This document discusses infrastructure development through public-private partnerships (PPPs) like build-operate-transfer (BOT) models. It provides details on BOT structuring, including that a private company builds and operates an infrastructure asset for a set concession period before transferring it to the public sector. The document also examines options for PPPs ranging from short-term service contracts to long-term divestitures. As a case study, it outlines plans for Mumbai's first metro rail corridor to address public transportation needs through a PPP.
Agreement between investors or owners of a project, and a management company hired for coordinating and overseeing a contract”.
A business or an organization will hire a management company to perform specific tasks. Your organization might hire a management company to look after its marketing and under the contract, the management company would perform marketing on your company’s behalf and receive a fee for doing so.
The compensation for the management might be decided based on performance or it can be a set sum decided between you are the management company.
Contractual Steps for Smooth Delivery of Infrastructure ProjectsAM Publications
Governments and public entities spend huge public money for purchase of goods, services and construction of works. Therefore, it is vital that procurement system shall not only be efficient but also be transparent, fair & just without compromising the quality of output. Various stakeholders have different interests in influencing the decision-making. This paper elaborates various possible alternative strategies available for procurement. Depending upon environment and various challenges, one can choose the best mode, method & process of procurement. The procurement could be for goods, work, services, consultancy etc. Consultancy contracts are different game altogether, because they have more emphasis on intellectual inputs rather than mere physical outcome. The scope of this paper is limited to works procurement.
Contract Closing is one of the important POST Award activity of the Contract Management.
The process involves settling of Contract Closing Procedures, thereby helping the agencies having executed the jobs successfully, in realizing their Final / Retained payments from their CLIENTS, which is mostly to the tune of 10 to 15 % of the Contract Value.
Contract Management - Generating Real Value from your ContractsTejari
- Why do we actually do contract management?
- The fundamentals - managing value and risk
- Contract administration, performance, risk and change management
- Technology, people and skills issues around contract management
This program is designed for those involved in drilling and service contracts from both the operator and contractor perspective. Attendees will actively participate in discussions pertaining to contracting philosophy and terms as well as industry custom and practice.
The program will cover all aspects of contracts including the tender process, letters of intent, contract negotiation, contract administration, ethics considerations and dispute resolution. Special emphasis will be placed on the most controversial and highly negotiated provisions of drilling and service contracts, the impact of decisions in the pending Macondo litigation and contract administration in the event of a crisis.
While the program will focus on offshore and land daywork drilling contracts, incentive contracts (footage, turnkey and performance bonus) and variable day rate drilling contracts will also be reviewed and analyzed along with oil service contracts.
Do you find yourself unable to agree contract terms because of their complexity?
Are you paralysed by indecision over which elements are important?
Do you find yourself avoiding the pain of paperwork by not signing or reviewing contracts?
Do you want a quick way of sorting out if your construction contract is good to go or may cause problems later in the project?
This checklist is designed for use during the tender stage to determine whether to continue.
The checklist was developed by Sarah Fox, author of the 500-Word Contract for construction projects. If you want to know how to use 4 key elements to evaluate contracts before they are signed then 500 Words Ltd runs a 90-minute introductory workshop to help you spot the disasters waiting to happen.
For information on how we can give you the confidence to use contracts for project success, email sarah@500words.co.uk or visit www.500words.co.uk
Agreement between investors or owners of a project, and a management company hired for coordinating and overseeing a contract”.
A business or an organization will hire a management company to perform specific tasks. Your organization might hire a management company to look after its marketing and under the contract, the management company would perform marketing on your company’s behalf and receive a fee for doing so.
The compensation for the management might be decided based on performance or it can be a set sum decided between you are the management company.
