Feasibility Study and DPR for Delhi- Gurgaon-Rewari-Alwar RRTS Corridor

Transcription

1 NCR Planning Board Feasibility Study and DPR for Delhi- Gurgaon-Rewari-Alwar RRTS Corridor Implementation Models and Financing Date:- 22/04/2017

2 Part I Financial Analysis

3 Sequence of Financial Analysis v Assessment of the project in generic terms i.e. without considering the implementation model and agency into account. Estimating; Ø Project Completion cost (capital cost), Ø Various streams of revenue, Ø Operation and maintenance cost and Ø Operational viability and returns from the project; v Assessment of Proposed Project Implementation Models Ø Calculation of returns from the project with regard to proposed models Ø Deliberations on Advantages and disadvantages of each model v Recommendations for suitable model

4 Assumptions for Analysis period vtotal Analysis Period 30 years; Ø Construction period: 6.5 years, Starting from FY (Oct 2018) to the full FY Ø Operation Period: 25 years, from FY to FY

5 Estimated Project Cost (EPC) Particulars Total (Rs. Crore) Land 5,429 Aggregate Project cost except Land 29,540 Total Project cost with cost of Land 34,969 General Charges including Design Charges (5% of cost except land) 1,477 Contingencies on all items at 3% 1,093 Total 37,539 v Excludes tax on project goods and IDC. These components will be introduced subsequently in the analysis as per the requirement vadditional cost of procurement of AC midi buses for feeder system is introduced.

6 Phasing of Construction and Completion Cost Particular Total Construction Phasing 10% 18% 20% 16% 14% 12% 10% 100% Project Cost (Un Escalated) Project Cost (Escalated) Central Taxes on Project Goods Total Figures in Rs. Crores 1.34X v Project Cost is escalated at 5% pa. v Central Taxes would be considered interest free sub debt contributed equally by central govt. and state govts. v State taxes would be waived off/reimbursed by states and hence not taken. v No major change is expected on the tax burden on Project Cost due to GST and therefore existing incidence is retained

7 Summary of Estimated O&M Expenses Particular TOTAL Rs. Crores % of the Total Staff Salaries % Energy Expenses % Replacement in Equipment /Addition of Rolling Stock % Repair & Maintenance Exp % Admin Expenses % Operational Viability Funding to Feeder Bus Services % Total % O&M expenses are estimated based on actual experience of operational Metro Systems in India and abroad. Energy expenses could be more than half of the total O&M Expenses

8 Initial Fare Fixation Guiding Principles Mix of distance based flat and increasing fares are adopted. Based on following principals 1. Affordability to the users 2. Sustainability of the system 3. Competitiveness with the other modes of transport on the similar route 4. Flexibility for revision Proposed Economy Class Fares Distance slabs in Km Average Fares in present terms (Rs.) Fare Revision Formula: Revised Fare = Base Fare + (100% of Base Fare x Percent Change in CPI) x (1-efficiency factor) 8

9 Fare Box Revenue Particular Daily Passenger ridership (In lakhs) Daily pass holders (in lakhs) Average Fare/Trip (Rs/pax) Daily fare box from Economy Class A(Rs. Crores) Daily Fare Box from Business Class B(Rs. Crores) Daily Fare Box Collection = A+B (Rs. Crores) Annual fare box collection (Rs. Crores) Ramp up of 70%,80% and 90% is taken in the estimated daily ridership for initial 3 years. Pass-holders are estimated to be around 60% of the total daily ridership 10% concession for pass holders Around 7% of the total commuters may travel in business class by paying 1.5 times higher fares. 9

10 Revenue to Project from Property Development Phase RRTS Stations Key Attribute Built up Area (Lakh Sqm) Comm. Resi. First 1) Panchgaon 2) Dharuhera Peripheral area of Gurgaon Spillover advantage Second 1) Rewari 2) MBIR Rewari Key transport/logistic node MBIR planned SIR Third 1) BTK 2) SNB 3) Alwar SIRs Key junctions benefits of Planned area ; semi urban settlements `Total Yr>> Total Phases Rs. Crores Phase Phase Phase Total

