FEASIBILITY REPORT

G.T. Road Expressway from Shahdara to

Kala Shah Kaku (Rachna Town) September 2014

Lahore Development Authority GOVERNMENT OF PUNJAB

Executive Summary

The city of Lahore, with a population of nearly 10 million, is expected to grow at a rate of

3.5% per year. At this growth rate, Lahore’s population is expected to double every 20 years,

putting immense pressure on infrastructure and services. Such a rapid increase in the city’s

population will require large investments in the transportation infrastructure.

A well-functioning and extensive road network is an essential requirement for any

metropolitan area. A city that is lacking in a proper transport infrastructure subtracts greatly

from its residents’ quality of life. Frequent traffic jams, hours lost driving and a lack of

connectivity to other areas of the city add to citizens’ frustrations and worries. Thus, to

prevent such issues, it is essential that the city be provided with an extensive transport

infrastructure.

The government of Punjab envisions the construction of a signal free corridor on G.T. Road,

which serves as the main northern entrance to the city. The road will be 5.8 km long with 4.9

km elevated and another 0.9 km at grade level. The project will originate near the Ravi

Bridge and end at Rachna Town.

The total construction cost of the project over 2 years (with escalation) is estimated to be Rs.

6.99 billion, of which Rs. 4.63 billion is sought for private funding while remaining Rs. 2.36

billion is proposed to be borne by the Metro Bus Authority to offset the cost of integrating

dedicated Metro Bus Service corridor into the project. Cost of land acquisition and relocation

shall be borne by the government. The total cost of the project, inclusive of all contingent

charges, escalations, relocation of utilities and land costs is estimated to be Rs. 8.24 billion.

The expressway will be a dual carriage, 3-lane road and will include 2 priority lanes for the

Metro Bus service, which shall extend the Metro Bus network up to Kala Shah Kaku.

Average annual daily traffic (AADT) in the corridor is expected to be 31,970, out of which

18,288 will be cars. In order to make the feasibility robust, only 75% of this traffic count has

been assumed (adjustment for seasonal variation), which corresponds to AADT of 23,976

vehicles. All analysis has been done on base toll rate of Rs. 30 for cars, Rs. 75 for buses

(2.5x) and Rs. 180 (6x) for articulated trucks. Analysis indicates that the private partner can

expect a Net Present Value (NPV) of Rs. 8.44 billion which results in an equity IRR of

22.55% (at 30% equity).

Contents

Part 1: Introduction ................................................................................................................................. 7

1.1: PPP Policy of Government .......................................................................................................... 7

1.2: Transport Infrastructure in Lahore ............................................................................................... 8

1.3: Project Overview ....................................................................................................................... 11

1.3.1: Project Alignment ............................................................................................................... 11

1.3.2: Localities served ................................................................................................................. 11

1.3.3: Metro Bus ........................................................................................................................... 12

1.3.4: Project Breakup & Costs: .................................................................................................... 12

Part 2: Objectives and scope of the study ............................................................................................. 16

2.1: Methodology .............................................................................................................................. 16

Part 3: Situation Analysis ...................................................................................................................... 17

3.1: Current Traffic Situation ............................................................................................................ 17

3.2: Traffic Count & Expected Growth Rates: ................................................................................. 19

Part 4: Technical Details ....................................................................................................................... 22

4.1 Project Specifications .................................................................................................................. 22

Part 5: Financial Analysis: .................................................................................................................... 26

5.1: Overview of financing options................................................................................................... 26

5.1.1: Build Operate Transfer (BOT) ............................................................................................ 26

5.1.2: BOT with government support ........................................................................................... 27

5.1.3: Build Lease Transfer (BLT) ................................................................................................ 27

5.1.4: Deferred Payment ............................................................................................................... 28

5.2: Project Financials ....................................................................................................................... 28

5.3: Options Analysis ........................................................................................................................ 32

5.3.1: Build Operate Transfer (BOT) ............................................................................................ 32

