Mumbai Metro One (Line 1) Project

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In March 2007, the Mumbai Metropolitian Region Development Authority (MMRDA) signed a 35 year concession (including construction period of 5 years) with Mumbai Metro One Private Limited (MMOPL) for building the 11.4 km elevated metro line connecting the Versova - Andheri – Ghatkopar stretch of Phase-I of Mumbai Mass Transport System. The Phase-I includes construction of three metro lines. The other corridors in the first phase includes the 38-km Colaba-Mahim-Charkop route and the 14-km Bandra-Kurla-Mankhurd route. The facility will be transferred back to MMRDA at the end of the concession period. Under the contract, the consortium was responsible for the design, construction, finance, operation and maintenance of the Metro line. The proposed MRTS project would provide connectivity between eastern and western suburbs of Mumbai. The proposed alignment would commence from Versova, a Western Suburb in Mumbai and run on an elevated structure along the main road connecting Versova and Andheri. The proposed rail system also crosses the arterial SV Road, connecting the Central Business District with the western suburbs, and Western Railway tracks on the north side of the existing Andheri suburban railway station. There would be 12 stations along the route, which would have double line elevated standard gauge tracks. The entire distance is likely to be covered in 21 minutes. Normally, a journey by road takes about an hour to an hour and a half during peak traffic. It was to be mostly elevated, except for a short stretch underground where it would cross the Western Express Highway. The consortium of Reliance Infrastructure Limited of India, Mumbai Metropolitian Region Development Authority (MMRDA, a state government body responsible for the development of Mumbai Metropolitan Region), and Veolia Transport (transport services subsidiary of Veolia Environnement, a leading French company) established Mumbai Metro One Pvt Ltd (MMOPL), a Special Purpose Vehicle (SPV), to implement the project. Reliance Infrastructure has a 69% equity stake, MMRDA a 26% stake and Veolia a 5% stake in the project. The consortium was one of the final two bidders for the metro project, the other being IL&FS-Unity Construction consortium. L&T-Siemens was the third bidder but did not submit any financial bids. The consortium won the tender through international competitive bidding, conducted by MMRDA, by quoting the lowest subsidy requirement from the government of US$ 138.3 million (INR 6500 mn @ 47 INR/USD). Reliance had quoted construction costs for the project at INR 23560 mn and IL&FS at INR 34060 mn. Under the contract, MMOPL was to recover the capital costs and operating costs including returns through user fees during the term of concession. When completed, trains on this route will be able carry at least 60,000 passengers per hour. Fares (at 2003-2004 level to be revised @ 11% every fourth year) was fixed at INR 6 upto 3 Kms, INR 8 between 3 Kms.to 8 Kms., and INR 10 beyond 8 Kms. Fares shall be fixed by Government of Maharashtra, through a notification. MMOPL would also be permitted to have the right of advertisement along the project site, as well as in the rail cars, stations etc. It would also have the right to develop commercial space to provide passenger amenities at the stations. The concession was signed in March 2007. The project attained financial closure on 3rd October 2008. The estimated capital cost of the project was US$ 501.3 million (INR 23560 mn @ 47 INR/USD) million. Financing comprises a US$ 183 million (INR 8600 mn @ 47 INR/USD) Rupee term loan, and US$ 71 million (INR 3340 mn @ 47 INR/USD) Foreign Currency loan, and US$ 109 million (INR 5120 mn @ 47 INR/USD) Equity. There was a capital grant or viability gap fund (VGF) from MMRDA of US$ 138.3 million (INR 6500 mn @ 47 INR/USD) for the balance fund requirement. Of the INR 6500 mn of VGF, some 20% is expected to be contributed by the central government and the rest by the state government. IDBI Bank was the sole lead arranger and the other members of the consortium were Indian Infrastructure Finance Company Ltd, UK (for foreign currency loan), Indian Bank, Canara Bank, Oriental Bank of Commerce, Karur Vysya Bank and Corporation Bank. Some key features of the transaction were: a. The transaction was structured to have a debt equity ratio of 1:1 (treating the VGF as quasi-equity). b. The tenor of the Rupee loan was for a period of 19 years with an initial moratorium of four years. c. The transaction was structured to have a better leverage reckoning the cashflow build-up of the project. Some 85% of the principal repayment was to be made in the last 10 years of the repayment period. Furthermore, a put option is also available for lenders at the end of the 10th year after commercial operation date (COD). d. The cost of borrowing for the rupee component, which constitutes about 75 per cent of the total debt, will be 12.25%, while the foreign currency loan will be at 3.5% above LIBOR (London Inter-Bank Offered Rate). The interest rate structure for the project is styled in such a manner that the lenders and borrowers would have the benefit of changing market conditions during operation period of the loan, with annual reset clause with IDBI BPLR as the benchmark. e. The facility was arranged as a mix of rupee denominated and foreign currency denominated loans. There is, however, an option to refinance by alternative debt funding by way of ECBs, ECAs, domestic bonds and/or multilateral agencies, within 24 months of the signing of the loan documents with the lenders of INR Loan. This would be up to maximum extent of 50% of INR Loan. f. MMOPL is permitted to prepay the equivalent amount of INR loan , without any prepayment premium. g. With a view to meeting any unforeseen contingency, to the extent of 20% of the project cost, it was agreed upfront that the sponsors would bring in 10% of the project cost as stand-by equity and the lenders would provide 10% of the project cost as stand-by debt. Construction on the project began in Feb 2008 and was expected to be completed by 2nd Quarter of 2011. Descriptions modified to suit the additional information available.