Hospet Bellary Highways Private Limited

cancelled

In October 2011, the National Highway Authority of India (NHAI) awarded a 25-year concession (including construction period of 30 months) to a consortium of PNC Infratech Limited and BF Utility Limited for the strengthening,improvement, four-laning,operation and maintenance, and tolling of 95.44 kms of Hospet-Bellary-Karnatka/Andhra Pradesh Border section from km.280.30 to km.375.74 of National Highway-63 (NH-63) in the state of Karnataka. Under the contract, the consortium was responsible for the design, construction, finance,operation and maintenance and strengthening of the existing 2-lane carriageway to a four-lane highway with paved shoulders. The scope included construction of 4/6-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, toll plaza, tunnel section, etc.The expansion project was part of National Highway Development Project Phase-IV. The consortium of PNC Infratech Limited (65%) and BF Utility Limited (35%), established Hospet Bellary Highways Private Limited (HBHPL), a special purpose vehicle on 17th January 2012, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI, by quoting the highest annual premium. The SPV would would pay NHAI a sum of US$ 3.6mn (INR 180mn @50 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of about US$ 51.4mn over the life of concession period at a discount rate of 10%). Of the 37 pre-qualified bidders, about 14 developers finally bid for the 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 EPC contract for the project had been awarded to PNC Infratech. The concession agreement was signed on 28th March 2012. The estimated cost of the project at the time of bidding was US$ 170.4mn (INR 9100.8mn @53.4 INR/USD). Funding closure had not be achieved at the time of cancellation of the project. However, financial closure could not be achieved by HBHPL within the stipulated period giving NHAI the right to encash performance security furnished by HBHPL of INR 91mn. HBHPL and the NHAI subsequently entered into a close-out and settlement agreement dated March 4, 2014, pursuant to which HBHPL agreed to submit a demand draft to the extent of INR 91mn as consideration towards complete closure of all existing and future claims and disputes with the NHAI in relation to the concession agreement (dated March 28, 2012). The concession was thus canceled on 28th March 2014.