5.3.2: BOT with Government Support (Project Cost Sharing) ..................................................... 32

5.3.3: BOT with Government Support Sensitivity Analysis ......................................................... 33

5.3.4: Build Lease Transfer (BLT) ................................................................................................ 34

5.3.5: Deferred Payment ............................................................................................................... 34

5.4: Recommendation ....................................................................................................................... 35

Part 6: Economic Analysis .................................................................................................................... 36

6.1: Vehicle Operating Costs ............................................................................................................ 36

6.2: Value of Travel Time ................................................................................................................. 38

6.3: Total Project Benefits ................................................................................................................ 41

Part 7: Risk and Mitigation ................................................................................................................... 43

7.1: Risk management ....................................................................................................................... 43

7.1.1: Risk management in toll roads ............................................................................................ 43

7.1.2 Risk responsibilities ............................................................................................................. 43

7.1.4: Risk register ........................................................................................................................ 47

Annexure 1: PPP Process ...................................................................................................................... 51

Annexure 2: Sensitivity Analysis of Equity and Toll Rate on Equity IRR ........................................... 52

Annexure 3: Sensitivity Analysis of Equity and Toll Rate on NPV ..................................................... 53

List of Tables

Table 1: Cost Details ................................................................................................................ 13

Table 2: Cost breakdown ......................................................................................................... 14 Table 3: GT Road Expressway Traffic Count ......................................................................... 19 Table 4: Adjusted traffic count ................................................................................................ 20 Table 5: Expected Traffic Growth Rates ................................................................................. 21 Table 6: Project costs and assumptions ................................................................................... 30 Table 7: Toll structure .............................................................................................................. 31 Table 8: BOT Summary ........................................................................................................... 32 Table 9: BOT with Government Support................................................................................. 33 Table 10: Sensitivity analysis of equity IRR with Class I Vehicle Count and base toll rate ... 33 Table 11: Sensitivity analysis of equity IRR with construction cost and base toll rate ........... 34 Table 12: Deferred Payment .................................................................................................... 35 Table 13: Vehicle Operating Cost (Rs. Per KM) ..................................................................... 37 Table 14: Annual Vehicle Operating Cost Savings ................................................................. 38 Table 15: Value of Travel Time (Rs. Per Hour) ...................................................................... 40 Table 16: Annual Vehicle Travel Time Savings ...................................................................... 41 Table 17: Total Economic Savings .......................................................................................... 42 Table 18: Risk Responsibilities ............................................................................................... 43 Table 19: Impact year & growth rate assumption .................................................................... 44 Table 20: Risk Matrix .............................................................................................................. 46 Table 21: Risk Register ............................................................................................................ 49

List of Figures

Figure 1: Map of Lahore and surrounding areas ------------------------------------------------------ 8 Figure 2: Lahore Map ------------------------------------------------------------------------------------- 9 Figure 3: International road density comparisons ---------------------------------------------------10 Figure 4: Project map ------------------------------------------------------------------------------------11 Figure 5: Traffic Visuals --------------------------------------------------------------------------------17 Figure 6: Vehicle growth --------------------------------------------------------------------------------19 Figure 7: Cross section of G.T. Road Expressway --------------------------------------------------22 Figure 8: Cross section of G.T. Road Expressway flyover at Imamia Phattak ------------------23

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Part 1: Introduction

1.1: PPP Policy of Government

First legislation to facilitate public private partnership in Punjab was enacted in 2010 by the

name of Punjab Public-Partnership for Infrastructure Act 2010. This was later amended in

2014 and renamed to Punjab Public Private Partnership Act 2014 (“PPP Act”). The first

schedule of the PPP Act provides for a list of 17 sectors identified for public private

partnership, such as housing, land reclamation, information technology, infrastructure and

mining.