11 Cess on Property Transaction Structure Area approximating 2 km in radius around each station could be earmarked as the Delineated Area (DA). Property owners whose properties are situated in the DA would need to pay a cess on every transaction in addition to stamp duty and other statutory levies. For this purpose cess of Rs 800/ sq mt for open area/plots and Rs 600/- per sq mt for BUA has been taken. Higher FAR of upto 3 could be permitted for this purpose. (Higher FAR may not be possible in stations situated in high density areas. Levy of this cess shall begin with RRTS operations. Estimated Velocity of transactions in DA Operation Period Calculation of delineated area No. of Stations 19 Total del. area for all stations (hac. ) Land Area already developed 30% Land Area yet to be developed outside of developed areas 30% Land Area yet to be developed (hac) 7159 Remove 40% for green area/roads/common area (hac) 2864 Net area for built up (hac) 4296 Average FSI that will be consumed in DA 3 Total BUA (hac) - (A) Existing Developed land area (hac) 7159 Remove 65% for green, roads, common areas (hac) 4653 Net developed Land Area (hac) 2506 Average FSI consumed 1.5 Total BUA (hac) - (B) 3759 Revenue from Cess Period Operation Period of RRTS (25 years) Aggregate revenue (Rs. Crore)

12 Sale of Additional FAR Illustrative Year Rate of absorption for add. FAR Sale of Add. FAR (in hec.) Land Circle Rates (Rs.Crores/Hec.) Revenue for the year (Rs. Crores) A B C C X B % % % % % TOTAL Rs crores v v v v v v Sale of additional FAR included as a strategy for non fare revenue augmentation. Strategy useful for densification and value capture Area approximating 1 KM around station shall be Delineated Area (DA) for sale of additional FAR of the order of 1. Ave. 16% of proposed/under construction properties in the DA may opt for purchase of additional FAR. Revenue from this sale is of prevailing land circle rates in the DA. Circle rates are assumed to grow 5% annually.

13 Institutional Mechanism for Cess on Transaction and Sale of Additional FAR v In the state of Haryana v The Town and Country Planning Department, Govt of Haryana vide Memo dated Date: 06/05/2016 permits sale of additional FAR atrs per sq ft. for high and hyper buildings. v Subsequently, relevant provision for Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Rules, 1965 and Haryana Building Codes, 1995 to be amended to impose Cess on Transaction. v In the States of GNCTD and Rajasthan v Similarly other states may give effect to 1) Cess on Property Transaction and 2) Sale of additional FAR within station wise delineated areas on RRTS corridor by amending relevant acts and regulations. v Collection and Ring Fencing v The Urban Local Bodies (ULBs)/ Revenue Circle Offices under which respective DA is falling can collect cess on Transaction v Revenue from sale of additional FAR within particular DA can be collected by applicable ULBs. v The funds can be transferred through escrow arrangement to Proposed Regional Transit Fund managed By NCRTC whichwill distribute the fund to the regional transit projects as per requirement Urban Development departments of respective states and MoUD, GOI need to intervene for better coordination and implementation

14 Summary of revenue Particular Total As % of total Rs. Crore Fare Box % Property Development % Advertisement % Stall Rentals Cess on transactions % Sale of FAR % Total % Fare Collection is the major source of revenue. Inflow from Property development and associated activities such as upfront lease premium, cess on transactions and sale of FAR jointly contribute to around 25% of revenue This non fare revenue inflow during middle years of operations shall help in operational sustainability of the project. Revenue from advertisement and license fees is expected to be insignificant. 14

15 Operational Viability Inputs related to Depreciation and taxes are taken as per prevailing practices including effect of MAT and benefit available As per Income tax Act, u/s 80 IA. The operating surplus would remain > 65% as Fare box revenues is supported handsomely by property development, cess income and sale of FAR. The fare revenue grows at 7% pa over 25 years (a combined effect of increase in fares biannually and y-o-y increase in traffic). In comparison, O&M expenses grows at 5.65% pa over 25 years. The operating ratio decreases during procurement of rolling stock for periodic replacement of assets though.

