Sushee IVRCL Arunachal Highways Limited

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In September 2011, the Ministry of Road Transport & Highways, Government of India (MoRTH) awarded a 17-year concession (including construction period of 4.5years) to a consortium of IVRCL Infrastructure Limited and Sushee Infra Private Limited for the strengthening, improvement,two-laning,operation and maintenance of 311kms of Nechipu to Hoj section on NH229, from Tawang in Arunachal Pradesh to Bogibeel bridge in Assam, in the state of Arunachal Pradesh. Under the contract, the consortium was responsible for the design, construction, finance, operation and maintenance,strengthening and widening the existing carriageway to 2-lane road. The scope would include construction of 52.60 km of realignments, 49 intersections, two major and 30 minor bridges and 1,707 culverts The expansion project, part of the Trans Arunachal Highway was a very important Highway which runs across the State of Arunachal Pradesh. The project road would improve the internal connectivity of western districts of Arunachal Pradesh with Itanagar, namely Seppa, Bomdila, and foster socio-economic development of the whole of the State. Apart from this, the road would help in hydro power projects coming up in Arunachal Pradesh. The road would also greatly facilitate the security/ defense agencies to combat anti-national activities and threat on border areas. The consortium of IVRCL Infrastructure Limited (26%) and Sushee Infra Private Limited (74%) established Sushee IVRCL Arunachal Highways Limited, a special purpose vehicle, to implement this project. The SPV won the tender through international competitive bidding, conducted by MoRTH,by quoting the lowest fixed annuity of US$ 15.6mn (INR 780mn @50 INR/USD). The project was to be implemented on a "Hybrid Annuity" model under which, 80% of the estimated construction cost (US$ 200.8mn or INR 10040mn) would be disbursed to the SPV during construction phase (of 4.5years) and remaining construction cost and maintenance cost etc. will be disbursed through 25 semi-annual annuity (US$ 7.8mn or INR 390mn) to concessionaire during maintenance period (of 12.5years). Under the contract, the consortium was to recover the capital costs and operating costs including returns through both upfront subsidy of INR 10040mn and fixed semi-annual payment of INR 390mn from MoRTH during the term of concession. About 12 bidders submitted financial bids for this project. They included Madhucon, KNR-PLL, BSC-C&C, Coastal-SREI, Sew, KMC-, Gayatri, Era-Sibmost, Sushee-IVRCL, DSC, Gammon and Abhijeet. Tendering for 2 times held earlier were annulled owing to high annuity quotes. In bidding held in 2010,DS Construction had emerged as the lowest bidder and had demanded INR 920mn of semi-annuity payment from MoRTH. IVRCL limited would undertake part of the EPC for the project. The concession agreement was signed on 19th December 2011. The project attained financial closure on 30th May 2012. The grant/debt/equity ratio of the project was 75/17.5/7.5. The estimated capital cost of the project at the time of financial closure was US$ 266.6mn (INR 13330mn @50 INR/USD). Apart from upfront cash support of INR 10040mn from MoRTH, financing comprised of a 14-year 9-month term loan of US$ 46.8mn (INR 2340mn) and sponsor equity of US$ 19mn (INR 950mn). The term loan had a repayment schedule of 40 structured quarterly installments. The debt was arranged by IDFC Bank.The other participating banks were United Bank of India,India Infrastructure Finance Co Ltd,State Bank of Bikaner & Jaipur,Indian Overseas Bank,South Indian Bank,State Bank of Hyderabad,IndusInd Bank. Financing also included a 4-year 6-month Bank Guarantee of US$ 34.9mn (INR 1743mn). Construction on the project began in December 2011 and was expected to be completed by June 2016.