Contractual Steps for Smooth Delivery of Infrastructure ProjectsAM Publications
Governments and public entities spend huge public money for purchase of goods, services and construction of works. Therefore, it is vital that procurement system shall not only be efficient but also be transparent, fair & just without compromising the quality of output. Various stakeholders have different interests in influencing the decision-making. This paper elaborates various possible alternative strategies available for procurement. Depending upon environment and various challenges, one can choose the best mode, method & process of procurement. The procurement could be for goods, work, services, consultancy etc. Consultancy contracts are different game altogether, because they have more emphasis on intellectual inputs rather than mere physical outcome. The scope of this paper is limited to works procurement.
Contract Closing is one of the important POST Award activity of the Contract Management.
The process involves settling of Contract Closing Procedures, thereby helping the agencies having executed the jobs successfully, in realizing their Final / Retained payments from their CLIENTS, which is mostly to the tune of 10 to 15 % of the Contract Value.
Contract Management - Generating Real Value from your ContractsTejari
- Why do we actually do contract management?
- The fundamentals - managing value and risk
- Contract administration, performance, risk and change management
- Technology, people and skills issues around contract management
This program is designed for those involved in drilling and service contracts from both the operator and contractor perspective. Attendees will actively participate in discussions pertaining to contracting philosophy and terms as well as industry custom and practice.
The program will cover all aspects of contracts including the tender process, letters of intent, contract negotiation, contract administration, ethics considerations and dispute resolution. Special emphasis will be placed on the most controversial and highly negotiated provisions of drilling and service contracts, the impact of decisions in the pending Macondo litigation and contract administration in the event of a crisis.
While the program will focus on offshore and land daywork drilling contracts, incentive contracts (footage, turnkey and performance bonus) and variable day rate drilling contracts will also be reviewed and analyzed along with oil service contracts.
Do you find yourself unable to agree contract terms because of their complexity?
Are you paralysed by indecision over which elements are important?
Do you find yourself avoiding the pain of paperwork by not signing or reviewing contracts?
Do you want a quick way of sorting out if your construction contract is good to go or may cause problems later in the project?
This checklist is designed for use during the tender stage to determine whether to continue.
The checklist was developed by Sarah Fox, author of the 500-Word Contract for construction projects. If you want to know how to use 4 key elements to evaluate contracts before they are signed then 500 Words Ltd runs a 90-minute introductory workshop to help you spot the disasters waiting to happen.
For information on how we can give you the confidence to use contracts for project success, email sarah@500words.co.uk or visit www.500words.co.uk
Presentation made by Özlem AYDIN SAKRAK, Turkish Treasury, at the 9th annual network meeting of Senior Infrastructure & PPP officials held at the OECD, Paris, on 1 March 2016
PPP APPLICATIONS IN TURKEY: HEALTHCARE PROJECTSHakan UZUN
Turkish Health sector, with its tourism side, is one of the leading and emerging sectors of Turkish economy. The highest quality of Turkish hospitals has already been pleasantly welcomed and accredited by the world’s famous health accreditation entities, such as Joint Commission International (JCI). According to JCI, Turkey is the second country at the ranking list with its 42 prestigious health institutions. The Turkish medical device sector is expected to expand at a CAGR of 8.5% over the 2013-2018 period. Investments in the healthcare sector are expected to continue as the government strives to increase the number of hospital beds per 10,000 populations to 32 in 2023 from the current number of 26.5. It has also taken on an ambitious healthcare PPP program. According to PPP professionals, Turkey is the second most attractive market globally for PPP projects in the medium to long term.
Prepared by the students of corporate finance at the MBA program of IE Business School, this presentation provides an introduction to project finance and analyzes two case studies involving project finance.
International Trade Laws: International Contracts of Sale of Goods Transactions, International Trade Insurance,
Patents, Trademarks, Copyright and Neighboring Rights. Intellectual property Rights, Dispute settlement
Procedures under GATT & WTO, Payment systems in International Trade, International Labour Organization and
International Labour Laws.
ISMED Training: PPP Fundamentals by Andrew Fitzpatrick, OECDOECDGlobalRelations
Presented at the Training Session on Public Private Partnerships organised by the MENA-OECD Investment Security in the Mediterranean (ISMED) Support Programme in September 2014.
