New Tiruppur Area Development Company Ltd.

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In March of 1998, the Tamil Nadu local government owned New Tiruppur Area Development Company Ltd. (NTADCL) awarded the private Mahindra Consortium a construction (EPC) contract along with a separate 30-year management contract for the water and sewerage services in Tiruppur, Tamil Nadu. The Mahindra Consortium was to generate and distribute water as well as sell water to the Tiruppur Municipality on behalf of NTADCL. NTADCL selected the Mahindra Consortium as the O&M operator on the basis of an international competitive bidding process. The contracts were part of a larger project to provide water and sewerage services to the residents of Tiruppur. Upon completion, the New Tiruppur Area Development Project was to supply 185 million liters/day (185,000 cubic meters per day) of water and provide municipal sewage collection and treatment to 1.6 million inhabitants and to 1,000 industrial undertakings at Tiruppur, the knitwear city of Tamil Nadu. M&M and Bectel (who also subcontracted work to Larsen & Toubro (India)) were to handle the EPC contract, involving the construction of the water distribution facilities, while M&M, Bechtel and United Utilities were to form a separate company to serve as the O&M operator for a fixed fee for 30 years. The Mahindra Consortium consisted of three private entities: Mahindra & Mahindra (M&M) of India, Bechtel of the U.S. and United Utilities of the UK (exact shares of the contract were unknown). NTADCL was a special purpose vehicle (SPV) created in 1994 that was considered the “concessionaire” of the New Tiruppur Area Development Project. NTADCL was owned by the Tamil Nadu Corporation for Industrial Infrastructure Development (TACID), (which was owned by the Tamil Nadu government), the mostly state-owned Infrastructure Leasing & Financial Services (IL&FS) and Tirupur Exporters Association, along with the state-owned Life Insurance Corporation (LIC) and General Insurance Corporation (GIC). IL&FS was a major financial services provider that was established by the Indian Central Bank, but by 2004 was 35% owned by IFC and Oriz Corporation of Japan. A bulk water off-take agreement between NTADCL and the Tiruppur Municipality was signed on February 11, 2000. The construction work was scheduled for completion in November 2004 to allow start up and testing to begin with the intention of the treatment facility supplying its first water in April 2005. The wastewater treatment side was to also become operational six months later. This wholly state-funded project achieved financial closure in October 2000. Originally estimated at Rs1,200 crore (roughly US$258 million), the total projected project cost was reportedly reduced to Rs1,000 crore (about US$216 million) due to successful contract renegotiations with Bechtel and Mahindra & Mahindra. The EPC contractors settled for a price of Rs 850 crore as against the initial price of Rs 1,250 crore. In addition to funds contributed by the shareholders of NTADCL, IL&FS raised US$25 million through 30 year floating rate notes guaranteed by USAID and swapped through the Bank of India. IL&FS also allocated a portion of the US$200 million line of credit granted to it by the World Bank for infrastructure projects. Rs100 crore was raised through municipal bonds by the Ahmedabad Municipal Corporation.