Mumbai Metro Rail Project

GROUP – 8Neeraj Gurbani A020

Akshiv Pathania A037

Sameer Sehgal A047

Karan Shah A050

Jinesh Vora A056

Agenda

Mumbai Transport Infrastructure: Overview

Mumbai Metro : Conceptualization

Project Planning

Financial Structuring

Key Learnings & Recommendations

Risk Management

Project Execution

Bidding Process

Mumbai Transport Infrastructure: Overview

12.8%

9.2%

78.0%

Private Vehicle Intermediate Public transport Public transport

78%

Suburban rail – 56%

BEST – 22%

13.0 million people travel daily by Public Transport

Train transportation – Lifeline of Mumbai

Mumbai is Public Transportation Dependent city

Mumbai Transport Infrastructure: Loopholes Rail Network: Failed to keep pace with demand Suburban rail traffic increased by 6 times while the

capacity increased by only 2.3 times 4500/5000 passengers travel per train against the

carrying capacity of 1750 resulting in unbearable overcrowding; Strong mismatch in demand and supply

Mumbai needs an efficient, economical and environment friendly Mass Transit System

Bus Network: Constraints to expand the existing road capacity to

meet the future demand Number of cars in Mumbai has grown by 51% in the

last six years; Resulting in road congestion & Environmental pollution

Not serving the purpose of the Feeder service to rail network

Mumbai Metro Project:

Serve areas not served by current system

Higher capacity

Faster travel

Attractive to commuters

Environment Friendly

Improve overall mobility

Access to important industrial and commercial area

Time reduced to 21 min from 71 min between Versova & Ghatkopar (Ph-I)

Provide a rail based connectivity within an approach distance of 1 to 2 km; Fare

East-West rail based connectivity to Central and Western suburbs

Additional 7 mn commuters

Reduction in air and noise pollution

Mumbai Metro is the best solution for Mass Transit System

Gap Analysis

Mumbai MetroOverview 3 Phases

PHASE ITotal Length of 62.68 Km (approx)• Versova – Andheri – Ghatkopar 11.07 Km• Charkop – Bandra – Mankhurd 31.8 Km• Bandra – Colaba 20 Km

PHASE IITotal Length of 40 Km (approx)• Charkop-Dahisar 7.5 Km• Ghatkopar – Mulund 12.5 Km• BKC Kanjurmarg via Mumbai Airport – 19.5 Km

PHASE IIITotal Length of 39.80 Km (approx)• Andheri East – Dahisar East route 18 Km• Flora fountain and Ghatkopar route 21.8 Km

Mumbai – Metro Phase I

PROJECT PLAN Phase I Line 1 – Versova – Andheri - Ghatkopar

India’s first PPP Metro Project, based on the Build, Own, Operate and Transfer (BOOT) model

Elevated 11 Km line to Ghatkopar via Marol, Chakala and Saki Naka

AUGUST 2004 – Approval received from the Government of Maharashtra and Global Bids were invited through Expression of Interest (EOI)

SPV – Mumbai Metro One Private Limited (MMOPL), a JV between Reliance Infrastructure, Veolia Transport and MMRDA

Concession period of 35 years including the construction period of 5 years

Estimated cost of the project – Rs 2356 crores 69%5%

26% Reliance Infrastructure

Veolia Transport

MMRDA

TIMELINE FOR THE PLANNED PROJECT

Govt. of Maharashtra approval 19th August, 2004

Invitation of Global Bids 21st August, 2004

Pre-bid meeting 23rd November 2004

Technical bids 16th May, 2005

Invitation of Financial Bids 15th September, 2005

Receipt of financial bids 10th January, 2006

Evaluation of Financial bids January, 2006

Negotiations with the lowest bidder

February-May, 2006

Negotiated offer 10th May, 2006

LOI issued after GOM approval June 2006

Commencement of Construction Feb 2008

EQUITY HOLDING (%)

FINANCIAL STRUCTURINGLine 1 – Versova-Andheri-Ghatkopar

The 70% debt was provided by a consortium of banks led

by IDBI

The remaining Rs1706 crores was financed by 70% Debt –

Rs. 1193 Cr and 30% Equity – Rs. 513 Cr

Out of the total estimated project cost, cumulatively 27.5% was contributed as

VGF by the GOI and Government of Maharashtra

Total project Cost

Rs 2356 Crores

Remaining Rs 1706 Crores

70% DebtRs 1193 Crores

Consortium of banks IDBI, Corporation Bank,

Karur Vysya Bank, Canara Bank, Oriental bank of

commerce and Indian Bank

30% EquityRs 513 Crores

Reliance Infra - 69% ~ Rs. 353 Cr.