Place of Power Sector in Public-Private Partnership: A Veritable Tool to Prom...IJMERJOURNAL
ABSTRACT: Public Private Partnership involves private sector engagement in infrastructural development. Though in the past, the country infrastructure had been experiencing a decline in the system, this is because, government had been the sole contributor to infrastructural finance and had often taken responsibility for implementation, operations and maintenance as well. This decline in the system is caused by escalating population growth depending on available infrastructure, decaying of existing power infrastructure, political instability and corruption in the system. The ongoing reform is about bringing the system to a lime light. Hence, Public Private Partnership participation in the infrastructural development in Nigeria, will create favorable environment for an investors, provide job opportunities, long time policy, decision making and efficient use of the available resources. This paper therefore dwells on overview of the public private partnership with regards to energy and other infrastructural development of Nigeria. Challenges of the partnership and possible solutions towards subduing the problems are proffered.
This ppt was prepared for educational purpose, and to teach about PUBLIC PRIVATE PARTNERSHIP scheme and their models for using this scheme. Many projects now days are using this method with help of gov. parties or private parties. This methods helps in decreasing load on construction and infrastructure, and road development load from government, as they are not participating in finance of project but let the construction firm, construct the project and run by their names to recover their cost and profit for predetermined time period and on predetermined rate of recovery, either by tolling system or annuity system.
Embracing GenAI - A Strategic ImperativePeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Honest Reviews of Tim Han LMA Course Program.pptxtimhan337
Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
1. PGPM14 Page 1
ASSIGNMENT NO -4
ON
“INFRASTRUCTURE DEVELOPMENT”
(PGPM – 14)
SUBMITTED TO:
NATIONAL INSTITUTE OF CONTRUCTION
MANAGEMENT
& RESEARCH (NICMAR) PUNE.
SCHOOL OF DISTANCE EDUCATION (SODE)
By
Mr. abc
(PGDPM)
Reg.no.-abc
3. PGPM14 Page 3
CONTENTS
SR.NO. DESCRIPTION PAGE NO.
1 ASSIGNMENT. 4
2 PUBLIC PRIVET PARTNERSHI: 4
3 OPTION OF PPP: 5
4 WHAT IS BOT? 6
5 CASE STUDY: MUMBAI METRO 9
4. PGPM14 Page 4
ASSIGNMENT:
Public Private Partnerships refers to arrangements, typically medium to long term,
between the public and private sectors whereby some of the services that fall under the
responsibilities of the public sector are provided by the private sector, with clear
agreement on shared objectives for delivery of public infrastructure and/ or public
services. A PPP is generally a contract or agreement to outline the responsibilities of each
Party and clearly allocate risk. In a BOT arrangement, the private sector designs and builds
the infrastructure, finances its construction and owns, operates and maintains it over a
period, often as long as 20 or 30 years. This period is referred to as the "Concession"
period. Such projects provide for the infrastructure to be transferred to the Government at
the end of the concession period. There are a number of major parties to any BOT project,
all of whom have particular reasons to be involved in the project. The Contractual
arrangements between those parties, and the allocation of risks, can be Complex. Explain in
detail structuring of BOT projects.
PUBLIC PRIVETPARTNERSHI:
A business relationship between a private-sector company and a government agency for
the purpose of completing a project that will serve the public. Public-private partnerships
can be used to finance, build and operate projects such as public transportation networks,
parks and convention centres. Financing a project through a public-private partnership can
allow a project to be completed sooner or make it a possibility in the first place.
The private sector is playing an increasingly crucial role in the financing and provision of
services that were traditionally the domain of the public sector. One of the key reasons is
that governments are unable to cope with the ever-increasing demands on their budgets.
Most infrastructure expenditures in developing countries have been funded directly from
fiscal budgets but several factors such as macroeconomic instability and growing
investment requirements have shown that public financing is volatile and, in many
countries, rarely meet crucial infrastructure expenditure requirements in a timely and
adequate manner.
