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Mumbai metro project Phase I

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Critical ANalysis of Mumbai Metro project - Phase I

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Mumbai metro project Phase I

  1. 1. Mumbai Metro Rail Project GROUP – 8 Neeraj Gurbani A020 Akshiv Pathania A037 Sameer Sehgal A047 Karan Shah A050 Jinesh Vora A056
  2. 2. Agenda Mumbai Transport Infrastructure: Overview Mumbai Metro : Conceptua lization Project Planning Financial Structuring Key Learnings & Recommen dations Risk Managem ent Project Execution Bidding Process
  3. 3. Mumbai Transport Infrastructure: Overview 12.8 % 9.2 % 78.0 % Private Vehicle Intermediate Public transport Public transport 78% Suburban rail – 56% BEST – 22%  13.0 million people travel daily by Public Transport  Train transportation – Lifeline of Mumbai Mumbai is Public Transportation Dependent city
  4. 4. Mumbai Transport Infrastructure: Loopholes Rail Network:  Failed to keep pace with demand  Suburban rail traffic increased by 6 times while the capacity increased by only 2.3 times  4500/5000 passengers travel per train against the carrying capacity of 1750 resulting in unbearable overcrowding; Strong mismatch in demand and supply Bus Network:  Constraints to expand the existing road capacity to meet the future demand  Number of cars in Mumbai has grown by 51% in the last six years; Resulting in road congestion & Environmental pollution  Not serving the purpose of the Feeder service to rail network Mumbai needs an efficient, economical and environment friendly Mass Transit System
  5. 5. Mumbai Metro Project: Serve areas not served by current system Higher capacity Faster travel Attractive to commuters Environment Friendly Improve overall mobility Gap Analysis Access to important industrial and commercial area Additional 7 mn commuters Time reduced to 21 min from 71 min between Versova & Ghatkopar (Ph-I) Provide a rail based connectivity within an approach distance of 1 to 2 km; Fare Reduction in air and noise pollution East-West rail based connectivity to Central and Western suburbs Mumbai Metro is the best solution for Mass Transit System
  6. 6. Mumbai Metro Overview 3 Phases PHASE I Total Length of 62.68 Km (approx) • Versova – Andheri – Ghatkopar  11.07 Km • Charkop – Bandra – Mankhurd  31.8 Km • Bandra – Colaba  20 Km PHASE II Total Length of 40 Km (approx) • Charkop-Dahisar  7.5 Km • Ghatkopar – Mulund  12.5 Km • BKC Kanjurmarg via Mumbai Airport – 19.5 Km PHASE III Total Length of 39.80 Km (approx) • Andheri East – Dahisar East route  18 Km • Flora fountain and Ghatkopar route  21.8 Km
  7. 7. Mumbai – Metro Phase I
  8. 8. PROJECT PLAN Phase I Line 1 – Versova – Andheri - Ghatkopar India’s first PPP Metro Project, based on the Build, Own, Operate and Transfer (BOOT) model Elevated 11 Km line to Ghatkopar via Marol, Chakala and Saki Naka AUGUST 2004 – Approval received from the Government of Maharashtra and Global Bids were invited through Expression of Interest (EOI) SPV – Mumbai Metro One Private Limited (MMOPL), a JV between Reliance Infrastructure, Veolia Transport and MMRDA Concession period of 35 years including the construction period of 5 years TIMELINE FOR THE PLANNED PROJECT Govt. of Maharashtra approval 19th August, 2004 Invitation of Global Bids 21st August, 2004 Pre-bid meeting 23rd November 2004 Technical bids 16th May, 2005 Invitation of Financial Bids 15th September, 2005 Receipt of financial bids 10th January, 2006 Evaluation of Financial bids January, 2006 Negotiations with the lowest February-May, 2006 bidder Negotiated offer 10th May, 2006 LOI issued after GOM approval June 2006 Commencement of Construction Feb 2008 EQUITY HOLDING (%) 26% Reliance Infrastructure Estimated cost of the project – Rs 2356 crores 5% 69% Veolia Transport MMRDA
  9. 9. FINANCIAL STRUCTURING Line 1 – Versova-Andheri-Ghatkopar Out of the total estimated project cost, cumulatively 27.5% was contributed as VGF by the GOI and Government of Maharashtra The remaining Rs1706 crores was financed by 70% Debt –Rs. 1193 Cr and 30% Equity – Rs. 513 Cr The 70% debt was provided by a consortium of banks led by IDBI Total project Cost Rs 2356 Crores Remaining Rs 1706 Crores 70% Debt Rs 1193 Crores Consortium of banks IDBI, Corporation Bank, Karur Vysya Bank, Canara Bank, Oriental bank of commerce and Indian Bank 30% Equity Rs 513 Crores Viability Gap Funding Rs 650 Crores VGF GoI-20% GoM-7.5% Reliance Infra - 69% ~ Rs. 353 Cr. Veolia Transport - 5% ~Rs. 26 Cr. MMRDA - 26% ~ 134 Cr. Free of Cost: • Space for Car Depot at DN Nagar Station and Ghatkopar Station • Land for the project