Veolia Transport - 5% ~Rs. 26 Cr.

MMRDA - 26% ~ 134 Cr.

Viability Gap Funding

Rs 650 Crores

VGFGoI-20%

GoM-7.5%

Free of Cost:• Space for Car Depot at DN Nagar Station and Ghatkopar Station

• Land for the project

An Indian Company or a Company authorized to carry out business in India or a JV with an Indian Company

Net worth of more than Rs.5,000 million or US$ 112 million

Annual Turnover for the last 3 years of more than Rs.3,650 million or US $ 81.0 million

Relevant experience in developing, constructing or operating a Mass Transit System with minimum capacity of 20,000 PHPDT.

Eligibility Criteria

Evaluate Bids for Financial Capability and Technical Competence as per evaluation

criteria

Scrutinize system design proposals for conformity - Technical and Performance

specifications

Obtain bidders‟ confirmation to incorporate proposed modifications if any to provide level

playing ground

Those bidders scoring 75% and above in technical evaluation were eligible to submit

financial proposal

Evaluation of Business Plan & other formats submitted as per RFP documents

Second Stage-Financial Proposals

First Stage-Technical Proposals

Technical Proposals Financial Proposals

Two Stage Process

Bidding – Metro Phase I Line 1

Received Bids - 5 Technically Qualified - 3Financial Proposals

Received - 2Preferred Financial Bid

"Mumbai Metro One consortium” LED by Reliance Energy Limited and Connex-France

"Mumbai Metro One consortium” LED by Reliance Energy Limited and Connex-France

“IICCU consortium” led by Infrastructure Leasing & Financial Services Limited – ITD Thailand-Unity Infra

Mumbai Metro Consortium” led by Gammon Infrastructure Ltd – Siemens and BEML

Hindustan Construction Company and RITES

Shaktikumar Sacheti Limited and Lingkaran Metro Bidding Parameter - A bidder asking for minimum capital contribution to be selected as Preferred Bidder Details of Preferred Financial Bid- Cost- Rs 2356 Cr and Capital Contribution: Rs 1251 Cr Negotiated bid - Negotiations were carried out with the lowest bidder to reduce the capital cost. As a result demand for

capital contribution reduced from Rs 1251 Cr to Rs 650 Cr Approvals - Negotiated offer was evaluated by the Bid Evaluation Committee appointed by the Metropolitan Commissioner

and approved by the state cabinet

Bidding – Metro Phase I Line 1

Technically Qualified Bidders

Reliance Infrastructure-SNC Lavalin, Canada-

Reliance Communication

GE India-L&T-CA-IDPL

Tata Power-Mitsubishi-Tata Realty's Pioneer

Infrastructure

GVK-Bombardier-YTL

Infrastructure Leasing & Financial Services Limited -Soma Constructions-Punj

Lloyd

Essar-Alstom

Bidding – Metro Phase I Line 2

Key Highlights of Project

Concession period - 35 years �with an extension clause of another 10 years.

Financial closure : Debt - Rs 6,931 CrEquity - Rs 2,332 Cr

Equity share : Reliance Infra - 74% SNC Lavalin - 26%

Implementation under PPP format

Project cost: MMRDA’s estimate : Rs 8,250 CrR-Infra’s estimate : Rs 11,000 Cr

VGF - Rs 1,532 Cr by GOI, Rs 766 Cr by GoM

Construction work stalled due to issues

Project Winner

Reliance Infrastructure

Only one that made a financial bid

Bid Submitted

Rs 2,298 Cr The grant from the state & Central governments

Charkop - Bandra – Mankhurd corridor

14 international and national firms have submitted the pre-qualification bids for detailed design and construction of underground stations and associated tunnels for the project

Bidders are as follows :AFCONS-KMB, CEC-ITDCEM-TPL, CTCEG-PIIPL, Dogus-Soma, IL & FS-CR25G, J Kumar- CRTG, L&T-STEC, MOSMETROSTROY-HCC, OHL-SKE&C, Pratibha-GDYT Consortium, Sacyr CMC ESSAR, Salin Impregilo-Gammon, STRABAG-AG-Patel and UNITY-IVRCL-CTG.

