Case Problem Project Finance

Financial Model for the Bridge Project A COST ESTIMATES B ASSUMPTIONS FOR FINANCIAL MODEL C TRAFFIC AND TOLL RATE PROJECTIONS D PROJECT TIME TABLE E FINANCIAL PLAN F OPERATION AND MAINTENANCE CALCULATIONS G DEPRECIATION SCHEDULE H TERM LOAN REPAYMENT I PROFIT AND LOSS ACCOUNT & WACC J CASHFLOW, NPV, IRR & EIRR FOR THE PROJECT K DEBT SERVICE COVERAGE RATIO L COMMENT ON PROJECT VIABILITY Instructions Above mentioned links are provided to navigate through the financial model Values mentioned in RED color are negative values Values Mentioned in BLUE Color Are Assumptions Made by the modeler

A

B

C

D

E

F

G

COST ESTIMATES Consultant Fees 2% Expert Fees (Deployed By State Govt) 1% Environmental Clearence 5% Pre Operative Expences 3% Contingencies 5% Increase in manpower cost 10% Cost Of Engineers (Rs.) ### cost of supervisior (Rs.) ### Cost of Permenant Staff (Rs.) ### Cost of Administrative Office 0% Cost of Construction Toll Plaza 1% The general Lighting cost of the Bridge is assumed to be covered in the Per Km cost of Bridge Land will be transferred by the state govt to the developer as free of cost. TRAFFIC PROJECTIONS Average Annual Growth Rate 4% Inflation Rate (Every 3rd Year) 10% Bridge Length 2.5 Toll Rates 2-Wheelers 7.5 4-Wheelers 10 S.T. Bus 1000 Advertisement Revenue 1% Inflation rate is also applied to the per annum payment of State Transport Buses FINANCIAL PLAN Interest During Construction is payed back quarterly Moratorium Period is considered as 3 years for both the debts OPERATION AND MAINTENANCE Inflation 4% Operation and Maintenance of Bridge 2% Periodic Re-surfacing 4% Increase in Operations of Toll Plaza 10% Cost of Operating Toll Plazas 5% DEPRECIATION Written Down Value Method 15% Straight line Method 10% PROFIT AND LOSS ACCOUNT Minimum Alternative Tax 0% Corporate Tax 40% Repayment of the principal for Debt Amount is not considered in the Profit and Loss Account CASHFLOW Method of Depreciation considered for preparing the cash flow is Straight line Method WACC is considered as Discounting rate for Project NPV

Cost of Equity is Considered as Discounting rate for Equity NPV

of total construction of total construction of construction cost of total construction of total construction Per Annum Per Annum Per Annum Per Annum of construction cost of construction cost m cost of Bridge

cost cost cost cost

Km. per km perkm per vehicle per annum of Total Vehicular Toll Revenue

every year of Initial Investment every 3rd Year every year of O&M for Bridge

d Loss Account

0

COST ESTIMATES A

Assumptions Consultant Fees 2% of total construction cost Expert Fees (Deployed By State Govt) 1% of total construction cost Environmental Clearence 5% of construction cost Pre Operative Expences 3% of total construction cost Contingencies 5% of total construction cost Increase in manpower cost 10% Per Annum Cost Of Engineers (Rs.) ### Per Annum cost of supervisior (Rs.) ### Per Annum Cost of Permenant Staff (Rs.) ### Per Annum Cost of Administrative Office 0.50% of construction cost Cost of Construction Toll Plaza 1% of construction cost The general Lighting cost of the Bridge is assumed to be covered in the Per Km cost of Bridg Land will be transferred by the state govt to the developer as free of cost.

A

Construction Costs Description Land Cost Site Clearances Bridge Construction Site Office Construction of Toll Plaza Environmental Clearence Total (Bridge Cost)

B

Unit Sqm. Km. L.S. L.S. L.S.

