L&T to refinance debt for $2.6 billion Hyderabad metro rail project
This article is part of a daily series of MegaProjects articles. If you want to know more about PPP projects with a considerable size visit our MegaProjects section. You can receive them by email on a daily basis.According to local sources, Larsen & Toubro is close to striking a Rs 1,000-crore (US$167 million) external commercial borrowing (ECB) deal for the Hyderabad metro rail project with India Infrastructure Finance Co Ltd (IIFCL). IIFCL is providing long term financial assistance to various viable infrastructure projects in India. It has recently created an infrastructure debt fund.
V.B. Gadgil, Chief Executive and Managing Director of L&T Hyderabad Metro Rail Ltd., a special purpose vehicle (SPV) to execute the metro project said:
"We are at advanced stage and expect to conclude the deal by September. We may even consider additional ECB loans. These ECBs help bring down the interest burden by about four per cent even after including Libor and hedge costs."
Addressing a press conference, he said:
"Interest rates have ruled high for quite some time. It is a matter of concern. By accessing these funds we will be able to bring down the overall costs. These loans also come with a tenure of say 20 to 25 years, bringing flexibility."
While the SPV has achieved financial closure, it has several options to augment additional funds to reduce the impact of high interest rates.
L&T achieved financial closure for the mega project in 2011. This includes Rs 11,400 crore (US$1,9 billion) in debt to be met through a consortium of 11 banks lead by SBI and including Canara Bank, Indian Bank, Indian Overseas Bank, Jammu& Kashmir Bank, Punjab & Sind Bank, State Bank of Hyderabad, State Bank of Mysore, State bank of Patiala and Syndicate Bank.
Referring to the currency fluctuation, Gadgil said most of the contracts were rupee-denominated, and therefore insulted against volatility. However, the increase in input costs and labour are two major issues.
Gadgil said the first stretch of 8 km of the 72 km elevated rail project would be commissioned by March 23, 2015.
The total investment for the project is estimated at US$2.6 billion.
Hyderabad Metro is a rapid transit system, currently under construction, for the city of Hyderabad, India. It is being implemented entirely on PPP mode, with the state government holding a minority equity stake.
The Phase I of the project includes 3 lines covering a distance of around 71 km.
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