Initial Eligibility Criteria Modified Eligibility Criteria

Average annual turnover of $175 million for five years generated specifically from the execution of underground railway works, excluding hill tunnels

Average turnover of $175 million for five years from billing for civil infrastructure works completed or in progress

All member companies of a consortium or JV were required to meet the minimum experience criteria individually

The combined experience of a consortium was required to meet the minimum experience criteria

In technical qualification the end date for experience limit of bidders for 10 years was December 2012

The end date for experience limit of bidders for 10 years ending December 2012 was revised to March 2013

Eligibility Criteria Milestones in Bidding Process

Bidding – Metro Phase I Line 3

Sept 2013

• Invitation for the pre-qualification bids

Oct 2013

• Expected Submission of bids

Nov 2013

• Expected Evaluation of Pre-Qualification of Bids

Jan 2014

• Re-Invitation for the pre-qualification bids

Mar 2014

• Submission of pre-qualification bids

July 2014

• Expected Issue of detailed tenders

Oct 2014

• Expected award of contract to successful bidder

Jan 2015

• Expected Commencement of construction Phase

Risk Management

Types of Risk

Construction Risk

Operational Risk

Market/Demand Risk

Financial Risk

Political Risk

Time and Cost overruns or shortfall in performance parameter of the project

Technical performance of the project during the operational phase can fall below the levels projected

Possibility that the market conditions assumed in determining the viability of the projects are not realized

Variation in Interest Rates and/or the risk of not being paid for services delivered by the investors

Any disruption in construction or operation of an project due to political decisions

Risk Mitigation

Risk Identification

• Identifying the events or actions which effects the viability of the project

Severity of Risk

• Incase the event occurs, the effect of the same on the cost/time of the project

Risk

Allocation

• Identifying and allocating the risk to the party who can manage it the best

Risk

Mitigation

• Steps/Actions which can be taken to reduce the chances of event occurring

Risk

Pricing

• Cost of addressing the risk needs to be determined and suitable provisioning made

Risk Allocation Framework (1/2)

Risk Type Sensitivity Primary Risk Bearer Comments

Delays in Land Acquisition High Government

To be handed over to the concessionaire by MMRDA. If unable to do so, MMRDA is liable to extend project completion date, financial closure date & concession period

Financing Risk Medium Private SectorHas to achieve financial closure in 180 days after signing the contract. Provision with MMRDA to extend the period by another 180 incase not achieved

Planning Risk Medium Private Sector Need to execute the project in conformance with the specifications and standards specified in the agreement

Regulatory, Approval Delays Low Private Sector Has to obtain all required clearances/permits from the

GoI/GoM for implementation of the project

Pre-Operative Risks

Construction Phase RisksRisk Type Sensitivity Primary Risk Bearer Comments

Design Risk Medium Private Sector Have to submit all drawings and schedule to MMRDA for review. Also to be scrutinized by an independent engineer

Construction Risk Medium Private Sector

Performance security of Rs.14 crore for due and faithful performance of its obligations. Renewed from time to time and replenished every 30 days. Penalty of Rs.2 crore/day for missing any milestone

Change in Scope Risk Low Government

Additional work outside scope would be ordered by MMRDA performed by private operator and subsequently reimbursed

Financing Risk Medium Private SectorOnly 85% of VGF to be released during construction period of the project. Remainder of funds after 6 months of project being operational

Risk Allocation Framework (2/2)

Risk Type Sensitivity Primary Risk Bearer Comments

Technology Risk Low Government/Private SectorProject to be executed in conformance with the specifications and standards specified in the agreement

O&M Risk Medium Private SectorTO submit an operations and maintenance manual to MMRDA for approval. Risk mitigation by allowing concessionaire to appoint O&M contractors

Market Risk High Private Sector

The private operator would be allowed to levy and collect the fares. The fares would be revised at a rate of 11% every fourth year. No revenue guarantee from the government

Performance Risk High Private Sector

Private operator has to hold at least 51% equity during construction and in the 2 years after completion of the project. Lead consortium member will have to hold at least 26% equity stake in the project for a minimum period of 15 years after project completion

Operational Phase Risks

Handover Risks

Risk Type Sensitivity Primary Risk Bearer Comments

Handover Risk Low Private Sector

Joint inspection by both parties 60 months prior to the expiry of concession period to gauge compliance with serviceability requirements defined in the agreement, private party to pay charges if found deficient

Private Operator Event of Default

Low Private SectorOnly lenders are protected to equity holders bear a major risk. MMRDA to take over the assets and is liable to pay 90% of debt less insurance claims

Mumbai Metro Project: Execution

However, MMOPL missed as many as 10 deadlines set for completion of the project including the March 2013 deadline set by Maharashtra CM Prithviraj Chavan

