Krishnapatnam Port Company Limited

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In January 1997, Government of Andhra Pradesh (GoAP) awarded the development of an all weather deep water greenfield port in Krishnapatnam (Nellore district, Andhra Pradesh State) to Krishnapatnam Port Company Limited (KPCL)via an international competitive bidding. Under the contract, KPCL had the exclusive right to design, finance, build, manage and operate the Krishnapatnam port for 30 years (from the commercial operations date) with an option to extend the lease for an additional 20 years. Further, KPCL was required to pay 2.6 percent of the revenues to GoAP. The port was initially expected to have three berths and a cargo handling capacity of 13.5 million tons per annum. According to revised concession agreement Dt. 17.9.2004 GoAP has to provide land on lease, external infrastructure such as Roads, Water Supply, Power, Rail connectivity etc. Phase-II expansion, which is underway, consists of seven berths including 4 for coal handling, 1 for container cargo handling and 2 for general cargo handling under a 30-year concession agreement. Phase-II has a capacity of handling 10 vessels and a cargo of 40 million tonnes per annum (mta). The Krishnapatnam port project was originally conceived to serve the large coal shipments for the mega thermal power plants planned in the region. The port was also expected to serve iron-ore exports from Hospet and Bellary regions, and other industries in Nellore and Rayalseema. However, the port construction was considerably delayed due to delays in the finalization of the power plants that it was going to serve. This BOT contract was the result of Government of India’s (GOI) commitment to encourage private investments to augment and upgrade the country’s port capacity. To this effect, GOI took several policy initiatives. Of these, the guidelines issued in October 1996 was the most comprehensive, facilitating private sector participation in the construction and operation of additional assets such as container terminals and cargo berths. KPCL was jointly owned by the Indian firms - Natco Pharma Ltd (26%) and Navayuga Group (74%). KPCL was selected to develop the port in an international competitive tender conducted by GoAP. The total cost of the Phase-I of the project was estimated at US$ 143.5 million. The project reached financial closure in December 2006. UTI bank raised a dual currency debt facility in the amount of US$120 million, with US$ 98 million in Indian rupees and the balance in US dollars. The project was funded on a non-recourse basis. The 2nd phase of the Krishnapatnam Port Project comprising seven berths including four for coal handling, one for container cargo handling and two for general cargo handling is estimated to cost US$ 789.9 million (INR 38242 mn @ 48.41 INR/USD). The financial closure for the 2nd phase was attained on 17th March 2009. Financing comprised US$ 617.6 million (INR 29900 mn @ 48.41 INR/USD) Debt and US$ 172.3 million (INR 8341.8 mn @ 48.41 INR/USD) Equity. Debt was further split between a US$ 578.4 mn (INR 28000 mn @ 48.41 INR/USD) 14.75-year term loan and a US$ 39.2 mn (INR 1900 mn @ 48.41 INR/USD) 14.75-year subordinate term loan. State Bank of India was the lead arranger. Krishnapatnam port was designated as a minor port. All major ports in India are administered by the central government while the minor ports are administered by the respective state maritime boards under the Indian Ports Act 1908. In terms of tariff setting, the major ports came under the Tariff Authority for Major Ports while the minor ports had the freedom to fix their own tariff. Construction for Phase-I was over and trial operations were completed in July 2008 and commercial operations were expected to start in March 2009. Further expansions plans under Phase II and Phase III were under progress. KPCL has already completed the 2nd phase works to the tune of US$ 106.4 mn and was expected to be fully commissioned by January 2012. http://www.ppp.ap.gov.in/ProjectDesc.aspx?Recordkey='40'