com

Written by ITW Editor · Filed Under BOT, NHPC, Toll Plaza

NHAI awards Rs 2,815 cr project to GVK

August 18, 2011

With private companies growing interest in the road sector, the National Highways Authority of India (NHAI) today awarded a Rs 2,815 crore contract in Madhya Pradesh to infrastructure player GVK that will fetch it an annual premium of about Rs 190 crore for 30 years, more than the total project cost.

With this award, the income to NHAI would be over Rs 870 crore per annum from four projects which it bid out within last few days.

“We have successfully awarded Rs 2,815 crore project in Madhya Pradesh for four-laning of Shivpur-Dewas section to GVK Transportation. NHAI will get a premium of Rs 189.9 crore per annum on this for 30 years, with a provision of an increase of five per cent every year,” a senior Road Ministry official told PTI.

The 330 km-project will be built under phase IV of the National Highways Development Project (NHDP) on BOT (build, operate and transfer) basis on DBFOT (design, build, finance, operate and transfer) pattern.

GVK was selected out of 14 major bidders that included players like GMR, Gammon, Essar and Punj Lloyd, the official said, adding that the “contract was proposed to be bid out on 15 per cent viability gap funding (VGF).”

The development comes close on the heels of NHAI bidding out its first mega project — Kishangarh-Udaipur-Ahmedabad at Rs 636 crore annual premium for 26 years to Bangalore-based GMR Infrastructure on July 29.

Further, the highway authority, which awarded projects worth over Rs 12,000 crore in the last four days, got about Rs 50 crore premium on Hospet-Bellary stretch in Karnataka and Orissa border-Aurang section.

Highways developers bid premium if they find the project lucrative; the private companies are confident that the toll revenue accruing to them would be more than their total cost.

Earlier, NHAI virtually used to provide grants on schemes to road developers to make the projects viable.

NHAI has announced to award 59 projects– involving 7,994 km, with a total cost of about Rs 60,000 crore– this fiscal.

India has a network of 3.3 million km roads out of which national highways constitute only 70,548 km. To augment it, the government plans to build 35,000 km of roads by 2014.

Source: business-standard.com

Written by ITW Editor · Filed Under BOT, GVK, NHAI, NHDP

Private bidders see profits in govt rejected road projects

August 18, 2011

Here’s a surprise: Corporate India wants to pay the government – and not be paid – to build roads.

In six recently awarded build-operate-transfer (BOT) contracts, the National Highways Authority of India (NHAI) had budgeted for a subsidy grant of Rs 270 crore. But the bidders promised it an income of Rs 6,350 crore over the life of the projects.

Experts are not sure if this is the result of aggressive competition or an underestimation of potential revenues on the part of government bodies. What the government thought was unviable seems to have been assessed as very profitable by private sector bidders, who opted for negative grants.

A negative grant is a premium a bidder offers to the NHAI to bag a contract it finds to be potentially lucrative. A grant is generally offered for projects which will not be able to recover their investments in a reasonable timeframe.

For example, rural roads are needed to connect villages to nearby towns. This offers economic benefits to villagers who are integrated to the mainstream, but revenues for the bidder may be low due to lack of traffic and the inability to pay. Tolls thus cannot be charged or have to be kept too low. In such cases, the government comes in to fund the viability gap with a grant. This is known as viability gap funding (VGF).

But when bidders offer to pay a premium for projects which the government considers unviable, it’s time to ask why. There is little doubt that roads are the only infrastructure projects to have gained some traction after a long time. The results of NHAI’s annual pre-qualification exercise show that competition has intensified. There were 98 unique bidders for 55 projects ranging from Rs 82 crore to Rs 11,350 crore. Five of the top 10 bidders were foreign players. With interest rates going up, international players have an edge over Indian companies who pay more for their money.

During the initial days of BOT projects, project bidders worked with internal rates of return (IRR) of nearly 20 percent. IRRs are commonly used metrics to evaluate the desirability of investments or projects. The higher a project’s IRR, the more desirable it is to undertake it.

In the recent round of bidding, some companies bid so aggressively that the IRRs went negative or lower than the cost of capital (cost of raising the funds for the project). For example, the equity IRR for the Khagaria-Purnea annuity project won by Punj Lloyd was 7.8 percent while for the Barasat-Krishnagar project, the IRR was negative.

It does not make economic sense for a company to take a project with a negative IRR, unless it is compensated in some other way, like development rights along the highway. However, in most of the recent BOT cases, such rights have not been awarded.

Industry observers say that since toll is collected in cash, not every rupee collected is reported. Faulty machines, power failures at the toll gates, and theft are various ways of showing lower revenues. Some companies auction a toll booth to outside agencies and are thus assured a minimum return, but the true value of the traffic is far above that recorded. It cannot be ruled out that the toll collection company is also a front company for the developer.

There is a possibility that NHAI may have been too conservative in estimating the commercial potential in some projects. This is all the more important as NHAI has been kept out of the purview of the Land Acquisition Bill, which means that they can acquire land at rates near market value – and not pay a premium for it. Infrastructure companies will increasingly be lining up for road projects, which are relatively hassle-free as far as land acquisition is concerned, rather than other projects.

Source: firstpost.com

Written by ITW Editor · Filed Under BOT, NHAI, Road

Multi-Storey Plan Stuck, Bus-Stop Makes Do With Bad Roads

July 4, 2011

It was to be Khadki’s showpiece: a modern bus-stand which would also be a shopping area. A proposal to construct a multi-storey complex with the bus-stop running from the ground floor has been hanging fire for years due to official apathy.

Even as cantonment board moved the proposal to the Defence Ministry seeking that it will construct the bus-stand in private-public partnership, the Ministry is reluctant to give the green signal on the plea that it will amount to creation of third party interest as a private party will earn money on a project on cantonment land. What is making things worse is withdrawal of the no-objection certificate (NOC) to KCB issued by PMPL allowing it to construct the complex. As per the original proposal, the ground floor was to be reserved for the stand and the remaining space was to be used for parking, office-space and a shopping complex.

“First, the PMPML gave us NOC. Later, it withdrew it stating they will give its decision later,” said KCB vice-president Manish Anand. He added that the project, which was to come up for around Rs 6 crore, was to be maintained by the private agency for at least 20 years. “If we construct it on our own we won’t be able to maintain it properly. That is why we sought to construct it in build operate and transfer (BOT) mode.”

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Written by ITW Editor · Filed Under BOT

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