KNR Muzaffarpur Barauni Tollways Private Limited

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In October 2011, the National Highway Authority of India (NHAI) awarded a 21year concession (including construction period of 730 days) to KNR Constructions Limited for the strengthening,improvement, two/four-laning, operation and maintenance, and tolling of 107.56 kms of (96.01 km two lane, 11.55 km four lane) of existing Muzaffarpur-Barauni section of National Highway - 28 (NH-28) from 519.6 KM to 627.0 KM in the state of Bihar. Under the contract, KNR Constructions was responsible for the design, construction, finance, operation and maintenance and strengthening of the existing carriageway to a 2/4-lane highway with paved shoulders. The scope included construction of 96.01kms of 2-lanes and 11.55kms of 4-lanes of existing Muzaffarpur-Barauni section of NH28 and included 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 would ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The project road on NH-28 passes through three districts namely Muzaffarpur, Samastipur and Begusarai. Muzaffarpur is an important center of wholesale cloth trade, while Barauni has few major industrial units such as IOC refinery, Barauni thermal power plant, Hindustan Fertilizers Corporation and Barauni Dairy. KNR Constructions Limited (KNRCL) established KNR Muzaffarpur Barauni Tollways Private Limited (KMBTPL), a special purpose vehicle, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI, by quoting the highest annual premium to NHAI. The SPV would pay NHAI a sum of US$1mn (INR 50mn @50 INR/USD) in the first year of operations, with 5% increase in each subsequent year through the life of concession period (this amounted to an NPV payout of about US$ 12mn 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. KNR Constructions had received the approval of National Highways Authority of India ("NHAI") and in June 2012 divested 49% equity in this SPV to JKM Infra Projects Limited (JKM). The fixed price EPC contract for the project had been awarded to JKM at a price of INR 3150mn. The SPV had not entered into any O&M contract as the project was still in the construction phase and would enter into an agreement within 6 months before COD as agreed with the lenders. The concession agreement was signed on 10th January 2012. The project attained financial closure in July 2012. The debt/equity ratio for the project was 56/44. The estimated capital cost of the project at the time of financial closure was US$ 89.3mn (INR 4465.5mn @ 50 INR/USD) million. Financing comprised a 15-year term loan of US$ 50mn (INR 2500mn) and sponsor equity of US$ 39.3mn (INR 1965.5mn). The participating banks were Punjab National Bank, State Bank of Bikaner and Jaipur, State Bank of Patiala and Corporation Bank. Construction on the project began in September 2012 (Appointed Date was July 2012) and was expected to be completed by July 2014. Approximately 97% of the land has been handed over by NHAI till October 2012 and for the balance, land acquisition was in process.