Infra PP Conf

1. INFRASTRUCUTRE
FINANCING
Part-C
Prof. R. Kannan

2. L & T EAST WEST TOLL WAY LTD.
Project Cost
(Rs. Crores)
EPC Cost 1614
Toll Equipment 13
Interest during construction 232
Insurance/Preliminary and
Preoperative expenses 62
Contingency / Escalation 119
Total 2040

3. L & T EAST WEST TOLL WAY LTD.
Means of Financing
(Rs. Crores)
Promoter 539
Senior Debt 1501
2040
Route:
Badnera – Akola (TP1)
Akola – Khamgaon (TP2)
Khamgaon – Muktainagar (TP3)
Muktainagar – Jalgaon (TP4)

4. CONCESSION AGREEMENT
a) Scope, rights and obligations of SPV and NHAI
b) Appointed date (AD) – Date of financial close or
earlier mutually agreed date.
c) Concession period – 20 years from AD, including 910
days of construction period. If traffic varies 2.5% or
more in actual traffic vis-à-vis target tariff (33950
passenger car units as on October 1, 2022), the
concession period with change. For every 1%
shortfall in the actual traffic, the concession period
will increase by 1.5% upto a maximum of 20%. For
every 1% excess the concession period to be
reduced by 0.75% upto a maximum of 10%.

5. CONCESSION AGREEMENT
d) Construction period – 910 days from AD
e) Scheduled Project completion date (SPCD):
Same as construction period but independent
engineer to issue completion certificate. If not
completed within 90 days of SPCD, SPV will pay
0.1% penalty for each day of delay.
f) Termination payment – Equivalent to outstanding
debt plus adjusted equity in case NHAI
terminates contract.
g) Competing Road – No competing road to be
constructed for 12 years.
h) Change of scope – Upto 0.25% change in project
cost to be borne by SPV, beyond NHAI

6. CONCESSION AGREEMENT
i) Obligation of SPV
- To obtain permits before AD
- Implement project as per concession
agreement
- Complete the project in 910 days
- Fulfill the conditions of the Lenders
- Acquire land (Pay)
- Select O & M operator and enter into O & M
contract subject to the approval of NHAI
- The toll road not to be branded to reflect the
promoter’s name

7. CONCESSION AGREEMENT
j) Obligation of NHAI
- To help SPV to procure permit
- No local tax/toll / charge to be levied for
project highway
- Police assistance for traffic
regulation/security/ trespass, etc.
- To provide 80% of land before AD Balance
20% within 90 days
- To pay damages if right of way is not
procured timely
- Additional work will need additional
compensation

8. CONCESSION AGREEMENT
k) Sponsor Obligation
To bring overrun amount upto 5% of project cost
- SPV to collect tolls as per toll rates specified
in the concession agreement. Toll rates will
increase every year by 3% plus 40% of
wholesale price index in December.
- In case the average traffic exceeds design
traffic in any year, NHAI would ask for
capacity enhancement for which concession
period is extended by 5 years to have a post
tax return on equity of 16% at a debt to equity
ratio of 70:30. If SPV does not accept
contract, the contract will be terminated.

9. CONCESSION AGREEMENT
l) Termination payments
Defaulter Construction Operation
SPV NIL 90% of debt less insurance
NHAI Due Debt Debt Due
150% of adjusted 150% of adjusted
equity equity

10. CONCESSION AGREEMENT
m) Force Majeure Events
(not in control of SPV or NHAI)
Non political event 90% of debt less
(Flood, epidemic, strikes, cyclone) insurance
Political event (Indirect) Debt due plus
(War, riot, terrorism, civil 110% adjusted
Commotion) equity
Political event (Direct) Debt due plus
(change in law, nationalisaiton 150% adjusted
of SPV, refusal to grant some equity
Approvals/permit)

11. CONCESSION AGREEMENT
n) Escrow account and Waterfall mechanism
o) Assignment of rights, title, interest in favour of
the Lenders.
p) The right of the Lenders to substitute the SPV
owners.
q) Appointment of Auditors

