L&T Great Eastern Highway Limited

Cancelled

Failure

In March 2012, the National Highway Authority of India (NHAI) awarded a 20 year concession (including construction period of 30 months) to L&T Infrastructure Development Projects Limited (LTIDPL) for the strengthening, improvement, four-laning, operation and maintenance, and tolling of 209kms of Amravati–Jalgaon section of NH-6 from KM 441.950 to KM 650.794 in the state of Maharashtra. This stretch was contiguous to Amravati to Jalgaon 275km section of the same NH-6. Under the contract, L&T IDPL was responsible for the design, construction, finance, operation and maintenance and strengthening of the existing 2-lane carriageway to a 4-lane highway with paved shoulders. The scope will include construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, road intersections, bypass, flyovers, interchanges, drains, toll plazas etc.The expansion project, part of National Highway Development Project Phase-IV, was part of the NHAI's Mega Highway Program. This stretch is a prominent East-West connector, connecting hubs of economic activity like Gujarat & Maharashtra in the West to the mineral rich states like Orissa & Chattisgarh in the Eastern part of the country. The Project would offer seamless, safer and faster commute between places like Surat, Dhule, Nagpur and shall pave way for development in Vidharbha region of Maharashtra. L&T IDPL established L&T Great Eastern Highway Limited (L&T GEHL), a special purpose vehicle, to implement this project. The SPV won the tender through competitive bidding, conducted by NHAI, by quoting the highest premium payment to NHAI. The SPV would pay NHAI a sum of of US$ 29mn (INR 1450.8mn @50 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of US$ 362mn over a concession period of 20 years at a discount rate of 10%). There were 17 final bidders for this project. Under the contract, the SPV was to recover the capital costs and operating costs including returns through tolling during the term of concession. L&T would execute the EPC contract for this project. The concession agreement was signed on 6th June 2012. The project attained financial closure on 30th November 2012. The debt/equity ratio of the project was 70/30. The estimated capital cost of the project at the time of financial closure was US$ 471.2mn (INR 23559mn @50 INR/USD). Financing included senior debt of US$ 300.3mn (INR 15014.3mn), subordinate debt of US$ 63.2mn (INR 3160mn), and sponsor equity of US$ 107.7mn (INR 5385mn). The lead arranger was ICICI Bank. Construction on the project was expected to begin in December 2012 and get completed by June 2015. According to the reports, the project financials had gone unfavorable, with key inputs such as bitumen, diesel and aggregates turning costlier, and the company fearing that the actual toll revenues would be lower than projected because of the economic slowdown setting in (2012-2014 period slowdown). Even the Government (NHAI) sop — allowing road developers to postpone payment of premium — would not be enough to make the projects profitable. L&T was in discussion with NHAI for exiting the project for some time. Finally in September 2014, NHAI canceled the concession for the project.

Transport

World Bank Group

Project

Road, Commercial, Bridge, Government, Waste Processing and Treatment, Automotive