Blue Water Iron Ore Terminal Private Limited

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In July 2009, the Paradip Port Trust (PPT) signed a 30 year concession (including a construction period of 36months) with a consortium of Noble Group Limited,Gammon Infrastructure Projects Limited,and MMTC Limited for developing an all-weather deep draught iron ore terminal at Paradip port in India. Depths at the proposed channel and berth would be 17.1 meters and would be capable of handling up to 125,000 dwt bulk carriers to import iron ore, pellets.On completion, Paradip port would be able to handle an additional 10mtpa of iron ore. Under the concession, the consortium was responsible for design, finance, construction, operation, maintenance and marketing of the iron ore handling facility with a capacity of handling 10 MTPA of iron ore per annum.Paradip Port would provide supporting facilities like dredging of channel and berth, railway lines and back-up area at an estimated cost of US$ 18.9mn.Concession would start from the date on which certain conditions precedent of the Paradip Concession Agreement were fulfilled, which included receipt of the forest approval from the relevant government authorities. The consortium of Noble Group Limited (51%), Gammon Infrastructure Projects Limited (31%), and MMTC Limited (18%),established Blue Water Iron Ore Terminal Private Limited (BWIOTPL),a Special Purpose Vehicle (SPV), to implement the project.The consortium won the tender through an international competitive bidding by quoting the highest revenue share to the Paradip Port Trust of 36.802% during the concession period of 30 years (BWIOTPL was required to pay to PPT a monthly royalty equivalent to 36.802% of the gross revenue of BWIOTPL earned from the Paradip Iron Ore Berth Project). BWIOTPL had agreed to pay PPT an annual license fee of INR 6.5 million. Five bidders had been short-listed, including the successful bidder BWIOTPL.Since the project was located at a classified "Major Port" (Paradip Port), it was subject to tariffs regulated by the Tariff Authority of Major Ports (TAMP).These ports do not have the flexibility to determine certain charges and dues that are payable by vessels as TAMP had the authority to fix charges for pilotage, mooring and other services rendered to vessels. BWIOTPL was permitted to recover tariff from the users of the project facilities and services in accordance with the tariff notification set out in the Paradip Concession Agreement. Further, BWIOTPL would collect all cesses and charges from the users of the project facilities and services, as may be directed by PPT. The concession was signed on 2nd July 2009.The project attained financial closure on 27th June 2011 with a debt equity ratio of 70:30. The estimated capital cost of the project was US$ 119.2 million. Financing comprised a US$ 86million 12-year term loan, and US$ 33.2million sponsor Equity. The term loan had a repayment schedule of 17 semi-annual installments ending in June 2023. The participating banks in the term loan were Sumitomo Mitsui Banking Corporation, Standard Chartered Bank, and ICICI Bank. Under the Paradip Concession Agreement, the consortium comprising Gammon, Noble and MMTC would have to maintain management control of BWIOTPL during the exclusivity period, being the period until the earlier of (i) 5years from the COD or (ii) the date on which the average annual volume of cargo handled at the project facilities and services reached a level of 75% of the project capacity for two consecutive years. The consortium was required to hold not less than 51% of the equity shareholding of BWIOTPL until three years after the COD and not less than 26% during the concession period. Further, Noble was required to hold a minimum stake of 50% of the consortium?s holding during the concession period. Construction on the project was expected to begin in January 2010 and receive its first cargo in November 2014.But the project had not started as per schedule due to the delay in getting various clearances - forest and environment.