16 Returns in Generic terms Pre-tax Cashflow Rs. Crore Project Investments O&M Costs Taxes Fare Box Collection Cess on Property Transaction Upfront Lease from Property Development Stall Linceses Carbon Credit Project IRR Pre- Tax : 8.40% Post- Tax : 7.41%

17 Implementation models Following models are assessed; 1) Public Sector Model 2) Public Private Partnership Models a) Outsourcing of O&M b) Viability Gap Funding (VGF) c) Hybrid Annuity Model

18 Public Sector Model Project Structure A Public sector special Purpose Vehicle (SPV) will Finance, Build,operate and maintain the project. Bear all the risk associated to the project. Financing S. No. Means of Finance Project Cost With cost of land, tax and IDC At 2017 Prices Rs. Crores Contribution % of Project Cost (Rs. Crores.) 1 Equity Contribution 30.00% A Govt. of India 15.00% 7864 B Govt. of Delhi NCT 3.84% 2011 C Govt. of Haryana 8.57% 4492 D Govt. of Rajasthan 2.60% Senior Debt from Multilateral Agencies (Int 2% pa, 30 years repayment + 5 grace period ) 55.43% Regional Transit Fund (RTF) 5.00% Int. free Subordinate Debt from Raj and GNCTD Govt for Govt. Land 0.03% 14 5 Int. Free sub debt from Central and State Govt for Tax 9.54% 5003 A Govt. of India 4.77% 2501 B Govt. of Delhi NCT 1.22% 640 C Govt. of Haryana 2.72% 1429 D Govt. of Rajasthan 0.83% 433 Total ( ) 100% At Concessional Rate Hedging Cost to be borne by Central Govt Interest rate includes Guarantee Commission form Central Govt Interest Free sub debt and RTF reduces capital requirements and WACC and improves debt service capabilities 18

19 Returns from Public Sector Model Parameter Pre Tax Post Tax Project IRR 8.40% 7.52% Avg. DSCR 5.62 Min. DSCR 3.12 Due to access to low cost funds the Project can achieve PIRR more than 8% on pre-tax basis which is quite higher than WACC of apporx 4.3%. The project would have adequate debt service capacity throughout the project period Sensitivity of the project to change in Certain factors which may affect the returns and debt service capacity are discussed further

20 Sensitivity Analysis - Public Sector Model S. No. Scenarios PIRR (Pre Tax) Change in PIRR Minimum DSCR Change in DSCR +10% -10% +10% -10% 1. Change in Project Cost 8.40% 7.60% 9.30% Change in O&M cost 8.40% 8.12% 8.66% Change in Fare revenue 8.40% 9.09% 7.66% Change in TOD revenue 8.40% 8.64% 8.15% S. No. Other Scenarios Particulars PIRR (Pre Tax) in Base Case PIRR with change Minimum DSCR Minimum DSCR with Change 5. Higher Cost of Debt 10% 8.40% 8.40% Change in Revenue Streams Only Fare + Advt. + License Fee 8.40% 3.97% 3.12 <1 7. Change in Revenue streams Only Fare + Revenue from TOD + Advt. + License Fee 8.40% 6.66% PIRR is below 8% DSCR below 1

21 Implementation models Following models are assessed; 1) Public Sector Model 2) Public Private Partnership Models a) Outsourcing of O&M b) Viability Gap Funding (VGF) c) Hybrid Annuity Model

22 PPP Models Outsourcing of O&M Development of Property Fare Collection, Sale of advertising & licensing rights Revenue from Property Development Govt. SPV Sharing of 50% of additional ER (+)20% of ER Share Fixed % of ER Expected Revenue (ER) (-)20% of ER Private O&M company Fare and non fare revenue Rolling stock & Feeder Buses All Civil construction, E&M, Traction, Signaling & other costs Sharing 50% of reduction in ER Maintenance of rolling stock, E&M, Buses, Civil Assets Operations of RRTS & feeder service % of revenue share can be the award criteria since revenue is expected to remain higher than O&M cost Key limitations of the model which can restrict private participation Unpredictability in Ridership Safety Risk to be born by the SPV as per Metro Act despite of not being involved in O&M Uncertainty over fare revision Gross Cost Modelis globally preferred modelin comparison with proposed model

23 Implementation models Following models are assessed; 1) Public Sector Model 2) Public Private Partnership Models a) Outsourcing of O&M b) Viability Gap Funding (VGF) c) Hybrid Annuity Model

