India: Preparing Nonsovereign Urban Infrastructure Projects

Sovereign Project | 42146-012

Summary

In urban infrastructure space it has been a challenge to access cost competitive long tenor loans. This TA is to assist in conducting due diligence of urban infrastructure projects from lenders' perspective and aid sub-sovereign entities to seek debt financing from local and international lenders.

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Project Name Preparing Nonsovereign Urban Infrastructure Projects
Project Number 42146-012
Country India
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 7221-IND: Preparing Nonsovereign Urban Infrastructure Projects
Technical Assistance Special Fund US$ 250,000.00
Japan Special Fund US$ 1.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector Water and other urban infrastructure and services - Urban policy, institutional and capacity development
Gender Equity and Mainstreaming No gender elements
Description In urban infrastructure space it has been a challenge to access cost competitive long tenor loans. This TA is to assist in conducting due diligence of urban infrastructure projects from lenders' perspective and aid sub-sovereign entities to seek debt financing from local and international lenders.
Project Rationale and Linkage to Country/Regional Strategy Urban infrastructure still continues to be seen as high risk sector and private capital is hesitant to enter this sector. Attracting private capital into urban infrastructure has been challenging and the progress has been relatively slower than in other infrastructure sub-sectors. The Government of India requested ADB for TA to promote PPPs in urban infrastructure development. Given this backdrop, this TA is to support due diligence of bankable projects that have not attracted private sector interests due to perceived high level of risk. By investing upfront in technical, financial, legal and other due diligence, the TA will make the risks more transparent, will reduce the gap between perceived and real risk and make the projects attractive for lenders including ADB's non-sovereign initiative. The TA resources to be used to pay for services of skilled professionals/consultants.
Impact Increased number of cities providing improved urban services by engaging in project financing in India; accelerated economic growth and reduction in poverty; and improved urban environment and enhanced quality of life for urban inhabitants.
Project Outcome
Description of Outcome Technical, financial and legal due diligence for two to three projects selected by ADB for possible ADB nonsovereign lending in selected cities in India
Progress Toward Outcome

Under this TA, ADB has assisted Bangalore Metro Rail Corporation (BMRCL) in developing a bankable financial model. Based on this model and due diligence carried out, ADB has sanctioned a non sovereign loan of $250 million to BMRCL.

For developing the Model Concession Agreement for Urban Metro Rail Projects in the country, consultant was engaged who delivered part deliverables (inception report and review report of best practices followed in such projects).

Implementation Progress
Description of Project Outputs

Project Outputs

(i) Sub-Component 1-Shortlisted Project Identification: Identification of Shortlisted Projects will be done through a multi-pronged approach. In addition to ADB Staff, local experts and consultants who have strong networks with Asset Owners through their earlier advisory work with those owners would be engaged to assess Asset Owners and possible Target Projects.

(ii) Sub-Component 2-Appraisal of the Targeted Project(s): After a Target Project is identified, the TA would provide financial assistance in respect of the Asset Owner in the appraisal of the detailed project reports (DPRs) and assist in suggesting improvements, if necessary, to the standards acceptable to ADB.

(iii) Sub-Component 3-Business, Financial and Legal Due Diligence for Subsovereign Lending. Once a suitable structure has been established and agreed to by the relevant government authority and the Asset Owner, the Asset Owner will need further assistance so that it can (i) frame the parameters for any needed reform to the regulatory requirements for the Target Project; (ii) undertake the preparation of a detailed financial model; (iii) transfer unencumbered Target Project assets into to a newly-formed SPV; (iv) prepare for tender by the SPV of a concession or other licensing agreement; and (v) identify the framework for direct agreements, escrow agreements, mortgages and other security elements on which a private sector lender will rely as collateral for its financing of the Target Project.

Status of Implementation Progress (Outputs, Activities, and Issues) The TA funds have been utilized in preparing bankable project structures (including, social and environmental impact assessments, commercial and financial due-diligence) for urban infrastructure projects in Bangalore (metro rail). Also there has been part deliverable in respect of model concession agreement for metro rail projects in the country incorporating best practices.
Geographical Location India
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Stakeholder consultation and participation was included in the design of Bangalore Metro Rail project.
During Project Implementation During implementation of Bangalore Metro Rail project, stakeholder participation was carried out.
Business Opportunities
Consulting Services 10 consultants (including individuals and firm) have been engaged to get expert input on the project.
Responsible ADB Officer Ashis Bhadra
Responsible ADB Department South Asia Department
Responsible ADB Division India Resident Mission
Executing Agencies
Ministry of Urban Development Mr.P.K.SrivastavaMinistry of Urban Development, Govt. of India
Timetable
Concept Clearance 27 Aug 2008
Fact Finding 22 Oct 2008 to 24 Oct 2008
MRM -
Approval 16 Dec 2008
Last Review Mission -
PDS Creation Date 16 Sep 2008
Last PDS Update 26 Mar 2013

TA 7221-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
16 Dec 2008 23 Feb 2009 23 Feb 2009 31 Dec 2010 31 Dec 2012 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,250,000.00 0.00 350,000.00 0.00 0.00 0.00 1,600,000.00 16 Dec 2008 271,944.33

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Safeguard Documents

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Evaluation Documents

See also: Independent Evaluation

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