Logistics

Singapore’s Cube wins highways bid

P Manoj Mumbai | Updated on November 20, 2019

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Quotes Rs 5,011 crores against a reserve price of Rs 4,994 crore

Singapore-based toll road operator Cube Highways and Infrastructure has emerged as the successful bidder for the third bundle of Toll-Operate-Transfer (ToT) highway projects auctioned by India’s highway development agency by placing the highest bid of Rs 5,011 crores when the bids were opened on Wednesday.

The Cube Highways bid is a tad higher than the reserve price of Rs 4,994 crores set by the National Highways Authority of India (NHAI) for some 566 kms of highways spread across Uttar Pradesh, Tamil Nadu and Bihar.

“Cube Highways has quoted the highest bid,” said a government official briefed on the bid. “Since, it is more than the reserve price, it will be awarded,” he added.

Cube Highways is an independent, professionally-managed company managing and operating a portfolio of toll roads in India. Its current shareholders are four top global financial institutions — I Squared Capital, International Finance Corporation (IFC), Abu Dhabi Investment Authority and Japan Highway International.

43 per cent of the highway bundle in the third round is under annuity, so the maintenance obligation is already on the annuity concessionaire. Four projects in the third bundle are on annuity, while five are on engineering, procurement and construction (EPC) contracts.

Having placed the winning bid, Cube Highways now face the prospect of raising debt for the project at a time when lenders have become cautious towards infrastructure projects.

“The constraints facing the banking sector will be an issue in achieving financing closure for the project,” an executive with a toll road operating company said.

The other two price bids for the third ToT bundle were below the reserve price — a consortium of National Investment and Infrastructure Fund (NIIF) and L&T IDPL quoted Rs 4,230 crores while IRB placed a bid for Rs 3,510 crore.

Having placed the winning bid, Cube Highways now face the prospect of raising debt for the project at a time when lenders have become cautious towards infrastructure projects. “The constraints facing the banking sector will be an issue in achieving financing closure for the project,” an executive with a toll road operating company said.

In the first ToT bundle, nine contiguous stretches of highways totalling 680 km generated a premium of $500 million for NHAI, translating into a premium of about $1 million per km. A consortium of Ashoka Buildcon and Australia’s Macquarie Group placed the winning bid of $1.5 billion against a reserve price of $1 billion (the net present value of future cash flows).

The second ToT package covering stretches in Rajasthan, Gujarat and West Bengal was below the reserve price and was scrapped.

The NHAI is looking to raise Rs 84,800 crore by offering 6,165 kms of highways under ToT by 2024, each involving a ticket price of about $1 billion with a 30-year concession period.

Under the ToT model, the right to collect user-fee or toll on selected national highway stretches built through public funding will be auctioned and assigned to a concessionaire for a period of 30 years against an upfront payment of a lump-sum amount to the government.

The concessionaire is also responsible for the operation and maintenance of the roads during the tenure. NHAI has floated a tender for a fourth bundle of highway projects under ToT.

Cube's projects

Currently, Cube Highways owns majority stake in the Jaipur Mahua Tollway Limited (JMTL), the entity that runs the 109 km long four-lane highway stretch on the Jaipur-Agra National Highway 11 in Rajasthan under the Build Operate Transfer (BOT) model.

It also runs the Mahua Bharatpur Expressways Ltd (MBEL), a 57 km operational four-lane toll road linking Mahua to Bharatpur, also in Rajasthan, allowing Cube to operate a contiguous stretch of 166 km connecting two growing urban centers of Jaipur and Agra on NH 11.

Cube Highways holds 100 per cent stake in Western UP Tollway Limited (WUPTL), an operational 77.8 km-long four-lane toll road connecting the towns of Meerut and Muzaffarnagar in the northern part of India.

It also runs the Andhra Pradesh Expressway Limited (APEL) a 75 km four-lane stretch between Kurnool and Kothakota on National Highway 44 in Andhra Pradesh/Telangana under the Build Operate Transfer (BOT) Annuity model.

Cube Highways also operates the Narketpally Addanki Medarametala Expressway Ltd, a 212.5 kms four-lane road auctioned by the Andhra Pradesh Road Development Corporation. This project was granted a viability gap funding (VGF) of Rs 467 crores by the Central government.

Published on November 20, 2019

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