Lucknow Varanasi Tollways Private Limited

Cancelled

In October 2011, the National Highway Authority of India (NHAI) awarded a 23-year concession (including construction period of 30 months) to a consortium of Atlanta Limited and Essar Projects (India) Limited for the strengthening, improvement, four-laning, operation and maintenance, and tolling of 125.9 kms of Lucknow–Sultanpur section of NH-56 from KM 11.500 to KM 134.700 in the state of Uttar Pradesh. The project was covered in the districts of Sultanpur, Pratapgarh and Varanasi in Uttar Pradesh. 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 4-lane highway with paved shoulders. The scope would 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 was part of National Highway Development Project Phase-IVA. This project would reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Sultanpur and Varanasi. NH 56 was an important link connecting two major cities of Lucknow and Varanasi. Gosaiganj, Haidergarh, Musafirkhana and Jagdishpur Industrial area are major settlements along the project road. Lucknow is a major marketing and trading center in North India. The consortium of Atlanta Limited (49%) and Essar Projects India Limited (51%) established Lucknow Varanasi Tollways Private Limited, 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 US$ 1.9mn (INR 96mn @50 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of US$ 26mn over the concession period at a discount rate of 10%). Out of the 34 pre-qualified bidders, 12 developers offered their final bids 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. Atlanta Limited would execute the EPC contract for this project. The project attained financial closure on 11th July 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$ 279.1 (INR 13955.4mn @50 INR/USD) million. Financing included term loan of US$ 195.4mn (INR 9768.8mn) and sponsor equity of US$ 83.7mn(INR 4186.6). The lead arranger for the term loan was Punjab National Bank. Construction on the project was expected to begin in October 2012 (Appointed Date) and get completed by June 2015. However LVTPL had backed out of the project citing lack of viability of the project under the severe economic downturn and the associated upfront premium payment to NHAI. Although NHAI had agreed to defer premium payments (inspite of reported aggressive bids by developers) to help concessionaires to use cashflows from the initial few years for equity commitments for the project, LVTPL failed to start the work. Finally NHAI had terminated the Concession in October 2013.