GVK Shivpuri Dewas Expressway Private Limited

cancelled

In October 2011, the National Highway Authority of India (NHAI) awarded a 30 year concession (including construction period of 30 months) to GVK Power & Infrastructure Limited for the strengthening,improvement, four-laning, operation and maintenance, and tolling of 332.46kms of Shivpuri to Dewas section of National Highway-3 (NH-3),from Km 236.00 to Km 566.45, in the state of Madhya Pradesh. Under the contract, GVK 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 included construction of 4-lanes 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-IV will ease traffic congestion and will reduce the time and cost of travel between Shivpuri and Dewas. It would also increase the employment potential for the local laborers and also development of tourism activities.The Project road lies on National Highway No. 3, one of India’s major national highways (commonly referred to as Mumbai-Agra highway) and a vital trade corridor connecting Western and Central India to Northern India. The Project road passes entirely through Madhya Pradesh, carrying predominantly long distance freight traffic and is expected to offer high growth potential for commercial traffic. GVK Power and Infrastructure Limited established GVK Shivpuri Dewas Expressway Private Limited, a special purpose vehicle, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI,by quoting the highest premium payment to NHAI. The SPV would pay NHAI a sum of of US$ 36.2mn (INR 1809mn @50 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of US$ 569.6mn over the concession period of 30 years at a discount rate of 10%). There were 19 pre-qualified bidders out of which 14 offered their final bids. The L2 bidder had quoted a premium payment of about INR 1100mn. 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 12th January 2012. The project had not obtained funding at the time of collection of this information. The estimated capital cost of the project at the time of bidding was US$ 587mn (INR 29351mn @ 50 INR/USD) million. On 13th January 2013, GVK has cancelled this concession siting delays in securing mandatory clearances, including right of way on the part of NHAI (mandated as per the concession agreement). NHAI has not yet accepted the unilateral cancellation of the concession and holds that aggressive bidding ( US$36.2mn per annum was one of the highest premium ever quoted for any NHAI road project so far!) in the road sector and developers’ growing debt, coupled with banks tightening lending for road projects has led to GVK realizing that the project had become unviable. No decision has yet been formed on the cancellation of this project. In May 2014, NHAI finally cancelled the concession for the project.