Furthermore, there are efficiency gains arising from innovation, management and
marketing skills offered by the private sector and greater incentives for the control of
construction, operating and maintenance costs. More so, the provision of additional finance
for infrastructure projects enables projects to be brought forward in time, thus generating
earlier economic benefits.
The diagram below illustrates the continuum of options for involving the private sector in
the provision of infrastructure delivery.
5. PGPM14 Page 5
Diagram 1: Range of Private Sector Options
At the left are supply and service contracts, which tend to be of short duration and
requireless private commitment than the options higher in the continuum. The private
contractor is not directly responsible for providing the service, but instead for performing
specified tasks, such as supplying inputs, constructing works, maintaining facilities, or
billing customers. At the left are the longer term arrangements which require significant
private sector commitment.
OPTION OF PPP:
There is a range of options for involving private sector participation that vary with regards
to ownership, operations and maintenance, financing, risk allocation and duration. A
summary of these options can be viewed in Table 1.
Table 1: Allocation of key responsibilities under the main private sector
participation options
Option Asset
Ownershi
p
Operations
and
Maintenanc
e
Capital
Investme
nt
Commerci
al Risk
Duration
Service
contract
Public Public and
Private
Public Public 1-2 years
Manageme
nt
contract
Public Private Public Public 3-5 years
Lease Public Private Public Shared 8-15 years
Concession Public Private Private Private 25-30
years
Build
Operate
Transfer
Private and
public
Private Private Private 20-30
years
Divestiture Private or
private and
public
Private Private Private Indefinite
(may be
limited by
6. PGPM14 Page 6
license)
Service contract
Under this option, the private sector performs a specific operational service for a fee, for
example meter reading, billing and collection.
Management contract
In this option, the private sector is paid a fee for operating and maintaining a government-
owned business and making management decisions.
Lease
Under the lease option, the private sector leases facilities and is responsible for operation
and maintenance.
Concession
Under concessions, the private sector finances the project and also has full responsibility
for operations and maintenance. The government owns the asset and all full use rights
must revert to the government after the specified period of time.
WHAT IS BOT?
BOT is the terminology for a model or structure that uses private investment to undertake
the infrastructure development that has historically been undertaken by the public sector.
5
In a BOT project, a private company is given a concession to build and operate a facility that
would normally be built and operated by the government. The private company is also
responsible for financing and designing the project. At the end of the concession period, the
private company returns ownership of the project to the government (although this need
not be the case). The concession period is determined primarily by the length of time
needed for the facility’s revenue stream to pay off the company’s debt and provide a
reasonable rate of return for its effort and risk.
The table provided below reviews the BOT option and its variants, describes some
characteristics of these different procurement arrangements and depicts the relationship
between these different procurement methods and the financing of the project.
7. PGPM14 Page 7
BOT PROJECTPROCUREMENTSTRUCTURES
BOT Project Type Characteristics
Build Own Operate Transfer (BOOT)
• The service provider is responsible for
design and construction, finance,
operations, maintenance and
commercial risks associated with the
project.
• The service provider owns the project
throughout the concession period
• The asset is transferred back to the
government at the end of the term,
often at no cost.
Build Own Operate (BOO)
• Similar to BOOT projects, but the
service provider retains ownership of
the asset in perpetuity.
• The government only agrees to
purchase the services produced for a
fixed length of time
Design Build Operate (DBO)
• A design and construction contract
linked to an operation and maintenance
contract.
• The service provider is usually
responsible for financing the project
during construction.
• The government purchases the asset
from the developer for a pre-agreed
price prior to (or immediately after)
commissioning and takes all ownership
risks from that time.
Lease Own Operate (LOO)
• Similar to a BOO project but an
existing asset is leased from the
government for a specified time.
• The asset may
8. PGPM14 Page 8
BOT projects, when properly designed, offer significant potential for technology transfer
and local capacity building as well as helping develop national capital markets.
Advantages and Challenges of the BOT Approach
The BOT approach has many potential advantages, some of which have been alluded to
above, and is a visible alternative in most countries to the more traditional approach using
sovereign borrowings or budgetary resources. These are captured in the box provided
below.
