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The Andhra Pradesh government has scrapped the concession agreement signed with the Nellore International Airport Private Ltd, a special purpose formed by the SCL-Turbo Consortium, for building a greenfield airport at Dagadarthi in Nellore district on public-private-partnership (PPP) mode, citing delays in achieving financial closure for the project.
Andhra Pradesh Airports Development Corporation Ltd (APADCL) had signed the concession agreement with the Nellore International Airport SPV in June 2018.
The Dagadarthi airport was envisaged as a low-cost airport to be developed on 1,352 acres of land as part of state government’s efforts to build greenfield airports to increase air connectivity and foster economic development in the region. The project had received all clearances/ approvals from various agencies.
The SCL-Turbo Consortium was awarded the project after quoting a premium (revenue share) of 9 per cent to commence from the 16th year of the commissioning of the airport with an escalation of 1 per cent every year subject to a ceiling of 30 per cent.
As per the agreement, the financial closure for the project was to be achieved by December 2018. Multiple extensions were granted up to July 2019, but the developer failed to achieve financial closure.
The SCL-Turbo consortium informed APADCL that handing over of the land is an essential condition for the airport development and the financial closure can only be achieved only on handing over the airport site.
Since the land is not encumbrance free, none of their lenders was showing interest for funding the project, and as such the financial closure cannot be achieved, rendering it impossible to go ahead with the project, the developer said.
“Therefore, the developer proposed to resolve the issue amicably by requesting to cancel the concession agreement and relieve them from the agreement without any liability on either side,” R Karikal Valven, special chief secretary, Andhra Pradesh government, wrote in a July 29 government order.
As per the concession agreement, if the financial close is not achieved for any reason whatsoever within the period prescribed or the extended period provided thereunder, the agreement will be deemed to be terminated by mutual agreement of the parties.
“As per the clauses of the concession agreement, the financial closure is mandatory to be achieved within the period prescribed, and this is an independent obligation cast upon the developer and the same is not connected to handing over of the land as per the clauses of the agreement,” Valven wrote in the government order.
According to APADCL, except for some portion of land, the remaining land was already made available for the project.
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