  10. 10. Bidding – Metro Phase I Line 1 Eligibility Criteria An Indian Company or a Company authorized to carry out business in India or a JV with an Indian Company Net worth of more than Rs.5,000 million or US$ 112 million Annual Turnover for the last 3 years of more than Rs.3,650 million or US $ 81.0 million Relevant experience in developing, constructing or operating a Mass Transit System with minimum capacity of 20,000 PHPDT. First Stage-Technical Proposals Evaluate Bids for Financial Capability and Technical Competence as per evaluation criteria Scrutinize system design proposals for conformity - Technical and Performance specifications Obtain bidders‟ confirmation to incorporate proposed modifications if any to provide level playing ground Those bidders scoring 75% and above in technical evaluation were eligible to submit financial proposal Second Stage-Financial Proposals Evaluation of Business Plan & other formats submitted as per RFP documents Two Stage Process Technical Proposals Financial Proposals
  11. 11. Bidding – Metro Phase I Line 1 Received Bids - 5 Technically Qualified - 3 Financial Proposals Received - 2 Preferred Financial Bid "Mumbai Metro One consortium” LED by Reliance Energy Limited and Connex- France "Mumbai Metro One consortium” LED by Reliance Energy Limited and Connex-France “IICCU consortium” led by Infrastructure Leasing & Financial Services Limited – ITD Thailand-Unity Infra Mumbai Metro Consortium” led by Gammon Infrastructure Ltd – Siemens and BEML Hindustan Construction Company and RITES Shaktikumar Sacheti Limited and Lingkaran Metro  Bidding Parameter - A bidder asking for minimum capital contribution to be selected as Preferred Bidder  Details of Preferred Financial Bid- Cost- Rs 2356 Cr and Capital Contribution: Rs 1251 Cr  Negotiated bid - Negotiations were carried out with the lowest bidder to reduce the capital cost. As a result demand for capital contribution reduced from Rs 1251 Cr to Rs 650 Cr  Approvals - Negotiated offer was evaluated by the Bid Evaluation Committee appointed by the Metropolitan Commissioner and approved by the state cabinet
  12. 12. Bidding – Metro Phase I Line 2 Charkop - Bandra – Mankhurd corridor Technically Qualified Bidders Reliance Infrastructure-SNC Lavalin, Canada-Reliance Communication GE India-L&T-CA-IDPL Tata Power-Mitsubishi-Tata Realty's Pioneer Infrastructure GVK-Bombardier-YTL Infrastructure Leasing & Financial Services Limited - Soma Constructions-Punj Lloyd Essar-Alstom Key Highlights of Project „Concession period - 35 years with an extension clause of another 10 years. Financial closure : Debt - Rs 6,931 Cr Equity - Rs 2,332 Cr Equity share : Reliance Infra - 74% SNC Lavalin - 26% Implementation under PPP format Project cost: MMRDA’s estimate : Rs 8,250 Cr R-Infra’s estimate : Rs 11,000 Cr VGF - Rs 1,532 Cr by GOI, Rs 766 Cr by GoM Construction work stalled due to issues Project Winner Reliance Infrastructure Only one that made a financial bid Bid Submitted Rs 2,298 Cr The grant from the state & Central governments
  13. 13. Bidding – Metro Phase I Line 3 Eligibility Criteria Milestones in Bidding Process Initial Eligibility Criteria Modified Eligibility Criteria Average annual turnover of $175 million for five years generated specifically from the execution of underground railway works, excluding hill tunnels Average turnover of $175 million for five years from billing for civil infrastructure works completed or in progress All member companies of a consortium or JV were required to meet the minimum experience criteria individually The combined experience of a consortium was required to meet the minimum experience criteria In technical qualification the end date for experience limit of bidders for 10 years was December 2012 The end date for experience limit of bidders for 10 years ending December 2012 was revised to March 2013 Sept 2013 • Invitation for the pre-qualification bids Oct 2013 • Expected Submission of bids Nov 2013 • Expected Evaluation of Pre-Qualification of Bids Jan 2014 • Re-Invitation for the pre-qualification bids Mar 2014 • Submission of pre-qualification bids July 2014 • Expected Issue of detailed tenders Oct 2014 • Expected award of contract to successful bidder Jan 2015 • Expected Commencement of construction Phase  14 international and national firms have submitted the pre-qualification bids for detailed design and construction of underground stations and associated tunnels for the project  Bidders are as follows : AFCONS-KMB, CEC-ITDCEM-TPL, CTCEG-PIIPL, Dogus-Soma, IL & FS-CR25G, J Kumar- CRTG, L&T-STEC, MOSMETROSTROY-HCC, OHL-SKE&C, Pratibha-GDYT Consortium, Sacyr CMC ESSAR, Salin Impregilo-Gammon, STRABAG-AG-Patel and UNITY-IVRCL-CTG.