2 1

Length 500 2.5

2

Man Power

Description Engineer Supervisor Permanent staff

Unit Persons Persons Persons

Total (Man Power) C

No

Expert & Consultancy Description Technical Consultancy fees Expert employed by State Govt. Total (Expert & Consultancy)

Period No (Years) 4 1 1 1 2 1

Breadth

Height 20 1

1 1

D E

Pre Operative Expenses Contengencies

(A+B+C +D+E) Total Project Cost (In INR)

Per Km cost of Bridge

Quantity

Rate (Rs.)/Sq.mAmount (Rs.) 0 0 20000 100 2,000,000 2.5 12,000,000 30,000,000 160,000 640,000 1,640,000 32,800,000

Rate / Rate / Amount Annum(INR.) Annum(INR.) Amount (INR) (INR) Year I Year I Year II Year II 500,000.00 550,000 2,000,000 2200000 300,000.00 330,000 300,000 330000 150,000.00 165,000 300,000 330000 2,600,000 ### ###

Amount (INR) 656,000 328,000 984,000

1,177,320 1,962,200

43,570,825

TRAFFIC PROJECTIONS Assumptions Average Annual Growth Rate 4% rd Inflation Rate (Every 3 Year) 10% Bridge Length 2.5 Km. Toll Rates 2-Wheelers 7.5 per km 4-Wheelers 10 perkm S.T. Bus 1000 per vehicle per annum Advertisement Revenue 1% of Total Vehicular Toll Revenue Inflation rate is also applied to the per annum payment of State Transport Buses

Traffic Projection 2-Wheelers 4-Wheelers S.T. Bus Toll Rate Projection 2-Wheelers (Rs) 4-Wheelers (Rs) S.T. Bus (Rs./each)

1 2013

2 2014

3 2015

4 2016

5 2017

6 2018

20000 75000 1000

20800 78000 1040

21632 81120 1082

22497 84365 1125

23397 87740 1170

24333 91250 1217

19 25 1000

19 25 1000

19 25 1000

21 28 1100

21 28 1100

21 28 1100

Toll & Advertizement Revenue Generation (INR) 2-Wheelers 375000 390000 405600 464001 482563 501868 4-Wheelers 1875000 ### ### ### ### ### S.T. Bus 1000000 ### ### ### ### ### Advertisement Revenue 32500 33800 35156 40215 41824 43499 Total Revenue Generation 3282500 ### ### ### ### ###

ansport Buses 7 2019

10 2022

11 2023

12 2024

13 2025

26318 27371 28466 98696 102644 106750 1317 1370 1425

29605 111020 1482

30789 115461 1541

32021 120079 1603

25 33 1331

25 33 1331

25 33 1331

28 37 1464

582038 605314 629533 720190 ### ### ### ### ### ### ### ### 49846 51844 53922 61690 ### ### ### ###

749007 3694191 1972542 64157 6479897

778962 3841965 2051071 66720 6738718

891144 4395192 2346792 76331 7709459

25306 94900 1266

23 30 1210

8 2020

23 30 1210

9 2021

23 30 1210

14 2026

15 2027

33302 124882 1667

34634 129877 1734

28 37 1464

28 37 1464

926795 4570993 2440488 79383 8017659

963864 4753823 2538576 82563 8338826

PROJECT TIME TABLE

Financial Close Operations Period Considered (Months) Construction Schedule Start of Construction Period Construction Period (months) End of Construction Period Operations: Commercial Operations Date Project Period Ends First Financial Year Begins First Financial Year Ends Concession Period: Concession Period Starts Concession Period Ends

31-Dec-10 180 1-Jan-11 24 31-Dec-12 1-Jan-13 31-Dec-27 1-Jan-11 31-Dec-11 1-Jan-13 31-Dec-27

FINANCIAL PLAN Assumptions Interest During Construction is payed back quarterly Moratorium Period is considered as 3 years for both the debts

Contribution 50% 25% 15% 10% 50% 10% 40%

Cost

INTEREST DURING CONSTRUCTION

Q1-1 5446353

Contribution of Equity Contribution of Sub Ordinated Debt Contribution of Senior Debt

5446353

Q1-2 5446353 16339059 5446353

Total Interest During Construction Sub Ordinated Senior Debt by Senior Lender Total Grand TOTAL IDC

5446353

5446353

EQUITY Private operator Authority state government DEBT Sub Ordinated Senior Debt by Senior Lender Total Project Cost

1187305 Senior

Proportion of Total Debt Proportion of Total Debt (Amount in INR)

Prime Lending Rate Interest Rate (During Construction Period) Interest Rate (During Operations Period) Drawdown Starts Repayment (years ) Repayment per year No. of Instalments

6% 10%

Sub-ordinated 40%

10%

0 10% 10% 10% 1-Jan-2012

0

10 1

10

6%

6% 6% 1-Jan-2012 10 1 10

Repayment / Redemption Starts Repayment / Redemption Ends Moratorium Period- 3 years

