Consortium in talks for risk cover
By Praveen Chandran | 10 Jan 2002
MIGA, a World Bank affiliate, covers investors and lenders against a series of risks including political, legal breach of contract, war and civil disturbances, while Hermes' export credit guarantee agency is providing equipment credit cover to Germany-based companies. Siemens AG, the Germany-based engineering major, is the equipment provider for the airport project.
L&T officials say MIGA provides cover on a project basis, ranging from 0.3 per cent to 1 per cent of the total risk cover. The agency covers up to 90 per cent of the equity investment and 95 per cent of the principal debt. MIGA can also cover single projects up to $200 million on its own. "We are in talks with these agencies to provide various risks involved in the project. Within a month we hope we can reach an agreement on the premium to be paid to these international agencies."
The Bangalore International Airport is to be developed by the L&T-Siemens-Unique Zurich Airport consortium. While the consortium will hold 74 per cent of the equity, the Karnataka government will hold 13 per cent. The Airports Authority of India will hold the remaining equity.
The officials say the total cost of the project is estimated at Rs 1,200 crore. The Karnataka government has agreed to put in $80 million. Project developers will infuse the remaining amount, and the debt-equity ratio of this amount will be 70:30. "Consortium members will mobilise funds through a rupee-dollar combination, and L&T is in talks with leading financial institutions and banks to mobilise the rupee loan component of the project."
Work on the airport is scheduled to begin in April 2002 and is expected to be over by 2005. The ultra-modern airport is expected to handle over 3.7 million passengers annually. The L&T and Hoechtif consortia were among the seven of the 17 bidders short-listed for the construction of the international airport. The Siemens-Zurich Airport-L&T and Hochtief-led consortia, both German, were the only two bidders qualified in the last round of selection in June 2000.
The Karnataka government recently floated a holding company — Bangalore International Airport Co, headed by Infosys CEO N R Narayanamurthy — to speed up the project and put the support systems in place. Land acquisition from private-holders is being taken up by the KSIIDC under a HUDCO loan of Rs 150 crore.