The Uttar Pradesh government has offered a termination guarantee of 20 per cent return on equity per annum in the event of political force majeure to Infrastructure Leasing and Financial Services (ILFS) for the Noida bridge.
Sources said the ILFS-promoted special purpose vehicle (SPV), NTBCL, has already signed agreements with the governments of Uttar Pradesh and Delhi.
This project has a notional concession period of 30 years. The actual concession is linked to the rate of return of 18 per cent. The SPV will transfer the rights of the bridge to the state governments the moment it hits this rate of return.
This is by far the highest force majeure compensation that has been secured by project promoters. The L&T concession document for the Narmada Bridge and the bypass project has a termination guarantee linked to the SBI Prime lending rate prevailing at that point of time. In addition the political force majeure for the draft concession for four laning of National Highways has been fixed at 175 per cent of the equity.
In addition the ILFS promoted SPV has also been given additional rights for ribbon development along the project and rights to provide physical asset cover for raising the debt funds. It has already raised about Rs 50 crore from the Industrial Finance Corporation of India (IFCI) on these terms and is now expected to raise Rs 50 crore through the issue of deep discount bonds on a project recourse basis.
This instrument will not have any fixed coupon rates like conventional bonds, but repayments would be made at the time of the instruments maturity which is about 16 year with put options ( the right of the bond subscriber to offer for repurchase) at the end of the fifth and the seventh years after purchase . This issue has managed a AAA rating based on a credit enhancement mechanism provided by IDFC in the event of the option being exercised.
This bridge is estimated to cost about Rs 433 crore to be financed on a 70:30 debt equity ratio, and the Rs 100 crore that is being tied up so far is part of this component. The SPV needs to raise funds before the project is fully financially closed . ILFS has short listed Marubeni - Mitsui combine as the engineering procurement and construction contractors and Gammon Engineering as the Operation and Maintenance Contractors during the concession period.
In addition this is the only project which has the tariffs linked to the consumer price index (CPI) in the country. All other projects have the tariff escalation linked to the whole sale price index fully or on a weighted basis.