Some challenges that should be taken into consideration include the length of time
required to develop and negotiate BOT schemes, the need for a suitable political and
economic climate, and a defined regulatory environment. In short, the BOT approach
requires an environment that is conducive to private sector investment.
The economic costs associated with BOT projects include the following:
• Costs due to imbalance in experience. Governments with little experience in BOT
contracts are advised to initiate BOT projects on a manageable scale and seek
professional advice to compensate the often greater experience of the private sector.
• User costs imposed for the first time or increased to match market rates. The
economic costs of public services, once covered by the Government, then become
financial costs for the user.
• Overpriced supplies. Potential conflicts of interest on pricing among the project
sponsors must be monitored. Care must be taken to ensure that sponsors who
supply goods or services to the project do so on a fully competitive basis.
• High financing costs. Financing costs for BOT projects tend to be high, as the legal fees
associated with their contractual arrangements are much higher than those of
standard commercial contracts. The complexity of the credit means that lenders
need more time than usual to assess a project’s merits and will tend to charge higher
fees.
Given the importance of infrastructure investment to national development it is essential
that the wider socio-economic costs and benefits associated with a BOT scheme are taken
into account when designing the legal framework to promote private sector investment in
such projects.
9. PGPM14 Page 9
CASE STUDY: MUMBAI METRO
15.1 Project Description
Toaddressbothpresentandfuturepublictransportationneeds,theGovernmentofMaharashtra
(GOM)throughtheMumbaiMetropolitanRegionDevelopmentAuthority(MMRDA)hasplanned a 146 kilometre
long rail based Mass Rapid Transit System (MRTS) for Mumbai.
ThisprojectisthefirstcorridoroftheproposedMRTS.TheVersovaAndheriGhatkoparlineshall
beanelevatedlinewitharoutelengthof11kms,with12stationsandacardepotsituatedatD.N.
Nagar.Thelinewillhaveaminimumcurvatureof100metersandminimumgroundclearanceof5.5
meters.Thelengthandwidthofthecoachesthatshallplyontheroutewillbe22metresand3.2
metres,respectively.Othertechnicalfeaturesoftheprojectinclude25KVACoverheadequipment,
cabsignallingwithautomatictrainprotection,andamaximumspeedof80kmphwithanaverage speed of 33 kmph.
MumbaiMetroOneisgoingtorunonadedicatedelevatedcorridorandshallhavehighlevels
ofcomfortforthepassengersviz.fullyair-conditionedworldclasscoaches,provisionforlifts
andescalatorsatstations,modernautomaticfarecollectionsystemandhighlevelsofpassenger security systems.
Theexistingsub-urbantrainsconnectthenorthernandsouthernpartsofthecity.Thisprojectwill provideEast-
WestrailbasedconnectivitytoCentralandWesternsuburbs.Thetotaltimetaken
forthejourneyfromVersovatoGhatkopar wouldbeapproximately21minutes,asagainstatypical time taken of 90
minutes by other modes of transport.
15.2 PPP structure of the Project
AconcessionagreementonBOOTbasisforaperiodof35years,includingaconstructionperiodof
5years,hasbeenawardedbytheMMRDA.Undertheconcessionagreement,theoperatorhasto
design,finance,construct,operate,ownandmaintainthefirstcorridorandtransfertheownership and assets at the
end of the concession period.
ASpecialPurposeVehicle(SPV)namedMumbaiMetroOnePrivateLimited(MMOPL)hasbeen
formedwithRelianceEnergyLimited,VeoliaTransportandMMRDAholdingequitystakesof69%,
5% and 26%,respectively.
