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Delhi Gurgaon ExpresswayBackgroundStakeholdersPublic Institution: National Highway Authority of India (NHAI)Private Institution: DS Constructions, Jaypee IndustriesIndependent Consultants: RITES CorporationGovernments: Haryana State Government || Delhi State GovernmentUsers:PatronsSalient FeaturesCost: 1000 croreLength of Expressway: 27.7 kmsNo of Flyovers & Overpasses: 11Toll Lane: 32 Lane State of the Art Plaza (Asias Biggest, Worlds 3rd Biggest)CCTV Surveillance till IGI Airport & SOS Telephony every 1.5kms

Primary IssuesTraffic CongestionPedestrian Safety

The National Highway Authority of India (NHAI) under MORTH# was entrusted with the responsibility of the Golden Quadrilateral Project

As part of the project it is proposed to converse the NH-8 Delhi Gurgaon Highway into a 6/8 lane access controlled divide carriageway

The project was awarded to a consortium of Jaypee industries & DS construction Ltd on Build, Operate & Transfer (BOT) basis

This was the first BOT project in India to be awarded on a negative grant basis.

# MORTH Ministry of Road Transport & Highways

Project DescriptionThe concessionaire offered to pay Rs. 61.06 crore upfront to NHAI.

The consortium is to design, finance, construct, operate, & maintain the facility for a concession period of 20 years.

An SPV called the Delhi Gurgaon Super Connectivity Ltd was created for the execution of the project

At time of bidding Jaypee held 51% & DS held 49%.

Jaypees stake in the SPV was about 1.2%

PPP StructureNHAI was responsible for land acquisition & providing right of way (row) to the concessionaire free from all encumbrances.

The NHAI undertook the operation & maintenance of the existing highway at its own cost, during the development.

Shifting of utility & related expenses was NHAIs responsibility

NHAI needs to have necessary environmental clearances, permits, etc.

A loan facility was made available if revenues fall short of the subsistence revenue level.NHAIs ObligationRequired to comply with all requirements needed for clearances, approvals, permits etc from various government agencies

Obliged to enter into a state support agreement with NHAI, GoH ( Govt of Haryana), GoNCTD ( Govt of National Capital Territory of Delhi)

It is entitled to collect toll during the operational period

At the end of the concession tenure the expressway shall be transferred back to the Government.Concessionaires ObligationThe funding of the project at the time of the financial closure 9 MAY 2003Financial InformationParticularsAmountDebt383.3 croreEquity164.2 croreTOTAL547.5 croreDEBT DETAILSHUDCO200 croreState Bank Of Mysore30 crorePunjab National Bank30 croreSrei International Finance25 croreJammu & Kashmir Bank15 croreNon convertible Debenture were issue towards LIC50 croreNon convertible Debenture were issue towards UTI Bank33.30 crThe actual cost of the project was eventually 1175 croreThe project overrun was funded by promoters, by withholding payments to DSC Limited (EPC contractor)From the amount received from NHAI (155.25 Cr )Including the grants of 61 croreFinancial InformationProcess AnalysisThe western transport corridor comprising of NH-8 connecting Delhi Jaipur Ahmedabad Mumbai was on utmost priority for up gradation.

NH-8 carried a sizeable amount of inter and intra state traffic along with the export and import traffic from the Arabian Sea.

An offer from Malaysian Construction Industry Development board was rejected as the proposal initially sought a grant of Rs.120 crore from NHAI

Government of India also at that time was promoting PPP i.e. Public Private Partnership.InceptionMORTH had invited pre qualification bids in 2001.

At beginning NHAI had proposed for a capital grant to the successful bidder enhancing the viability of the highway project which is normally maximum of 40% of the project cost has been provided under NHDP (National Highways Development Project).

But considering the robust traffic projections bids received were of negative grants.

In April 2002, the consortium of Jaiprakash Industries and DS Construction was declared a successful bidder.

RBM Malaysia was quoted a Rs.55 crore bid as negative grant.ProcurementSPV achieved financial closure in May 2003.Construction had already commenced in January 2003.2004, Jaiprakash had sold its stake to DS construction and retained only 1.2%.Soon the project ran into issues due to approvals and land acquisition.Due to thickly populated region land acquisition was a major problem , but was taken care by NHAI and State Government under tripartite agreement.Another reason was change in scope of work.Due to high density of traffic on the route and the requirement of a minimum length for acceleration and de-acceleration of traffic approximately 300 meters, the partial opening was delayed due to safety reasons.