  14. 14. Risk Management Types of Risk Construction Risk Operational Risk Market/ Demand Risk Financial Risk Political Risk Time and Cost overruns or shortfall in performance parameter of the project Technical performance of the project during the operational phase can fall below the levels projected Possibility that the market conditions assumed in determining the viability of the projects are not realized Variation in Interest Rates and/or the risk of not being paid for services delivered by the investors Any disruption in construction or operation of an project due to political decisions
  15. 15. Risk Mitigation Risk Identific ation •Identifying the events or actions which effects the viability of the project Severity of Risk •Incase the event occurs, the effect of the same on the cost/time of the project Risk Allocati on •Identifying and allocating the risk to the party who can manage it the best Risk Mitigation •Steps/Actions which can be taken to reduce the chances of event occurring Risk Pricing •Cost of addressing the risk needs to be determined and suitable provisioning made
  16. 16. Risk Allocation Framework (1/2) Risk Type Sensitivity Primary Risk Bearer Comments Delays in Land Acquisition High Government To be handed over to the concessionaire by MMRDA. If unable to do so, MMRDA is liable to extend project completion date, financial closure date & concession period Financing Risk Medium Private Sector Has to achieve financial closure in 180 days after signing the contract. Provision with MMRDA to extend the period by another 180 incase not achieved Planning Risk Medium Private Sector Need to execute the project in conformance with the specifications and standards specified in the agreement Regulatory, Approval Delays Low Private Sector Has to obtain all required clearances/permits from the GoI/GoM for implementation of the project Pre-Operative Risks Construction Phase Risks Risk Type Sensitivity Primary Risk Bearer Comments Design Risk Medium Private Sector Have to submit all drawings and schedule to MMRDA for review. Also to be scrutinized by an independent engineer Construction Risk Medium Private Sector Performance security of Rs.14 crore for due and faithful performance of its obligations. Renewed from time to time and replenished every 30 days. Penalty of Rs.2 crore/day for missing any milestone Change in Scope Risk Low Government Additional work outside scope would be ordered by MMRDA performed by private operator and subsequently reimbursed Financing Risk Medium Private Sector Only 85% of VGF to be released during construction period of the project. Remainder of funds after 6 months of project being operational
  17. 17. Risk Allocation Framework (2/2) Risk Type Sensitivity Primary Risk Bearer Comments Technology Risk Low Government/Private Sector Project to be executed in conformance with the specifications and standards specified in the agreement O&M Risk Medium Private Sector TO submit an operations and maintenance manual to MMRDA for approval. Risk mitigation by allowing concessionaire to appoint O&M contractors Market Risk High Private Sector The private operator would be allowed to levy and collect the fares. The fares would be revised at a rate of 11% every fourth year. No revenue guarantee from the government Performance Risk High Private Sector Private operator has to hold at least 51% equity during construction and in the 2 years after completion of the project. Lead consortium member will have to hold at least 26% equity stake in the project for a minimum period of 15 years after project completion Operational Phase Risks Handover Risks Risk Type Sensitivity Primary Risk Bearer Comments Handover Risk Low Private Sector Joint inspection by both parties 60 months prior to the expiry of concession period to gauge compliance with serviceability requirements defined in the agreement, private party to pay charges if found deficient Private Operator Event of Default Low Private Sector Only lenders are protected to equity holders bear a major risk. MMRDA to take over the assets and is liable to pay 90% of debt less insurance claims
