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

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Invite private investment by providing grant / premium to / by the concessionaire on competitive bidding

Our Projects

Our Projects

MPRDC

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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

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Financial Models

MPRDC

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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

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MPRDC

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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%

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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

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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

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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

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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%

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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State Highway Fund

MPRDC

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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

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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