Baleshwar Kharagpur Expressway Limited

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In March 2012, the National Highway Authority of India (NHAI) awarded a 24year concession (including construction period of 30 months) to IL&FS Transportation Networks Limited (ITNL) for the strengthening, improvement, six-laning, operation and maintenance, and tolling of 119.3kms of Kharagpur to Baleshwar section of NH-60 from KM 0.0 to KM 119.300 in the states of Orissa and West Bengal. Under the contract, ITNL was responsible for the design, construction, finance, operation and maintenance and strengthening of the existing 4-lane highway with paved shoulders. The scope included construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, road intersections,interchanges, drains, etc.The expansion project, part of National Highway Development Project Phase-I, was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. IL&FS Transportation Networks Limited established Baleshwar Kharagpur Expressway Limited (BKEL), a special purpose vehicle, on 22nd March, 2012, to implement the project. The SPV won the tender through competitive bidding, conducted by NHAI, by quoting the highest annual premium. The SPV would pay NHAI a sum of US$6.5mn (INR 350mn @53.4 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of about US$ 91mn over the life of concession period at a discount rate of 10%). There were 40 pre-qualified bidders for this project, out of which 5 had finally bid for this project. Under the contract, the SPV was to recover the capital costs and operating costs including returns through tolling during the term of concession. The concession agreement was signed on 24th April 2012. The project attained financial closure in October 2012 at a debt/equity ratio of 69/31. The estimated project cost at the time of financial closure was US$ 123.6mn (INR 6600mn @53.4 INR/USD). Financing comprised a senior debt of US$ 74.1mn (INR 3960mn), a subordinate debt of US$ 11.2mn (INR 600mn) and sponsor equity of US$ 38.2mn (INR 2040mn). ILFS was the adviser and the syndicating banks were led by State Bank of Patiala. The project debt would be amortized in 43 structured quarterly installments over December 2015-May 2026. Over 65% of BKEL’s debt was likely to be amortized in the last 4-years. Loan covenants stipulated maintaining a debt service reserve account equivalent to one quarter’s principal and interest payments (to be funded through a bank guarantee). For a substantial part of the project, the debt was at a floating interest rate (reset every 2-years). Construction on the project was expected to begin on 8th February (Appointed Date for start of Concession) and be completed by June 2015. According to the August 2013 lenders’ independent engineer’s report, the project was marginally ahead of schedule at 22.42% as against the planned progress of 19.34%. 100% right of way was available.