Professional Documents
Culture Documents
Session on Finance
Sidharth Sinha
Indian Institute of Management, Ahmedabad
• Land acquisition
¨ Expropriation of right of way for toll road construction. Cost
of land acquired maybe borne either by the government or
the concessionaire.
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Grant During
Grant During Construction
Operations
Lower, as the grant amount Higher as the entire
Extent of
in capital structure reduces initial project investment
funds
the amount of equity & debt is raised through debt &
leveraging
raised in the project equity
Lower Higher part of lender
Lender dues entirely met dues assured through
Lender through toll revenues grant disbursement
protection during operations
regardless of project
revenues
Grant amount to be Grant amount to be
Cash flow
disbursed by road agency disbursed by road
impact from
within a short span of time, agency over a longer
road agency’s
and during actual asset period of time, after
perspective
(road) creation creation of asset
The views expressed here are those of the presenter 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.
2
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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• Shadow toll
¨ Government pays toll to the concessionaires according
to the vehicle - kilometers of the traffic counted
automatically. This provides for a means of introducing
private financing without stimulating resistance to tolling.
¨ Possible financial burden/ fiscal inflexibility in later years
may hinder transition to real tolling.
The views expressed here are those of the presenter 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.
3
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
The views expressed here are those of the presenter 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.
4
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Implications of LPVR
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
5
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Road Funds
Cross-Border Infrastructure: A Toolkit
• Ring-fenced government sponsored special purpose
entities
¨ limits amount of liabilities arising from public support to
public-private partnerships projects
¨ assists to improve governance and transparency of the
allocation of government contribution.
• Capital bias
¨ Even when the road budget is adequate for proper
maintenance, maintenance can still be inadequate,
because of capital bias. Politicians want to build new
roads.
¨ ‘The public mistakenly thinks the remedy for bad roads is
renewal, not maintenance.’
The views expressed here are those of the presenter 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.
6
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
The views expressed here are those of the presenter 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.
7
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
The views expressed here are those of the presenter 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.
8
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
Background
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Background (continued)
Cross-Border Infrastructure: A Toolkit
• The traffic that is generated by this satellite town is
substantial and the interaction with Delhi is also
substantial.
Project Alignment
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
10
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Background (continued)
Cross-Border Infrastructure: A Toolkit
• 30% of Delhi’s population lives across the river Yamuna
Project Development
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
11
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
The views expressed here are those of the presenter 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.
12
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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The Project
Cross-Border Infrastructure: A Toolkit
• Bridge specifications
¨ An 8 lane link across the river Yamuna
¨ A 552 meter long main bridge, 3 minor bridges
¨ 8 lane approach roads on embankments
¨ A 27 lane automated toll plaza
The views expressed here are those of the presenter 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.
13
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Stakeholders
Cross-Border Infrastructure: A Toolkit • Government of India
• Governments of Uttar Pradesh (UP) and NCT Delhi
(entered into a support agreement to the concession
agreement)
• NOIDA - concession grantor
• IL&FS - sponsor
• The World Bank - line of credit to IL&FS
• Kampsax International, Denmark - project consultants
• Mitsui Marubeni Corporation, Japan - EPC contractor
• Intertoll, South Africa - O&M operator
• Users of the bridge
Support
Govt. of NCT Agreement Govt. of Uttar
of Delhi Pradesh
Cross-Border Infrastructure: A Toolkit
NOIDA
Indpt. Engineer
Concession Agreement
Indpt. Auditor
Shareholders
NTBCL
Agreement
Loan Agreement
O&M Contract
Banks/FIs EPC Contract Investors
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Milestones
Cross-Border Infrastructure: A Toolkit
• Apr 1992: Signing of MOU
• Jun 1993: Appointment of Kampsax
• Jan 1996: World Bank review & approval
• Dec 1996: Delhi Development Authority Technical
Committee approval
• Nov 1997: Concession agreement signed
• Nov 1997: Delhi Urban Arts Commission approval
• Jan 1998: Support agreement
• Jan 1998: EPC contract awarded to MMC
Milestones (continued)
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
15
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Grid of Topics
Principal Challenges
Cross-Border Infrastructure: A Toolkit
• The Delhi Noida Bridge Project was the first large private
sector initiative in the surface transport sector.
