Vijayawada Gundugolanu Road Project Private Limited

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In February 2012, the National Highway Authority of India (NHAI) awarded a 30 year concession (including construction period of 30 months) to Gammon Infrastructure Projects Limited for the strengthening, improvement, six-laning, operation and maintenance, and tolling of 103.59 kms of Vijayawada-Gundugolanu section from km 1076.48 to km 1022.48 including 6-lane Hanuman Junction bypass (length 6.72 km) and 4-lane Vijayawada bypass (length 47.88 km) of National Highway-5 (NH-5), in the state of Andhra Pradesh. Under the contract, Gammon was responsible for the design, construction, finance, operation and maintenance and strengthening of the existing carriageway to a six-lane highway with paved shoulders. The scope includes construction of 6-lanes (except for the four lane Greenfield Vijayawada Bypass) including construction of new pavement, rehabilitation of existing pavement, construction and/or rehabilitation of major and minor bridges, culverts, service roads, road intersections,interchanges, drains, etc.The expansion project, part of National Highway Development Project Phase-V would ease traffic congestion and give significant stimulus to trade and commerce in the entire region. Gammon Infrastructure Projects Limited established Vijayawada Gundugolanu Road Project Private Limited (VGRPPL), a special purpose vehicle, to implement the project. The SPV won the tender through competitive bidding, conducted by NHAI, by quoting the highest annual premium. The SPV would pay NHAI a sum of US$11.5mn (INR 575.7mn @50 INR/USD) in the first year of operations with 5% increase in each subsequent year (This amounted to an NPV payout of about US$ 180.9mn over the life of concession period at a discount rate of 10%). Under the contract, the SPV was to recover the capital costs and operating costs including returns through tolling during the term of concession. Gammon Infra had received the approval of National Highways Authority of India (NHAI) and in August 2012 divested 49% equity in this SPV to Simplex Infrastructure Limited. The EPC contract for the project had been awarded to Simplex Construction Limited. The responsibilities of maintenance of the project (existing highway) during construction period have been covered in EPC contractor scope The concession agreement was signed on 21st March 2012. The project attained financial closure on 24th March 2012. The debt/equity ratio for the project was 80/20. The estimated capital cost of the project at the time of financial closure was US$ 417.4mn (INR 20870 mn @ 50 INR/USD) million. Financing comprised a 15-year term loan of US$ 334mn (INR 16700mn) and sponsor equity of US$ 83.4mn (INR4170mn). The term loan was syndicated by Central Bank of India. Construction on the project was expected to begin in October 2012 and was expected to be completed by March 2015.