DevelopmentFinancial closure means that all financial sources of funds are being tied up by that time.12The project was commissioned on 25 January 2008.The project is operational and has significant traffic volume of more than 180,000 PCUs growing at 9% year on year.DeliveryExitConcession period is for 20 years and the projected end date is 11 Jan 2023 when the expressway will be handed over to the government.Risk TypeSensitivityRisk PeriodPrimary Risk BearerCommentsDelay in Land acquisitionHigh0-5 yearsNHAINHAI was liable to pay damage if it failed to provide RoWFinancial RiskMedium0-5 years

Private SectorAn advance payment of Rs 1 lacs per week as damages by Concessionaire for delay in achieving financial closureApprovalsLow0-5 years

Private SectorThough the government was expected to provide best effort support but the obligation was of the ConcessionaireA) Pre-Operative RisksRisk allocation frameworkRisk TypeSensitivityRisk PeriodPrimary Risk BearerCommentsDesign RiskHigh0-5 yearPrivate SectorThere was substantial changes in the design that led to escalation of cost as well as time over run which lead to revenue loss as the period was not alteredConstruction RiskHigh0-5 yearPrivate SectorThe construction of expressway got delayed due to inordinate delays in land acquisition and changes in the scope of work. The risk was primarily borne by DS construction Ltd and for change in scope NHAI was also asked to contribute for increased investment requirementB) Construction Phase RisksRisk allocation frameworkRisk TypeSensitivityRisk PeriodPrimary Risk BearerCommentsOperations & Maintenance RiskMediumThroughoutPrivate SectorThe risk is primarily with the ConcessionaireMarket RiskLowThroughout

Private Sector

Market risk that primarily manifest in terms of lack of tollable traffic in a typical BOT project is with private sector. However it was proven to be non-existent in this case and actual traffic is much higher than the projected Financial RiskMediumThroughoutPrivate SectorAdverse movement in interest rate, exchange rate etcC) Operation Phase RisksRisk allocation frameworkRisk TypeSensitivityRisk PeriodPrimary Risk BearerCommentsHandover RiskMediumLast 2.5 to 3 yearsPrivate SectorA joint inspection shall be conducted, not less than 30 months or more than 36 months prior to expiry. 2 years prior to expiry an amount equivalent to the fees for traffic volume of 10,000 PCUs/day for the last two year or higher based on Independent consultant shall be retained in an escrow A/CConcessionaire event of defaultLowThroughoutPrivate SectorNHAI will pay a termination payment equal to 90% of the debt due less any insurance claimD) Handover risks events Risk allocation frameworkRisk TypeSensitivityRisk PeriodPrimary Risk BearerCommentsNHAIs event of defaultLowThroughoutNHAINHAI will pay a termination payment equal to the total debt due, 120% of subordinated debt, 150% of the equity subscribed in cash and negative grant amountChange in lawLowThroughoutPrivate sector & NHAIIn case of financial burden greater than Rs 1 crore, the concessionaire may notify NHAI to amend the concession agreement so that the concessionaire is in the same financial position and vise-versaRisk allocation frameworkLack of access to feasibility reportAnalysis of efficiencies limited to 2 years of operation.Assessment of Potential Benefits:Govt RemunerationsNegative grant basisRevenue Sharing MechanismConcessionaire covenant (Facility reversion on expiry)Cost Overruns & Risk of timeIncrease in Project CostReasons for delaysSemi access controlled highway traversing between two states.Connected both domestic and international airport along with sensitive defense zone on its ways.More than 15 government agencies were affected by this highway so the approvals also varied from department to department.Out of 11 structures spread over the entire life of the project, 9 structure had significant modification which also affected the completion schedule.Increase in cost funded by promotersSuch overruns typically retained by public sectorPost facto VFM AnalysisParticularsEarlierNowAverage Travel Speed25.65 kmph66kmphAverage travel Time from Delhi to Gurgaon65 min25 minCapacity (in terms of lanes)6 lane-5 km4 lane-22.7 km8 lane-22.3 km6 lane-5.4 kmIntersections2011 grade separatedEfficiencies Achieved

VFM Analysis ContdLand Acquisition ProcessLand acquisition commitment even before acquiring it led to the unnecessary delay in project

Support from stakeholders for the projectSupport from all the stakeholders of the projects viz. public, government should be taken during the preparation of project schedule

Approvals from multiple entitiesSingle window clearances for the project could have saved time and moneyKey Learning & ObservationsTraffic Risk is Lower in case of Brown Field ProjectsThe traffic on the route is more or less established

Outdated Traffic ForecastsTraffic forecast conducted in 1998 during the procurement of the project was used to design the project

Fee Sharing require efficient contract management Fee sharing provisions put more burden on contract supervision & management

Key Learning & Observations