Thisprojectwasoneofthefirstprojectsinmasstransportationsystemsbeingimplementedon
aPPPbasisinMaharashtra.Thegovernmentthusfelttheneedtocloselymonitortheprojectand
tooka26percentstakeintheSPVimplementingtheproject.Thisallowedthegovernmentto have 3 members on the
board of the SPV and ensured that it would be able to effectively monitor
andinfluencedecisionsonfinancing,designandconstructionfortheproject.TheMMRDAwill
contributeequitytothetuneof` 134croreforthis26percentstakeintheSPVduringthe construction phase of the
contract.
Theassetsoftheprojectincludetheviaduct, stations, bridges, depot, rollingstock, signalling
system,tractionandSupervisoryControlandDataAcquisition(SCADA)system,communicationssystems,trackwor
k,farecollectionsystem,etc.AlltheseareownedbytheSPV.Theassetsshallbe
constructedorprocuredthroughcontractorsandequipmentsuppliers.Forexample,thesignalling
systemshallbeinstalledbySiemenswhilethecommunicationssystembyThalesInc.andtherolling
stockshallbeprocuredfromCSRNanjing.Thelandforthedepothasbeentakenonalongterm
10. PGPM14 Page 10
leasewhichisrenewablefromtheownersoftheland.TheSPVholdstheexclusiverightstodevelop and use the land
for the MRTS Project
15.3 Current Status
TheconstructionhascommencedfromFebruary,2008andtheprojectachievedfinancialclosurein
October 2008.The completion date for the project construction is expected by mid 2011.
Atpresent,theconstructionoftheviaductisunderwaywith773pilesbeingdugup.Theconstruction
oftheDepot,SubstationandStationshasalsocommencedalongtherouteoftheproject.Workhas
alsocommencedontheconstructionof2overheadbridgesatAndheriStationandtheWestern Express Highway.
15.4 Financing Information
Thetotalprojectcostisestimatedat`2,356crores.Theprojectshallbefinancedonthebasisof aViability Grant
of`650 crores contributed by the Government of India (`470 crores being 20%
oftheprojectcost)andGovernmentofMaharashtra(`180croresbeing7.5%oftheprojectcost).
Theremainderistobefinancedby70%debt,30%equity.TheprivateoperatorandMMRDA shall provide equity
contribution of`466 crores in proportion of their equitystake.The private
operatorhasalsoarrangeddebtof`1240croresfortheproject.Thishasbeentiedupfroma consortium of banks
ledby IDBI,Corporation Bank,KarurVysya bank,Canara Bank,Indian Bank andOrientalBankofCommerce.
IIFCL(U.K.)isprovidingtheforeigncurrencyloanforthe project.
15.5 ProcessAnalysis
Conceptualisation and Feasibility
TheGovernmenthadbeenexploringtheviabilityofvariousmasstransitsystemsthatareefficient,
economicallyviableandenvironmentfriendly.Inthiscontext,adetailedfeasibilitystudywascarried
outundertheIndo-GermanTechnicalCo-operationbyentrustingtheconsultancyworktoTEWET in association
with DE-Consult &TCS,during 1997-2000.
ThestudyrecommendedamasstransitcorridorfromAndheritoGhatkoparaspotentiallybankable
andeconomicallyviable,afterexamininganumberofalternativecorridorsandalignments.Itwas then decided to
bid out the project on PPP basis.
Tomanagethetransactionprocess,aconsortiumconsistingofLouisBergerastechnicalconsultants,
PriceWaterhouseCoopers(PWC),MasonsandEconomicLawPracticeswasappointedin2003-04 to assist MMRDA.
Procurement
TheprojectwasapprovedbytheGovernmentofMaharashtrainAugust2004andglobalbidswere
invitedinthesamemonthfortheprojectthroughanExpressionofInterest(EoI).Almost150 bidders responded to
the EoI and a pre-bid meeting was held in November 2004.
The suggestions of prospective bidders were incorporated in the agreements being prepared for
theproject.Thebidprocessconductedwasessentiallyatwostagebid-process,i.e.technicaland financialstage.
