Etawah Chakeri (Kanpur) Highway Private Limited

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On 30th November 2011, the National Highway Authority of India (NHAI) awarded a 16-year concession (including construction period of 30 months) to Oriental Structural Engineers Private Limited (OSEPL) for the strengthening, improvement, 6-laning, operation and maintenance, and tolling of 160.212kms (from KM323.475 to KM483.687) of Etawahto Chakeri section of National Highway-2 (NH2),in the state of Uttar Pradesh. Under the contract, Oriental was responsible for the design, construction, finance, operation and maintenance and widening of the existing 4-lane highway to a 6-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-V would ease traffic congestion and give significant stimulus to trade and commerce in the entire region.The project passes through the districts of Etawah, Auraiya, Ramabai Nagar (Kanpur Dehat) and Kanpur Nagar. Oriental Structural Engineers Private Limited established Etawah Chakeri (Kanpur) Highway Private Limited (ECPL), a special purpose vehicle, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI, by quoting highest premium to NHAI. The SPV would pay NHAI a sum of of US$ 15.7million (INR 918.9mn @58.6 INR/USD) in the first year of operations with 5% increase in each subsequent year (this amounted to an NPV payout of US$157.1mn over the concession period at a discount rate of 10%). Under the contract, the SPV was to recover the capital costs and operating costs including returns through tolling during the term of concession. The concession agreement for the project was signed on 5th March 2012. The project attained financial closure on 28th February 2013. The debt/equity ratio for the project was 69/31. The estimated capital cost of the project at the time of financial closure was US$ 383.9mn (INR 22500mn @58.6 INR/USD). Financing comprised of a 13-year term loan of US$ 264.5mn (INR 15500mn) and sponsor equity of US$ 119.4mn (INR 7000mn). Part of the equity was planned to be sourced through internal accruals (toll collection of existing stretch) of INR 2260mn. The term loan had a repayment schedule of 41 quarterly installments. The debt was co-arranged by Axis Bank Ltd (5200mn), Bank of India(5150mn), Central Bank of India (5150mn). Construction on the project was expected to begin in March 2013 (the Appointed Date was March 13,2013) and be completed by September 2015.