12. EVENTS OF DEFAULT (SPV)
- Financial default, Lenders serve notice
- Failure to replenish performance security within 30
days.
- Failure to cure SPV default within 90 days
- Non-achievement of project milestones as per CA
- Abandoning the project without NHAI’s consent
- Failure to achieve project completion within the
stipulated date
- Break of maintenance / safety
- Failure to make statutory payments
- SPV becomes bankrupt / insolvent
- Resolution passed for winding up of SPV

13. EVENTS OF DEFAULT (NHAI)
- Refuses to abide by CA
- Commit material default in complying with CA
leading to losses for SPV
- NHAI fails to make any payment due to SPV

14. SUBSTITUTION AGREEMENT
(Substitution of Promoter)
- Material breach of terms of financing
arrangement
- Default in payment for more than 3 months
- NHAI has to accept change in promoter
- If no promoter is found, NHAI to pay terminal
payment.

15. ESCREW WITHDRAWALS
(Operation)
- Taxes
- Payment for construction
- O & M expenses
- O & M expenses incurred by NHAI
- Concession fee due and payable to NHAI
- Debt Service to Senior Lenders
- Payment / damages payable to NHAI as per CA
- Debt service for subordinate debt
- Debt Service Reserve
- To the promoters

16. TERMINATION
(Default of SPV)
- Taxes
- 90% of senior debt
- Outstanding concession fee
- Payment due to SPV/owners (revenue shortfall
loan)
- Retention payments for defects/deficiencies
- Balance debt due (senior)
- Subordinate debt
- Accrued O & M expenses
- All other payments
- To SPV / owners

17. (EPC Contract)
- Project execution as per specification / CA
- Coordinate with NHAI / SPV and others for timely
completion
- To obtain relevant permits / clearances as per CA
- Removal of encumbrances / shifting of utilities as
per CA
- During defect liability period – Rectification of
defects
- Assist independent Engineer

18. Independent Engineer
(Appointed by NHAI)
- Review drawings / documents
- Review inspection / monitoring of works
- Test of completion / Issue completion certificate
- Review the work of O & M contractor
- Evaluate reasonableness of cost of
works/services
- Determine any extension period for work/duty/
obligation
- Resolution of disputes assistance
- Others in accordance with CA

19. Lenders Engineer (LE)
Pre financial close
- Review of CA / project contracts
- Review of utility shifting
- Review of project costs
- Review of base O & M cost
- Review of designs
- Review of approvals / clearances
- Review of construction methodology / technology
- Review of environmental protection plan

20. Lenders Engineer (LE)
Financial close to Completion
- Review of Construction programme / expenditure
schedule and adequacy of arrangements
- Monitor progress of work, milestones as per CA
report bi-monthly
- Cost certification / Disbursement approval
- Monitor quality control
- Review operation and maintenance programme
and adherence
- Assess orders
- Utilities shifting monitoring

21. Lenders Engineer (LE)
Financial close to Completion
- Monitor removal of encroachments
- Monitor appointment of O & M contractor
- Review status of statutory clearances / toll
notification
- Assessment of road side facilities / amenities /
horticulture / landscaping
- monitor appointment of toll collection agents.

22. Actuals Adjussted equivalent car
Tollable
Car / Jeep / Van
Mini Bus
School bus
Mini LCV
LCV
2 axle trun
3 axle trun
MAV (4 - 6 axle)
HMV
MAV > 6 axles
Toll Exempt
Car / Jeep / Van
Mini Bus
Bus
LCV
Non-Tollable
2 wheeler
Auto rickshaw
Agri Tractors
Non-motors

23. Stretch Stretch
1 2 3 1 2 3
Tollable 7349 5266 6771 21 5741 7375
Exempt 26 21 20 28 23 21
Total Vehicle 10378 6843 7908 11051 7320 8514
Tollable PCU 17570 13262 20045 19106 14411 21806
Weighted to 16371
Seasonal correction in
factor Petrol 1.11
Diesel 1.09
Growth Rates