SP Jammu Udhampur Highway Private Limited

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In April 2010, the National Highway Authority of India (NHAI) awarded a 20 year concession (including construction period of 36 months) to Shapoorji & Pallonji Company for the strengthening, improvement, two-laning, operation and maintenance of 65 kms Jammu-Udhampur Section of National Highway-1A (NH-1A) from Km.15 to Km.67 in the state of Jaummu & Kashmir. Under the contract, the consortium was responsible for the design, construction,finance, operation and maintenance and strengthening of the existing carriageway to a four-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, tunnels, viaducts, culverts, road intersections, interchanges, drains, etc.The project has many technical challenges, including building new tunnels totalling almost 3km, 59 major and minor bridges, 12 underpasses, 20km of new road alignments and 17km of service roads, all in mountainous terrain. The expansion project, part of National Highway Development Project Phase - II, was very important since NH-1A is the lifeline of the state of Jammu & Kashmir (J&K). The highway traverses through the difficult terrain of the Himalayan mountain range. There was an urgent need to upgrade this landslide and accident-prone two-lane highway to a modern four-lane highway with divided carriageways that facilitate safe and speedy travel and was expected to give significant stimulus to trade and commerce in the entire region. The winning bidder, Shapoorji Pallonji & Company Limited (SPCL), established SP Jammu Udhampur Highway Private Limited, a special purpose vehicle, to implement the project. The SPV won the tender through international competitive bidding, conducted by NHAI, by requesting the lowest fixed annuity of US$ 89.7 million (INR 4038 million @ 45 INR/USD). Under the contract, the SPV was to recover the capital costs and operating costs including returns through fixed semi-annual payment of INR 2019mn from NHAI during the term of concession.SPCL has awarded a fixed-price, fixed-time EPC contract to Afcons Infrastructure Ltd. (a SPCL Group Company), which has considerable experience in constructing bridges and tunnelling in mountainous regions and is handling a large construction contract for Indian Railways in J&K. The concession agreement was signed in October 2010. The project attained financial closure in January 2011.The estimated capital cost of the project at the time of financial closure was US$ 533.3 (INR 24000 mn @ 45 INR/USD) million. Financing comprised INR 6200mn 18year Rupee term loan, US$350 million 6year 5months foreign currency loan, and INR 2660mn sponsor equity (estimated based on public sources). The INR 6200mn term loan had a 2year grace period and repayment was in semi-annual instalments. The US dollar loan had a grace period of 3years 5months and a bullet repayment at the end of 6years 5months and the potential refinance risk was expected to be taken care of by a Bond refinance at the end of the tenure. The Indian Rupee loan was arranged by IDFC Ltd. and Foreign Currency loan was arranged by Standard Chartered Bank.The debt equity ratio of the project was estimated at 90:10, though the same couldnot be confirmed because of unreliable Equity estimates. Construction on the project was expected to begin in July 2010 and was expected to be completed by July 2013.