NHAI likely to set base price for TOT rights auction at $1 billion
NHAI’s TOT right auction for the second bundle, which features 7 stretches of operational toll roads totaling 566 km, is likely to feature few new names, including Cube Highways, the Canada pension fund
Mumbai: The National Highways Authority of India (NHAI), which will begin to invite bids for the second package of toll-operate-transfer rights (TOT) auction within the week, is likely to set the base price at $1 billion (₹6,800 crore), a person aware of the development said.
The auction for the second bundle, which features seven stretches of operational toll roads totaling 566km across Tamil Nadu, Telangana, Rajasthan and Gujarat is likely to feature a few new names, including Cube Highways (a Singapore-based joint venture between I Squared Capital and International Finance Corp.) and the Canada Pension Plant Investment Board (CPPIB).
Calls to the NHAI spokesperson went unanswered.
This round of auctions may also see investments made through infrastructure investment trusts (InvITs). A second person told Mint CPPIB may bid for the bundle via Larsen and Toubro’s InvIT IndInfravit. CPPIB holds 30% in the InvIT.
On 29 June, Mint reported that Cube Highways was also considering the launch of its InvIT to house its road projects.
Emails to CPPIB and Cube Highways went unanswered at the time of going to press.
The first auction of TOT projects featured five highways in Andhra Pradesh and four in Gujarat, with a total length of under 700km. The auction, a fairly new mechanism by the government to monetize operational roads it owns, met with wild success in February when Australian private equity investor Macquarie won the auction by bidding ₹9,681 crore against the initial estimated concession value (or base price) of ₹6,258 crore.
Brookfield, IRB Infrastructure and the National Infrastructure and Investment Fund had also participated in the first round.
Detailed project reports are being prepared for two more bundles that will go under the hammer this year—479 km of highways in Odisha, West Bengal, Assam and Bihar, and 658 km of highways in Uttar Pradesh, Bihar and Jharkhand. In total, the three tranches are expected to net a minimum of Rs13,500 crore for the exchequer.
The project reports this time will also contain information about asset condition collected through drone videos and network survey vehicles, to provide more information to investors about the quality of the roads ahead of the auction.
The Cabinet Committee on Economic Affairs had in 2016 given NHAI the green signal to monetise operational highways under the TOT model by incentivising private capital to invest in roads. Here, a concessionaire pays an upfront fee to buy the right to operate and earn from the toll roads for a fixed period of time. The model concession agreement provides traffic variations, road expansion and other risks that concessionaires may face.
NHAI has identified 75 operational highways that will qualify for the TOT model. The new round of auctions is a continuation of this monetisation programme. The government has set a target of raising Rs2 lakh crore via this route in the next five years.
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