• NTBCL had to contend with several governments,
multiple departments, and ever changing political and
bureaucratic interfaces.
• As the first project of its kind, it did not have the
advantage of precedence, either in documentation or with
respect to financing.
• The project was also implemented during a fragile
political and economic environment in the country and
state/s.
The views expressed here are those of the presenter 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.
16
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Assured Returns
Cross-Border Infrastructure: A Toolkit
• The concession agreement allows NTBCL to earn an
assured return of 20% net of taxes, calculated on the
total capital employed in rupee terms.
The views expressed here are those of the presenter 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.
17
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
Support Agreement
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
18
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
O&M Agreement
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Grid of Topics
Allocation of Risks
Cross-Border Infrastructure: A Toolkit
• Commercial and revenue risks -
¨ NTBCL
• Sovereign and political risks -
¨ Governments of UP and Delhi
• Time overruns -
¨ EPC contractor
• Operation & maintenance -
¨ O&M contractor
• Natural force majeure -
¨ Insurance
Interest rate • All debt contracted are based on fixed rate of interest
The views expressed here are those of the presenter 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.
20
Session: Finance
Topic 2.5. Toll Roads & Road Funds
Return to
Grid of Topics
The views expressed here are those of the presenter 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.
21
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Financing Plan
Cross-Border Infrastructure: A Toolkit Equity Amount (Rs Million)
IL&FS 360.0
NOIDA 100.0
IFCI 50.0
FCD Issue 207.8
International Funds 400.0
Intertoll (O&M Operator) 106.2
Total Equity 1224.0
Debt
Deep Discount Bond issue 500.0
IL&FS (World Bank L/C) 600.0
RTL from FIs/Banks 1758.0
Total Debt 2858.0
Public Issue
Cross-Border Infrastructure: A Toolkit
• This was also the first initial public offering with take out
financing arrangement
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Take-Out Financing
Cross-Border Infrastructure: A Toolkit
• Take-out financing facility offered by IDFC and IL&FS
in the 5th and 9th years at the following rates :
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Financial Performance
Cross-Border Infrastructure: A Toolkit
Rs. Million
Year ended 31 March 2001 2002 2003 2004 2005 30.9. 2005
Total income 13 118 187 259 317 189
Total expenses 8 65 82 82 91 51
Operating profit 5 53 105 176 226 138
Interest/Finance charges 50 426 337 346 374 193
Depreciation 9 62 63 2 2 1
Miscellaneous expenditure
written off 2 15 15 15 15 8
Net profit before tax (56) (450) (311) (186) (165) (63)
Less provision for tax / FBT 0
Adjusted net profit after tax
and extraordinary items (56) (450) (311) (186) (165) (63)
40
35
30
Closing Price
25
20
15
10
0
3
5
2
5
00
00
00
00
00
00
00
00
00
00
00
00
00
2
2
/2
/2
/2
/2
6/
6/
6/
6/
6/
6/
6/
6/
6/
/6
/6
/6
/6
3/
6/
9/
3/
6/
9/
3/
6/
9/
12
12
12
12
Date
The views expressed here are those of the presenter 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.
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Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Debt Restructuring
Cross-Border Infrastructure: A Toolkit
• Original project debt was contracted at an average cost of
15% pa.
• In view of the downward interest rate trends and revised
cash flow projections, the effective cost of term loans was
reduced to 8.5% pa.
• DDBs were restructured w.e.f. Nov 2004 with revised
interest yield of 8.5% pa and are proposed be refinanced in
the current financial year.
• The debt restructuring exercise has been fully completed
and the current carrying cost of debt is 8.5% pa with
complete repayment by 2017.
Valuation of Company
Cross-Border Infrastructure: A Toolkit
• Market capitalization
¨ =Rs. 35*122.4 million= Rs.4,284 million
The views expressed here are those of the presenter 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.
25
Session: Finance
Topic 2.5. Toll Roads & Road Funds
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Grid of Topics
Learnings
Cross-Border Infrastructure: A Toolkit
• Problem of long-term funding to realize value.
Learnings (continued)
Cross-Border Infrastructure: A Toolkit
The views expressed here are those of the presenter 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.
26