Reasons for delay: MMRDA supposed to make 59% land

available to MMOPL but could manage only 45% when construction began

Complete land needed for construction could be handed over to MMOPL only in 2012

ROW and legal issues with removal of encroachments and religious structures also stalled construction progress

Unavailability of records of underground utilities forced MMOPL to change design on numerous occasions

Delay in safety certifications from RDSO and Fire department

2006: Former PM Manmohan Singh laid the foundation stone for Metro One project in June 2007: Reliance Infra led MMOPL awarded the contract for developing the 11.4 km Versova-

Andheri-Ghatkopar (VAG) corridor 2008: Actual construction on the project began in Feb 2008, and the corridor was expected to

be operational by 2010-end

Effects of delay:

MMOPL asking for steep increase in the fare creating a controversy in the media and asking for reimbursements for expenses

8 year delay and harassments for Mumbai commuters on the affected stretch

0-2 2 -4 4 - 6 6 - 9 9 - 12 12 - 15

15 - 18

18 - 21

21 - 24

24 - 27

27 - 31

31 - 35

35 - 39

39 - 44

> 44 ₹ 0.00₹ 5.00

₹ 10.00₹ 15.00₹ 20.00₹ 25.00₹ 30.00₹ 35.00₹ 40.00₹ 45.00

Pricing Comparison

Mumbai (Proposed)DelhiBangaloreChennai

Mumba

i (el

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ed)

Delhi

(ele

vate

d)

Delhi

(Und

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ound

)

Banga

lore

(ele

vate

d)

Banga

lore

(Und

ergr

ound

)

chen

nai (

elev

ated

)

350250

400

240325

200

Cost Per Kilometre (Rs Crores)

PRICING

Comparison with other metros

Parameters Other Metro Mumbai Metro

Financial Viability Among 200 metro cities – Hong Kong, Singapore, Tokyo, Taipei have been financially viable

Very early to predict

Cost Escalations It can happen because of delays in clearance

From 2346 Crores to 4200 Crores

Source of Revenue Ticket sales, Advertisements

5 – 10 % Ticket Sales Advertisement, Station naming rights

Fare Low as compared to other modes of transport

Very high compared to other metros in India

Pricing Authority Government in most of the projects

MMOPL *

The project, which was under the Indian Tramways Act, was brought by the union government under the Indian Metro Act in 2014, allowed MMOPL to fix its own fare structure in the absence of a fare fixation committee

Learnings & Recommendations

1. Expediting the bid process

Entire bid process to choose the successful bidder took more than 2 years. This led to very less no. of bidders bidding for the project.

2. Delay in obtaining VGF approval

Substantial delay in obtaining VGF approval from the govt. because model concession agreement was not in place.

3. Delay in getting approval

Delay in getting approval for construction of over-bridge that passed over the railway line. This was because railways were thinking of a project that could invade the path of the metro line.

It is recommended that authorities be cognizant of all other upcoming infrastructure projects that have the potential to affect operations of the planned project while bidding out such projects and resolve the same prior to the appointment of a developer.

4. Land acquisition issues

Land for the depot was under dispute.

It is recommended in the future concerns such as these are addressed before the project procurement stage itself to ensure smooth functioning of the project.

5. Clear specification on Asset transfer on termination

5 years before the expiry of the concession period a survey of the assets would be carried out to determine whether they are in working condition as given in the agreement. Schedule in the concession agreement does not have clear and robust specifications. Risk of a difference of opinion between the concessionaire and the government and this can potentially lead to a dispute.

The government could manage this better by incorporating clear and robust specifications on the condition it would want the assets to be handed over to the government.

Risk allocation has to be equitable; Tendency to pass on maximum risk to the Concessionaire will prove counter productive.

Learnings & Recommendations

References

http://timesofindia.indiatimes.com/city/mumbai/Metro-phase-III-tenders-to-be-issued-by-July-2013/articleshow/32677654.cms

http://en.wikipedia.org/wiki/Line_3_(Mumbai_Metro)

https://mmrda.maharashtra.gov.in/home

http://articles.economictimes.indiatimes.com/2014-07-31/news/52285190_1_mthl-santa-cruz-chembur-link-road-sclr

http://toolkit.pppinindia.com/water-sanitation/module3-rocs-mm1.php?links=mm1

http://indiatogether.org/metro-fares-in-mumbai-and-other-cities-economy

http://www.mumbaimirror.com/mumbai/others/Mumbais-Metro-fare-is-double-that-of-other-cities-MMRDA/articleshow/36318428.cms

Thank youQ&A