Only those consortia whose technical bids met the technical criteria were allowed to submit
financialbids.Technicalbidswereinvited fortheprojectinMay2005.Theconsortiathatsubmitted bids were:
• Hindustan Construction Company and RITES
11. PGPM14 Page 11
• Reliance Energy Limited and Connex-France
• ShaktikumarSacheti Limited and Lingkaran Metro
• Siemens, L&T, Gammon, BEML
• IL&FS and ITDThailand and Unity Infraprojects
The consortia which qualified to submit financialproposals were:
• Reliance Energy Limited and Connex-France
• Siemens, L&T, Gammon, BEML
• IL&FS and ITDThailand and Unity Infraprojects
FinancialproposalsweresubmittedinJanuary2006onlybytheRelianceEnergyandIL&FSconsortia. The Siemens
consortium withdrew their bid.
Afterthebidprocess, negotiationscommencedwiththelowestfinancialbidder, i.e. Reliance
EnergyandConnexFrance.VeoliaTransportandHongKongMRTweretheothermembersofthe
consortiumprovidingtechnicalknow-how.FromFebruarytoMay2006negotiationswerecarried out with the
lowest financialbidder.
TheREL-ledconsortiumexpectedanEquityIRRof26%butthegovernmentwasabletonegotiate foralower
returninlinewithinternationalexperience.Theconsortiumfinally agreedonanEquity IRR of 15% on their
investment.This brought down theVGF to `650 crores.
AnapplicationforVGFwassubmittedtotheGovernmentofMaharashtrainJune2006afterthe
successfulbidderwaschosen.TheprojectfaceddelaysinobtainingapprovalforViabilityGap
Funding(VGF)astheprojectwasconceptualizedbeforethemodelconcessionagreementwas
putinplace.ItsconcessionagreementwasbasedonthemodelconcessionagreementofNational HighwaysAuthority
of India.
Moreover,thePublicPrivatePartnershipAppraisalCommittee(PPPAC)atthecentralgovernment
levelhadnotbeenconstitutedtillthattimeandonlytentativeguidelineswereinplaceforthePPP
agreements.Therefore,atthattimevariousoptionstoobtaingrantfundingwereexploredincluding
obtaininggrantfundingthroughtheJnNURMscheme.However,theJnNURMfundswerecapped
at10%oftheprojectcost.TheissuewasfinallyresolvedbygrantofVGFintheformofaspecial
onetimegrantgiventothestate.TheGoIagreedtogiveaspecialgrantof20%oftheprojectcost.
Inaddition,theGoMapprovedagrantof7.5%ofprojectcost.Thedocumentationandapproval
processtooksometimeandthe formal approval forVGFof`650croreswasobtained muchlater by January 2009.
Development
ThedevelopmentphaseoftheprojectwasinitiatedinparalleltotheVGFapprovalprocess.Major milestones
achieved in the development phase are presented below:
• The SPV was incorporated in December 2006.
• TheEngineeringandProjectManagementConsultants,aconsortiumofParsonsBrinkerhoff
(USA) and Systra SA (France) joined the team on February 14,2007
• SigningoftheConcessionAgreementandShareholdersagreementtookplaceonMarch
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7,2007
• MMOPLandGovernmentofMaharashtraenteredtheStateSupportAgreementonApril
20,2007
• Construction commenced on February 8,2008
• Financial Closure for the project completed on October 3,2008
Allmajorcontractsfortheprojecthavebeenawarded.Atpresent,90%oftheRightofWayhasbeen
handedovertoMMOPL.Utilities,mapping,conditionsurvey,andtheworkforutilityshiftinghas beencompleted.
70%ofthefoundationworkhasbeencompleted.Girderlaunchinghasstarted
atcertainstretches.TheconstructionoftheDepot,SubstationandStationshasalsocommenced
alongtherouteoftheproject. Workhasalsocommencedontheconstructionof2overhead bridges atAndheri Station
and theWestern Express Highway.