24 PPP Models Viability Gap Funding Project Structure A Private Player will Finance, Build, Operate and Maintain the project. All the risks, except Land acquisition risk, will be borne by private sector. Private Player will retain fare and TOD revenue. Govt will retain Cess on Property Transactions, Revenue from Sale of add. FAR. Govt will pay Viability Gap Funding on Project Completion cost. Outcome Particulars Output Financing : Equity: Debt 30:70 Debt in form of Term Loan from domestic market with repayment Period and 10% pa interest rate WACC 13.80% Aggregate Project Cost to Pvt prices (Rs. Crore) VGF (Rs 40% of Est Project Cost (Maximum Limit) Project IRR 9.44% Equity IRR 12.06% Minimum DSCR 0.47 Key Limitations The project is not viable under this model The returns would not be attractive to the private sector unless it is convinced about revenue potential of property development as well as VGF is further increased. To get acceptable level of PIRR of 11% and EIRR of 18% plus, the actual viability gap rises to 55% which is not permittedas per Govt. policy (max 40%) However DSCR may still remain below 1.

25 Implementation models Following models are assessed; 1) Public Sector Model 2) Public Private Partnership Models a) Outsourcing of O&M b) Viability Gap Funding (VGF) c) Hybrid Annuity Model

26 Proposed Hybrid Annuity Model for DGRA RRTS Project Structure NCRTC 50% Revenue - Property Development - Cess on transaction - Sale of addl FAR Land Acquisition Alignment & Formation Shareholder s Agreement SPV State Govt. (Delhi, Haryana, Rajasthan) EPC Contracts Loan Agr. 50% Lenders (JICA /WB/ ADB) Concession Annuity payments for 15 years Technology and Ops. Company (Pvt.) Civil Maintenance Private Sector Company P- Way, Traction and Power Rolling Stock Lenders Banks / FI Revenue - Fare -Ad -License - Carbon credits PD and Stations Bldgs. R&R Rolling Stock, E&M Maintenance Signaling and Telecom Utilities 26

27 PPP Models Hybrid Annuity Model Item SPV Tech Ops Total Govt. Land Pvt. Land Alignment and Formation Station Buildings E & M Works Depot Permanent Way Traction and Power Signalling and Telecom Rolling Stock (BG) Utilities Environmental, social and R&R costs CISF Barracks and Security equipments Special noise & vibration reduction treatment Feeder Buses Miscellaneous Cost General Charges including Design Charges Contingencies Total without IDC and escalation Share in un-escalated cost 68% 32% 100%

28 PPP Models Hybrid Annuity Model S. No. Means of Finance Contribution (%) SPV (Public Sector) Project Cost Escalated (Rs. Crore) 1 Equity Contribution 26.15% 9334 A Govt. of India 13.07% 4667 B GNCT- Delhi 3.34% 1193 C Govt. of Haryana 7.47% 2665 D Govt. of Rajasthan 2.26% RRTF 5.00% Soft Loan (Multilaterals) 60% Int. free Sub debt from state Government for land 0.04% 14 Int. free Sub debt from Central & State govt. 5 for Tax on project Goods 9% 3146 A Govt. of India 4.48% 1573 B GNCT- Delhi 1.15% 402 C Govt. of Haryana 2.56% 898 D Govt. of Rajasthan 0.78% 272 Total of above 100% Tech Ops Company (Private Sector) Equity Contribution 30% 6272 Senior Commercial debt@10% 70% Total of above 100% Aggregate Total Govt. SPV and Tech Ops (Rs. Crores) 56604

29 PPP Models Hybrid Annuity Model Returns The Govt SPV will pay Annuity to the Tech.Ops appreciating latter s viability (desired PIRR of 15% and EIRR of 18%) and capacity to serve the debt in time (DSCR > 1 during repayment period). Returns for Tech Ops EIRR of 18% and Avg. DSCR of 1.4 on behest of; Annuity of Rs crore per year for 15 years (cumulatively Rs crores) Revenue from fare box, advertisement and licenses Returns for Govt SPV PIRR of 2.3% which is less than WACC of 5.33%. Average DSCR > 1 Annuity Payout can be financed through revenue from Property Development, Cess on Property Transactions and Sale of FAR. Model Limitations The project cost is escalated due to the need to service high cost private capital through annuities. Risky revenues sources like property development, cess, additional FAR etc. are with Govt. SPV while more certain fare revenue is with private sector SPV. 29

