Mysore-Bellary Highway Private Limited

active

In February 2014, Government of Karnataka (through PWD) awarded a 10-year concession (including a 30-months construction period) to a consortium of Sadbhav Engineering Limited and GKC Projects Limited for the strengthening, improvement,two-laning,operation and maintenance,and tolling of 193.344 kms of existing state highways SH-3 and SH-33, from Malavalli to Pavagada (Malavalli-Maddur-Huliyurdurga-Kunigal-Tumkur-Koratagere-Madhugiri-Pavagada section),in Karnataka. Under the contract, the consortium was responsible for the design, construction, finance, operation and maintenance,strengthening and widening the existing 2-lane carriageway to 2-lane divided carriageway.The scope included construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, road intersections,interchanges, drains, etc.The expansion project,part of the Karnataka State Highways Improvement Project (KSHIP-II), was expected to ease traffic congestion and give significant stimulus to trade and commerce in the entire region. The consortium of Sadbhav Engineering Limited (74%) and GKC Projects Limited (26%), established Mysore-Bellary Highway Private Limited (MBHPL),a special purpose vehicle on 21st February 2014, to implement the project. The SPV won the tender through international competitive bidding, conducted by Karnataka PWD,by requesting the lowest annuity payment. Under the KSHIP-II annuity concession contracts, it was proposed to avail of The World Bank assistance for an upfront payment of certain per cent of the construction cost and the remaining payments during the maintenance period of 7-years on annuity basis to be met out of Karnataka state funds. Under this concession, MBHPL was to recover the capital costs and operating costs including returns through an upfront payment of US$ 39.2mn (INR 2392.09mn) and semi annual payment of US$ 11.7mn (INR 711.5mn) during the term of operation of concession (7 years). The concession agreement for the project was signed on 20th March 2014. The project attained financial closure on 21st October 2014. The grant/debt/equity ratio of the project was 28/62/10. The estimated capital cost of the project at the time of financial closure was US$ 139.2mn (INR 8490.8mn @61 INR/USD). Apart from the upfront grant of US$ 39.2mn, financing comprised of a term loan of US$ 87mn (INR 5308mn), and sponsor equity of US$ 13mn (INR 790.7mn). The loan was arranged by Kotak Bank. The project construction started in December 2014 (Appointed Date) and was expected to be operational by 10th January 2017.