The Ennore Port Ltd is likely to invite fresh bids for the Rs 1,300-crore new container terminal project. This follows a decision by the Bay of Bengal Terminal Pvt Ltd — a special purpose vehicle (SPV) set up to design, construct and operate a new container terminal at the port — to withdraw from the project citing delay in finalising debt funding.
If a re-bidding happens, the terminal is likely to be delayed by another year. This means the neighbouring Katupalli port, developed by Larsen & Toubro and which is ready to commission its container terminal, will be in an advantageous position to capture a significant share of the container traffic.
Ennore Port’s board will soon decide on the re-bidding, which will be forwarded to the Shipping Ministry for clearance, said a source. The London-based Eredene is part of an international consortium led by Spain’s biggest port terminal operator Grup Marítim TCB which constituted the SPV. The consortium was awarded the build-operate-transfer project in June 2009 for 30 years. Eredene in a statement said that the consortium will withdraw from the project with immediate effect.
In July, Eredene said: “Protracted negotiations have taken place to secure debt funding for the project. However, there is no guarantee that the consortium will be able to agree to acceptable financial terms with State Bank of India, particularly in light of the negative change in the global and Indian funding environment.”
Ennore Port gave the SPV time until April 30 to finalise debt funding. Due to the consortium’s failure to meet that deadline, the port even cashed a bid guarantee of Rs 14 crore.
Changed outlook
The concession awarding body, Ennore Port Ltd, has been informed of the withdrawal, which was taken in light of the changed economic outlook in India since the concession was granted; the increased cost of local financing, rupee depreciation and lower projected growth in container traffic, Eredene said.
Till date, Eredene has incurred £1.6 million in costs connected with the Ennore project. The value of Eredene’s involvement in the project, including all capitalised costs, was written down completely in the last financial year.
The withdrawal is symptomatic of the challenges being faced by bidders in port PPP projects, said K. Ravichandran, Senior Vice-President and Co-Head, Corporate Ratings, ICRA.
The high level of competition during the bidding stage and exuberance on trade growth prospects force bidders to quote aggressive revenue share. However, with lenders becoming cautious with regard to their fresh exposures to the infrastructure sector, some developers have been hard put to achieve financial closure. Even if they achieve financial closure, it comes with stringent financial covenants that make it unattractive to proceed further, he said.