1-Jan-2016 ###

1-Jan-2016 31-Dec-2025

3

3

Share

Total Equity/Debt 21785412

10892706 6535624 4357082 21785412 4357082 17428330 43570825 ok Q1-3 5446353 10892706 5446353

Q1-4 5446353 5446353 5446353

Q2-1 5446353 0 4357082 1089271

5446353

5446353

5446353 261425 108927 370352

Q2-2 5446353

Q2-3 Q2-4 5446353 5446353

5446353 5446353 5446353

5446353 5446353 5446353

408476 408476

272318 272318

136159 136159

ok

INTEREST ON SENIOR AND SUB-ORDINATED DEBT 2011

2012 0

Interest On Senior Debt Principal Senior Debt (Repayment) Repayment of Senior Debt Interest On Subordinated Debt Principal Sub-Ordinated Debt (Repayment) Repayment of Sub-Ordinated Debt

2013 1

0

2014 2

0

2015 3

0

2016 4 ### ### ### ###

0

0

435708 0 ###

2017 5 ###

2018 6 ###

2019 7 ###

2020 2021 2022 2023 2024 2025 8 9 10 11 12 13 ### 871416 697133 522850 348567 174283

### ###

### ###

### ###

### ###

### ###

2026 14 0

### ###

### ###

### ###

### ###

235282 209140 182997 156855 130712 104570

78427

52285

26142

0

435708 435708 435708 435708 435708 435708 435708 435708 435708 ### ### ### ### ### ### ### ### ###

0

2027 15

A

OPERATION AND MAINTENANCE Assumptions Inflation 4.00% every year Operation and Maintenance of Bridge 1.50% of Initial Investment Periodic Re-surfacing 4.00% every 3rd Year Increase in Operations of Toll Plaza10.00% every year Cost of Operating Toll Plazas 5.00% of O&M for Bridge

B

Operation and Maintenance

Initial Investment O&M Bridge Periodic Re-surfacing Operating Toll Plazas

###

2011 0

2012 1

2013 2 653562 32678

cost of periodic resurfacng has to be considered in referenece with construction cost

2014 2015 3 4 679705 706893 35946

onstruction cost

39541

2016 2017 2018 5 6 7 ### 764576 795159 ### 43495 47844 52628

2019 2020 2021 8 9 10 ### 860043 894445 ### 57891 63680 70048

2022 2023 11 12 ### 967432 ### 77053 84759

2024 13 ###

2025 2026 2027 14 15 16 ### ### ### ### 93234 102558 112814 124095

DEPRECIATION Assumptions Method of Depreciation Rate of Depreciation

WDM 15%

SLM 10%

Depreciation 2011 Depreciation (WDV) Written Down Value Depreciation (SLM)

2012 0

2013 1 ### ### ###

2014 2 ### ### ###

2015 3 ### ### ###

2016 4 ### ### ###

2017 5 ### ### ###

2018 6 ### ### ###

2019 7 ### ### ###

2020 8 ### ### ###

2021 9 ### ### ###

2022 10 ### ### ###

2023 11 ### ### ###

2024 2025 2026 2027 12 13 14 15 ### 929639 790193 671664 ### ### ### ### ### ### ### ###

PROFIT AND LOSS ACCOUNT Assumptions Minimum Alternative Tax 0% Corporate Tax 40% Repayment of the principal for Debt Amount is not considered in the Profit and Loss Account

Profit and Loss Account 2011 EXPENDITURES O&M Bridge Periodic Re-surfacing Operating Toll Plazas Non-Operating Expenses Interest On Senior Debt Interest On Subordinated Debt TOTAL EXPENSES

2012

2013 ### 0.00 32678.12

###

REVENUES Operating Revenues Toll Revenues Advertisement Revenue

### 32500.00

TOTAL REVENUES

###

PROFIT BEFORE DEPRE & TAX DEPRECIATION PROFIT BEFORE TAX Corporate Tax PROFIT AFTER DEPRE & TAX

### ### ### 0.00 ###

WACC Cost Of Equity Cost of Debt WACC

Cost

Share 15% 50% 10% 50% 12.50%

the Profit and Loss Account

2014

2015

2016

2017

2018

2019

2020

2021

### ### 735168.79 ### ### ### ### ### 0.00 0.00 ### 0.00 0.00 ### 0.00 0.00 35945.93 39540.52 43494.58 47844.03 52628.44 57891.28 63680.41 70048.45

