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APM Terminals Pipavav recognized as a ‘Great Place to Work’

APM Terminals Pipavav (Gujarat Pipavav Port Ltd) has been certified as a Great Place to Work by the Great Place to Work® Institute for the second time in a row under the category: small and mid-size organizations.

Every year, more than 10,000 organizations across 60 countries apply to get Great Place to Work–Certification. APM Terminals Pipavav was assessed through a multi-pronged approach where the employees answer an online survey. Employees across various levels were interviewed for their assessment of the company and its policies and a detailed analysis is also done through the website of the institute. The certification takes a holistic view of the employees’ experience in the organization. The key findings highlighted were that employees at APM Terminals Pipavav are proud to be associated with the organisation as well as have strong desire to continue working here.

Mr. JakobFriis Sorenson, Managing Director, APM Terminals Pipavav, stated, “We are honoured to receive this recognition second time in a row. This is a testament to our inclusive and transparent work culture built over time by constant communication and by sticking to our values.”

NHAI proposes to provide extension in concession period and Covid-19 loan for operational BOT (Toll) projects

  • Extension in concession period by NHAI does not compensate for loss in net present value terms for majority of BOT Toll projects
  • For the entities who have not opted for moratorium on project loans earlier, Covid-19 loan from NHAI is a positive in terms of liquidity

The Ministry of Road Transportation and Highways (MORTH) had suspended tolling on all national highways for a 25-day period between March 26, 2020 to April 19, 2020. As per ICRA, who had issued a note to the Ministry requesting for this suspension, the Association had expected that this event to be treated under political force majeure (FM) clause of the concession agreement (CA), as was done during demonetisation when the tolling was suspended for 24 days in November 2016. As per CA, all force majeure costs (including interest and O&M) are to be reimbursed by the concessioning authority in case of a political event and revenue loss is to be compensated by extension in concession period. As per rating agency, the total O&M expenses and interest costs for the BOT Toll concessionaires for the recent 25-day period of toll suspension is estimated at Rs. 649 crore.

The recent relief package announced by NHAI for BOT Toll concessionaires has two parts: (1) the revenue loss during and after toll suspension period will be compensated in the form of extension by three to six months in concession period and (2) covid-19 loan is provided for concessionaires to the extent relief is not granted under moratorium under RBI guidelines. Many BOT concessionaires have already opted for loan moratorium on their project debt; thus, in such cases, the quantum of covid-19 loan eligibility is not significant. For the entities that have not opted for loan moratorium earlier, the Covid-19 loan is a positive from liquidity point of view.

Elaborating further, Mr. Rajeshwar Burla, Vice President, Corporate Ratings, ICRA says, “NHAI seems to have taken a different approach when compared to the toll suspension during demonetisation period, when it compensated the concessionaires for the interest and O&M costs. Possible reason for this deviation could be the availability of moratorium on debt servicing under RBI guidelines. Further, O&M costs for an operational toll project is also not expected to be significant. Nevertheless, this approach may end up becoming contentious with concessionaires disputing the proposed relief measures. Also, these measure discriminates between concessionaires as entities that have not opted for loan moratorium earlier are better off – they would now have access to covid-19 loan from NHAI at a much cheaper rate of bank rate plus 200 bps with flexible repayment terms.”

The extension in concession period is for a period equal in length to (a) the period during toll suspension which is 25 days and (b) for the period in proportion to loss of fee on a daily basis (where daily collection is less than 90% of average daily collection for previous accounting year and increasing the result thereof by 5%) for instance, loss of 25% fee as compared to daily average for four days shall result in an entitlement of one day increase in concession period. The floor and ceiling for extension in concession period has been set at three and six months respectively. Post resumption of tolling, the toll collections reached 30-35% of pre covid levels in last week of April, 2020 which subsequently improved to 50-55% in May, 2020.

On an annual basis, for projects witnessing upto 25% loss in revenue, the extension in concession period would be 90 days and for projects witnessing more than 50% dip in toll collections the increase in concession period is capped at 180 days. Assuming a discounting rate of 12%, the ratio of present value of toll collections during period of concession extension to the current revenue loss for varying balance concession periods is tabulated below.

1) Assuming toll collection growth of 6% from FY2022 onwards (on FY2020 as base) for a period of first ten years followed by 5% for balance period; at a discount rate of 12%

2) Value of greater than 1 signifies that such projects are better off with the extension in concession period as they are protected in net present value terms
(Source: ICRA research)

It can be noticed that projects with revenue loss upto 18% and balance concession period upto 5 years and projects with revenue loss upto 10% with balance concession period upto 10 years are likely to get benefitted with the extension in concession period by three months. For all the remaining projects, the extension in concession period by NHAI does not compensate for loss in net present value terms.

Mr. Burla added, “In net present value terms, the relief measure does not adequately compensate for the losses incurred by majority of the operational BOT Toll road projects. Such departure from the concession agreement could have been avoided as it may have ramifications on attracting investments in TOT and NHAI’s InvIT.”

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