30 Conclusion Model Construction O&M Property Development Attractiveness Public Sector SPV SPV SPV Higher Outsourcing of O&M SPV Pvt. Sector SPV Limited VGF Pvt. Sector Pvt. Sector Pvt. Sector Limited Hybrid Annuity SPV and Pvt. Sector Pvt. Sector SPV Moderate Public Sector Model is recommendable due to following reasons; Described public sector model is able to achieve threshold of 8% financial return. Cost of funding is lower for public sector. Access to low interest and high gestation multilateral funding makes the project viable. Better in handling the risks of ROW clearance, land acquisition, urban development, TOD and key approvals Higher concessions and supports from the Government in terms of equity support, interest free sub-debt, property development rights, collection of cess and sale of FAR. The private sector capacity in metro development operations is evolving. Significant capacity and understanding gaps can be disastrous for large scale projects. The option to outsource O&M can be worked out provided supporting regulatory framework gets into place as described in Model 1.

31 Part II Economic Analysis

32 Sequence of Economic Analysis Conceptual Framework Economic Analysis Estimated Economic Costs and Benefits Outcome

33 Conceptual Framework Objective : To Evaluate/Measure the Contribution of Project to Society and Region's Economy RRTS Project Inputs from Traffic demand Model (Passenger forecast, diverted trips etc.) Life Cycle Economic Cost Life Cycle Economic Benefits Conversion of Financial Cost to Economic Cost by excluding taxes, subsidies, interest payment and thereafter applying Standard Conversation factors of 0.9 to financial cost. Benefits accrued owing to Diversion of Traffic from alternate mode leads (i.e Roads and Rails) to RRTS Project. Benefits derived by Comparing user cost in With Project and Do- Noting or Alternative scenario. 1. Project Cost 2. O&M Cost 3. Asset Replacement Economic Viability Parameters Economic Internal Rate of Return Economic Net Present Value Benefit/Cost Ratio Sensitivity Analysis with respect to key parameters. 1. Quantifiable Benefits. a) Fuel Savings. b) Savings in Vehicle Operating Costs (VOC) of Existing System (Depreciation and Maintenance Cost). c) Time Saving d) Savings in Infrastructure Maintenance Costs. e) Pollution reduction f) Accident reduction 2. Non Quantifiable Benefits

34 Estimates of Economic Cost and Economic Benefits Sr. No. Particulars Amount in Present Value terms (at 12% discount rate) (Rs Crore) Economic Cost (A) 1 Capital Cost (Without Land) Maintenance Cost during operational period 4242 Total Economic Cost Economic Benefits (B) 1 Fuel Savings Savings in VOC of Diverted Trips (Depreciation cost + Maintenance Cost ) Time Savings Infrastructure Maintenance Cost Savings Accident Reduction Benefits Pollution Reduction 1530 Total Economic Benefits Net Benefits (B-A) Key Features The Project shall also lead to significant savings in highway lanes and corresponding land acquisition cost for the additional highway lanes owing to diversion of vehicular road traffic to RRTS. The benefits of RRTS project shall also accrue to non diverted trips (i.e Residual Traffic ) due to lower congestions. These benefits have not been captured.

35 Outcome of Economic Analysis Particulars Economic Internal Rate of Return Economic Net Present Value 12% Discount rate (Rs Crores) Benefits to cost ratio Without land cost 17.92% With land cost 16.58% Project provides 17.92% and 16.58% of E-IRR in without land and with land cost scenario which are higher than the social opportunity cost of capital i.e.12% normally used in the Asian context by ADB and World Bank. Thus on these counts, the returns are higher than the opportunity cost. Further it also provides 1.95 of benefits to cost ratio indicating 95% higher benefits would be accrued to the economy than the economic cost of the project if project is undertaken.

36 Economic Viability of Project under different sensitivities Particular Increase in Economic Cost of the Project (capex + opex) by 15%. Decrease in benefits by 15%. Combined scenario of increase in Economic Cost of the Project by 15% and decrease in Economic benefits by 15%. Economic Internal Rate of Return Without Land cost With Land Cost 16.61% 15.32% 16.40% 15.10% 15.13% 13.92% Project provides E-IRR of 13.92% in with land cost scenario under the most pessimistic combined scenario of increase in economic Cost of the Project by 15% and decrease in economic benefits by 15% which is also determined to be higher than social cost of capital. Project also provides many non quantifiable benefits as well as benefits to non diverted trips which may further improve economic rate of returns. Thus project is determined to be economically viable.

37 Thank you