Ashoka Sambalpur Baragarh Tollways Private Limited

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In May 2010, the National Highway Authority of India (NHAI) awarded a 30 year concession (including construction period of 30 months) to Ashoka Buildcon Limited for the strengthening, improvement, four-laning, operation and maintenance of 88kms of Sambalpur-Bargarh-Chattisgarh/Orissa Border Section of National Highway-6 (NH-6) in the state of Orissa. Under the contract, Ashoka Buildcon was responsible for the design, construction,finance, operation and maintenance and strengthening of the existing carriageway to a four-lane highway with paved shoulders. The scope includes construction of 4lanes including construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, service roads, road intersections,interchanges, drains, etc.The expansion project, part of National Highway Development Project Phase - III will ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The sponsor Ashoka Buildcon Limited established Ashoka Sambalpur Baragarh Tollways Private Limited, a special purpose vehicle, to implement the project. The SPV won the tender through competitive bidding, conducted by NHAI during April 2010, by quoting the lowest financial grant or highest premium offer to NHAI. Ashoka Sambalpur Baragarh Tollway Private Limited was required to pay NHAI a premium of US$0.29mn (INR13.3mn @45 INR/USD) during the first year, due and payable on a pro rata basis for the period remaining in that year; and for each subsequent year of the concession period, the premium shall be determined by increasing the proportion of the premium in the respective year by an additional 5% as compared to the immediately preceding year. For example, the premium for the second and third years would be equal to INR13.97mn and INR14.66mn for the respective years.The NPV of the total payout through the life of concessions was thus estimated to be about US$4.7mn at a discount rate of 10%. There were 20 bidders qualified for the financial bidding stage.Under the contract, the SPV was to recover the capital costs and operating costs including returns through tolling during the term of concession.The toll rates are set forth in the concession agreement with a clause to increase the toll rates annually by 3%, without compounding (such increased rates shall be deemed to be the base rate for the subsequent years). The applicable base rates shall further be revised annually with effect from April each year to reflect the increase in Wholesale Price Index (restricted to 40% of the increase in WPI to be rounded to nearest INR5). The concession agreement was signed on 29th June 2010. The project attained financial closure on 25th January 2011. The debt equity ratio of the project was 70:30. The estimated capital cost of the project at the time of financial closure was US$ 253.8mn (INR 11420mn @45INR/USD) million. Financing comprised INR 8100mn 17year term loan, and INR 3320mn equity. The INR 8100mn term loan had a repaymnet in 163 monthly instalments.The debt was arranged by Axis Bank Limited. There were a total of 5 lenders: Bank of Baroda (1650mn), Punjab National Bank (1650mn), Bank of India (1000mn), IIFCL (1650mn) and Axis Bank (2150mn). Construction on the project began in January 2011 and was expected to be completed by July 2013.