15.7 Key Learning and Observations
1. Expeditingthebidprocessiscriticaltoensuringagoodresponsetotheproposal:The
entirebidprocessforchoosingthesuccessfulbiddertookmorethan2years.Thisled
toalessernumberofbidderstobidfortheproject.Similarhurdleswereexperienced
inthebidprocessfortheMetroLine2astheconcessionagreementwasbasedon
themodelconcessionagreement.Thisagreementhoweverhadtobetailoredforuse
forimplementationofametrosystem.Thesedelaysresultedinonlyonebidderfinally submitting a bid for the
project.
2. DelayinObtainingVGFapproval:Therewassubstantialdelayinobtainingapprovalfor
VGFfromtheGovernment.Whilethiswasattributedtothemodelconcessionagreement
notbeinginplace,thePPPAppraisalCommitteenotbeconstitutedandonlytentative guidelineswithrespectto
VGFapprovalbeingavailableatthetime,thisissuewasa deterring factor for developers and is also likely to have
impacted the level of interest in the Phase 2 bid.
3. Delayinapprovalscanpotentiallyderailtheproject:Therewasadelayinobtaining
approvalsfortheoverbridgethatpassedovertherailwaylinefromtherailwayauthorities.
Thishadthepotentialofdelayingtheprojectschedule.Thiswasduetotherailways exploringthe
feasibilityofanotherprojectinvadingthepathofthemetroline.Howevera quick resolution of this issue ensured
that work was able to continue.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.
4.LandAcquisitionprocesscanleadtoissuesintheproject:Thegovernmentcommittedthat
thelandfortheprojectwhichessentiallyconsistsoflandallocatedforthedepotwouldbeprocuredasperthelandprocu
rementscheduleprovidedintheagreement.However,this
landwasunderprivateownershipandunderdispute.Thisexposedthegovernmenttothe risk of land not being
available for the depot thereby bringing in a possibility of derailing
theproject.Theissuewasfinallyresolvedbytheprivateownerofthelandagreeingto allocate 75% of the land for
the development of the project on the condition of the
governmentgrantinghimtherighttotheFloorSpaceIndex(FSI)availableovertheentire
plotoflandfor25%oftheland.Thislandhasbeenprovidedonanominalleaserentto the concessionaire for the
concession period.It is recommended in the future concerns
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suchastheseareaddressedbeforetheprojectprocurementstageitselftoensuresmooth functioning of the project.
5. ClearSpecificationsonAssetTransferontermination:Ontheterminationoftheproject
throughtheeffluxoftime,5yearsbeforetheexpiryoftheconcessionperiodasurveyof the assets would be carried
out to determine whether they are in working condition as
givenintheagreement.Thesurveyistobecarriedoutbyanindependentengineerbased
onascheduleofspecificationsontheconditionofassets.However,thescheduleinthe
concessionagreementdoesnothaveclearandrobustspecifications.Thereisthusarisk of a difference of opinion
between the concessionaire and the government and this can
potentiallyleadtoadispute.Thegovernmentcouldmanagethisbetterbyincorporating clearand
robustspecifications ontheconditionit would wanttheassetsto behanded over to the government.
6. PublicSupportfortheproject:Foraprojectofthismagnitude,itisimportantforthe
governmentagencytogarneradequatepublicsupporttoensuresmoothimplementation. MMRDA
ensuredadequatepublic support for land acquisitionandroadexpansion activities
byadialoguewiththeaffectedindividuals.Despitetheseefforts,theprojectwas susceptible to delays and similar
difficulties are also being experienced in phase 2 of the project.
7. RoleofGoodProjectPreparation:Theviabilitygapfundingusedintheproject(`650crore)
makesupasignificantcomponent(27.5percent)oftheprojectcost.Thisprojectcosthas
beensharedbetweenthecentralandstategovernments.Theinitialquotesubmittedby
thesuccessfulbidderquotedanamount(`1250crore)whichwassubsequentlyrevisedto thecurrentfigure
throughnegotiations.Thus,thereisanincreasedneedforgoodproject preparation prior to the procurement
process to ensure that the fair bids are received for the projects.Thiswould eliminate private operators
colluding with each other and/or speculative bids.