s5_110929 ppp presn_prasad gadkari

8/3/2019 S5_110929 PPP Presn_Prasad Gadkari

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Private Investment In

Indian Infrastructure

Prasad S. Gadkari

PRIVATE EQUITY ADB Conference, September 30th, 2011

The views expressed in these presentations are the views of the author and do not necessarily reflect the views or policies of the Asian Development

Bank (ADB), or its Board of Directors or the governments they represent. ADB does not guarantee the source, originality, accuracy, completeness orreliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented, nor does it make any representation concerningthe same.


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Contents

Progress during the past decade

Select sector experiences

Concluding remarks

Snapshot of IDFC PE

2


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Past Decade


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Progress during the decade

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Private investment in infrastructure

% of GDP

1990 2000 2010

National Highways ('000 lane kms) NA 127* 156

Coastal Ports - volume of freighthandled (million tonnes)

163 334 819

Civil Aviation routes (aircraft millionkms flown)

118 193 713**

Power installed capacity (GW) 64 98 159

*Refers to 2006, **Refers to 2009Source: IDFC

Source: Planning Commission, CSO

> 4x capacity addition byprivate sector versus 1.3x forpublic sector

> 7x container handlingcapacity for private sectorversus degrowth for publicsector between 2002-2010

12,820 kms added from FY05-11

Pax growth 2x from FY05-09Private sector airports shareup 37x in same period

$16 bn*investedby financialinvestors (PE,infra funds, capitalmarkets)

* Excl telecom


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India has used a range of PPP models balancing efficient

risk transfer, fiscal resource allocation and sector criticality

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Full

Privatization

Works &

Services

Contracts

Management &

Maintenance

Contracts

Operation &

Maintenance

Concessions

Build Operate

Transfer

Concessions

Asset

ownershipPublic Public Public Public & Private Private

Commercial risk Public Public Private Private Private

Typical duration 1-2 years 3-5 years 15-20 years 20-30 years Indefinite

Sectors

Roads EPC,Sewerage,

WaterToll stations Urban infra Highways, Ports

WaterTelecom, Power

Extent of private sector engagement

Low High


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Select Sector Experiences


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PPP in Roads - 1

7

60,000 km of National Highways

National Highway Development Project (NHDP) worlds largest PPP

based programme

NHAIs process for national highway projects:

Toll based model for financially viable projects.

Annuity structure for unviable projects

NHDP provides Viability Gap Funding (VGF) of up to 40% on toll projects. Bidding

criteria - minimum VGF

Typical concession tenures are in the range of 20-30 yrs with 3 yrs construction

Model Concession Agreement in place Toll rates and escalation basis specified

Provides for hand over of 90% of land to developer prior to financial closure

Provision for compensation in case of termination


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PPP in Roads - 2

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A leading builder and

operator of National

Highway projects in India

Equity financing at multiple levels with participation from investors

with different risk profiles and return expectations


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PPP in Airports - 1

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Airports owned & managed by Airports Authority of India

16 international airports, 80 domestic and 25 civil enclaves

200+ non operational/military airstrips

Top 6 cities contribute ~ 70% of the total passenger traffic

PPP structure

Projects to be awarded for 30 yrs plus concession through competitive bidding

Two stage bidding process

First stage: Pre-qualify 5-6 bidders based on technical experience

Second stage: Award project to bidder with highest revenue share

Viability Gap Funding (VGF) mechanism also built-in through ADF / UDF in someairports


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PPP in Airports - 2

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GOI sought private partner to modernize a major infra

asset of national importance, while retaining a degree of

influence (but not control)

In 2006, the airport awarded to a consortium of:- Airport Authority of India (26% stake)- Private sector shareholders (74%)

Project Cost: ~ USD 2.5 bn

Financed By:- Equity from promoters, strategic investors, financial investor- Asset securitization- INR Debt from Indian Banks- ECBs

Combination of funding sources utilized to fund modernization of a

premier airport in the country


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PPP in Ports - 1

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India has about 12 major ports and 180 minor ports.under federal and stategovernment

National Maritime Development Programme (NMDP)

Major Ports

Privatization largely witnessed in Container Terminals / Berths

Projects awarded based on revenue share

Tariffs set by independent regulator (TAMP)

Provision for compensation in case of termination

Minor Ports

Witnessed setting up of greenfield ports (Gujarat, AP, Maharashtra)

No tariff regulation

States having some variations; but overall structure similar


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PPP in Ports - 2

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Non-major Port on West Coast

Concession for 30 years

Developed by Indian entrepreneur

Subsequently sold to international

operator

Project Cost ~ USD 500 mn

Equity investments from financial

investors

Project finance from Indian Banks

IPO

Port project accessing capital through different sources along its life

cycle


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Concluding Remarks


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5 pillars for successful PPPs

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Enabling Framework Legislative, policy & administrative

order

Appropriate risk sharing throughcontracts

Government support financial/non-financial, fiscal incentives

Transparent regulatory (independent)environment Adequate Project preparation

Feasibility, DPR

Clarity in project requirements

Prescription Vs flexibility

Sound Project Economics Adequate revenues to meet costs

(Capital/Operating/Financing)

Adequate cover for debt Risk adjusted return for equity

Strong Sponsors Ability to bring in own equity, provide

comforts to lenders

Ability to bring in third party equity Credit history

Track record of project development andimplementation

Breadth & Depth In

Financial Markets Banking system, project finance,

PE funds

Capital Markets

1 2

3

4

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Towards the 12th five year plan.

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How do we provide steady flow of projects? Financing, not the biggestproblem

Few sector specific issues to focus on:

Roads (timely) land availability, pending dispute resolution, NHAIstaffing

Power Discom health, fuel availability

Airports no action after Delhi / Mumbai??

Urban infra commercial and contractual framework, ULB levelreforms, next JNNURM

Financial sector deepen availability of long term funding, allow

domestic money to flow into PE funds, taxation

With concrete positive steps, strong interest among investors ininfrastructure should definitely continue into the 12th five year plan


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IDFC Private Equity


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IDFC Private Equity brief snapshot

Established in 2002, part of the IDFC Group

IDFC is itself a PPP. set up originally by Govt of India in 1997 to channelise

private investments into infrastructure .now a financial conglomerate (B/S

$11 bn)

IDFCs activities include project & corporate finance, funds management,

investment banking, mutual fund, policy advisory and consulting

IDFC PE manages three private equity funds with corpus of USD 1.3 B

Made 33 investments over last 8 years with 16 exits / liquidity events

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IDFC PEs participation in Indian infrastructure

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3 airports

15 ships

2,500 trucks200,000 students

4,962 hotel rooms

2,180 hospital beds

2 amusement parks35 roads and bridges

11 ports and terminals

7,600 MW power plants

40,000 telecom towers

3 rail container licenses

3,100 km of gas pipelines

29 million sq ft of real estate ment

196 MW of renewable power assets


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Thank you


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Annex

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Equity Investors Evolution

Over Last Decade

s5_110929 ppp presn_prasad gadkari

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