  18. 18. Mumbai Metro Project: Execution  2006: Former PM Manmohan Singh laid the foundation stone for Metro One project in June  2007: Reliance Infra led MMOPL awarded the contract for developing the 11.4 km Versova- Andheri-Ghatkopar (VAG) corridor  2008: Actual construction on the project began in Feb 2008, and the corridor was expected to be operational by 2010-end However, MMOPL missed as many as 10 deadlines set for completion of the project including the March 2013 deadline set by Maharashtra CM Prithviraj Chavan  Reasons for delay:  MMRDA supposed to make 59% land available to MMOPL but could manage only 45% when construction began  Complete land needed for construction could be handed over to MMOPL only in 2012  ROW and legal issues with removal of encroachments and religious structures also stalled construction progress  Unavailability of records of underground utilities forced MMOPL to change design on numerous occasions  Delay in safety certifications from RDSO and Fire department  Effects of delay:  MMOPL asking for steep increase in the fare creating a controversy in the media and asking for reimbursements for expenses  8 year delay and harassments for Mumbai commuters on the affected stretch
  19. 19. ₹ 45.00 ₹ 40.00 ₹ 35.00 ₹ 30.00 ₹ 25.00 ₹ 20.00 ₹ 15.00 ₹ 10.00 ₹ 5.00 ₹ 0.00 Pricing Comparison 0-2 2 -4 4 - 6 6 - 9 9 - 12 12 - 15 15 - 18 18 - 21 21 - 2424 - 27 27 - 31 31 - 3535 - 3939 - 44 > 44 Mumbai (Proposed) Delhi Bangalore Chennai 350 250 400 240 325 200 Mumbai (elevated) Delhi (elevated) Delhi (Underground) Bangalore (elevated) Bangalore (Underground) chennai (elevated) Cost Per Kilometre (Rs Crores) PRICING
  20. 20. Comparison with other metros Parameters Other Metro Mumbai Metro Financial Viability Among 200 metro cities – Hong Kong, Singapore, Tokyo, Taipei have been financially viable Very early to predict Cost Escalations It can happen because of delays in clearance From 2346 Crores to 4200 Crores Source of Revenue Ticket sales, Advertisements 5 – 10 % Ticket Sales Advertisement, Station naming rights Fare Low as compared to other modes of transport Very high compared to other metros in India Pricing Authority Government in most of the projects MMOPL * The project, which was under the Indian Tramways Act, was brought by the union government under the Indian Metro Act in 2014, allowed MMOPL to fix its own fare structure in the absence of a fare fixation committee
  21. 21. Learnings & Recommendations 1. Expediting the bid process  Entire bid process to choose the successful bidder took more than 2 years. This led to very less no. of bidders bidding for the project. 2. Delay in obtaining VGF approval  Substantial delay in obtaining VGF approval from the govt. because model concession agreement was not in place. 3. Delay in getting approval  Delay in getting approval for construction of over-bridge that passed over the railway line. This was because railways were thinking of a project that could invade the path of the metro line.  It is recommended that authorities be cognizant of all other upcoming infrastructure projects that have the potential to affect operations of the planned project while bidding out such projects and resolve the same prior to the appointment of a developer.
  22. 22. Learnings & Recommendations 4. Land acquisition issues  Land for the depot was under dispute.  It is recommended in the future concerns such as these are addressed before the project procurement stage itself to ensure smooth functioning of the project. 5. Clear specification on Asset transfer on termination  5 years before the expiry of the concession period a survey of the assets would be carried out to determine whether they are in working condition as given in the agreement. Schedule in the concession agreement does not have clear and robust specifications. Risk of a difference of opinion between the concessionaire and the government and this can potentially lead to a dispute.  The government could manage this better by incorporating clear and robust specifications on the condition it would want the assets to be handed over to the government.  Risk allocation has to be equitable; Tendency to pass on maximum risk to the Concessionaire will prove counter productive.
  23. 23. References http://timesofindia.indiatimes.com/city/mumbai/Metro-phase-III-tenders-to-be-issued-by-July- 2013/articleshow/32677654.cms http://en.wikipedia.org/wiki/Line_3_(Mumbai_Metro) https://mmrda.maharashtra.gov.in/home http://articles.economictimes.indiatimes.com/2014-07-31/news/52285190_1_mthl-santa-cruz-chembur-link-road-sclr http://toolkit.pppinindia.com/water-sanitation/module3-rocs-mm1.php?links=mm1 http://indiatogether.org/metro-fares-in-mumbai-and-other-cities-economy http://www.mumbaimirror.com/mumbai/others/Mumbais-Metro-fare-is-double-that-of-other-cities- MMRDA/articleshow/36318428.cms
  24. 24. Thank you Q&A

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