###

###

### ### 33800.00 35156.00

### ### ###

### ### ###

### ### ###

### ### ###

### ### ###

### ### ###

### ### ### ### ### ### 40215.39 41824.13 43499.43 49846.23 51844.38 53922.14

###

###

###

###

###

###

###

###

### ### ### 0.00 ###

### ### ### 0.00 ###

### ### ### 0.00 ###

### ### ### 0.00 ###

### ### ### 0.00 ###

### ### ### 0.00 ###

### ### ### ### ###

### ### ### ### ###

2022

2023

2024

2025

2026

2027

### ### ### ### 0.00 0.00 77053.29 84758.62 93234.49

### ### ###

### 0.00 ###

### 0.00 ###

### ### ### ### ### 78427.48 52284.99 26142.49 ### ### ### ###

0.00 0.00 ###

###

### ### ### ### ### ### 61689.71 64157.40 66719.98 76331.28 79382.76 82562.63 ###

###

###

###

###

###

### ### ### ### ###

### ### ### ### ###

### ### ### ### ###

### ### ### ### ###

### ### ### ### ###

### ### ### ### ###

CASHFLOW AND EIRR Assumptions Method of Depreciation considered for preparing the cash flow is Straight line Method WACC is considered as Discounting rate for Project NPV Cost of Equity is Considered as Discounting rate for Equity NPV 2011 0 Depreciation Initial Investment Cash Flow NPV IRR

27,227,476 2%

EQUITY IRR Initial Investment Depreciation (SLM) Principal Repayment

###

Cashflow NPV EIRR

### 15,785,345 4%

Comment on Project viability

Project's Net present value of the project is negative and also the project The Net present value of the Equity is also negative and the Internal rate

The Net Present Value is negative, coupled up with a very low level of Internal Rat With regard to this we can conclude that the Project is not Viable enough to be tak The project IRR and NPV not yeilding better results, Equity IRR has been worked ou

w is Straight line Method

2012 0

2013 1 4,357,082.50

2014 2 ###

2015 3 ###

2016 4 ###

2017 5 ###

2018 6 ###

417,718.26

###

###

###

###

###

4,357,082.50

###

###

### ###

### ###

### ###

417,718.26

###

###

### 374,890.21

###

### ###

###

###

tive and also the project IRR is also not attractive hence the project is not viable for con ive and the Internal rate of return of the Equity is Very much Lower than the Cost of Eq INFERENCES

ery low level of Internal Rate of Return at 2% as compared to the Weighted Average Cost of Capital not Viable enough to be taken, in accordance with the conditions and assumptions taken for compu uity IRR has been worked out to check the return on Equity investments

2019 7 ###

2020 8 ###

2021 9 ###

2022 10 ###

2023 11 ###

2024 12 ###

2025 13 ###

###

###

###

###

###

###

###

### ###

### ###

### ###

### ###

### ###

### ###

### ###

255,026.66

###

###

###

###

###

###

not viable for consideration an the Cost of Equity hence the project is not viable for investment.

age Cost of Capital at 12.5%. ons taken for computing the Financial Model

2026 14 ###

2027 15 ###

###

###

###

###

###

###

DEBT SERVICE COVERAGE RATIO

Debt Service Coverage Ratio

PROFIT AFTER DEPRE & TAX Depreciation (SLM) Interest On Senior Debt Interest On Subordinated Debt Amount Available For Repayment Interest Repayment Principal Repayment Amount required for Debt Service DSCR Average DSCR

2011 0 0

2012 0 0

2013 1 ### ###

2014 2 ### ###

###

###

2015 3 ### ###

###

2016 4 ### ### ### ### ### ### ### ###

2017 5 ### ### ### ### ### ### ### ###

2018 6 ### ### ### ### ### ### ### ###

2019 7 ### ### ### ### ### ### ### ###

2020 8 ### ### ### ### ### ### ### ###

2021 9 ### ### ### ### ### ### ### ###

2022 10 ### ### ### ### ### ### ### ###

0.16 1.72

1.09

1.32

1.07

1.82

2.01

1.82

2023 2024 2025 11 12 13 ### ### ### ### ### ### ### ### ### 78427.48 52284.99 26142.49 ### ### ### ### ### ### ### ### ### ### ### ### 2.55

2.81

2.58

2026 14 ### ###

2027 15 ### ###

###

###

0.00

0.00