The PPP Act establishes a mechanism for government and private investor cooperation. The

PPP Act enables government agencies to provide support in multiple forms to make projects

feasible for private investors, including provision of administrative support through

facilitation of approvals of various documents and licenses. Additionally, the government

may become an equity partner by providing various inputs including land to the project. The

provision of utilities such as gas pipelines is also considered to be government support. In the

proposed arrangement, government support is extended in the form of partial financing of the

project, land and relocation of utilities.

Under the PPP Act, the government establishes a clear process for approval of a PPP project.

Diagram 1 in Annexure 1 summarizes this process. This process starts with submission of

PPP proposal by a government agency to PPP Cell, which then reviews it before presenting it

before the PPP Steering Committee for approval. This feasibility report has been prepared as

part of the documents to be submitted to the PPP Cell for consideration of the project.

8

1.2: Transport Infrastructure in Lahore

Lahore city is the provincial capital of the Punjab and is also its largest city with a population

of nearly 10 million. The city is the center of commerce, arts and manufacturing in the

province, and is home to the provincial government and all attendant agencies. The city also

has its own stock exchange which acts as a conduit for investments in the province. All major

companies and organization have their offices located in the city. The city’s GDP (Purchasing

Power Parity), according to a report by PricewaterhouseCoopers (PWC)1 was $45 billion in

2008, making it the second largest city in Pakistan economy wise.

Figure 1: Map of Lahore and surrounding areas

The city is spread over an area of 404 km2, while the district covers an area of 1,772 km2. The

city is divided into 9 administrative areas called towns. The City District Government is

responsible for the administration of these towns, except for the Cantonment areas, which are

directly administered by Cantonment Boards. Lahore’s road network has primarily developed

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haphazardly along the old pre-partition routes without further planning. The partial Ring Road

is one of the few large projects that have been planned and implemented over the past two

decades to alleviate the traffic problems in the city.

Figure 2: Lahore Map

Pakistan, compared to developed countries, has very low road density, as can be seen in the

figure above. Compared to a developed city such as London, where the city’s road

infrastructure covers a length of 14,728 km for a total population of 8.3 million people2, the

road infrastructure of Lahore is considerably less extensive. London’s residents have 1.79 m

of road length per resident while the average road length available in Lahore is 0.07 m per

resident.

2. Road Lengths in Great Britain. (2013, June 5). UK Government. Retrieved September 3, 2014.

https://www.gov.uk/government/statistics/road-lengths-in-great-britain-2013

10

Figure 3: International road density comparisons

While traffic studies and master plans have been prepared, most of the city’s road

development has not been in line with such plans, largely due to paucity of funds and

frequent regime changes. The outcome is a city growing in an unbalanced manner, with

executing agencies having to follow the city’s growth rather than lead it.

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1.3: Project Overview

1.3.1: Project Alignment

This project envisages construction of an expressway and extension of Metro Bus Service

from Shahdara Mor to Kala Shah Kaku.

Figure 4: Project map

The alignment starts at the toll plaza just after crossing River Ravi, traverses through

Shahdara Mor (intersection leading to Jaranwala and Sheikhupura in the west and Old Ravi

Bridge in the east), moves across Shadarah Town, crosses Railway Line at Imamia Phattak,

moves along various settlements / towns along N-5 to reach Kala Shah Kaku Interchange that

leads to Gujranwala / Gujrat in the north and Motorway M-2 in the west.

1.3.2: Localities served

The project will service a number of heavily populated areas. The following is a list of

localities and areas that will benefit in terms of reduced travel time from the construction of

the G.T. Road Expressway:

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Shahdara Town Kala Shah Kaku

Imamia Colony Ferozwala

Rachna Town Aziz Colony

Taiba Town Rasool Park

Ring Road Pukhpura

Ali Park Rehman City

1.3.3: Metro Bus

As discussed earlier, this route serves as an important entry to Lahore and is used by a large

number of commuters on a daily basis. Keeping in view the importance of this route, it has

been proposed that this project should be used to extend the Metro Bus service up to Kala

Shah Kaku. The Metro Bus will provide the citizens of the area with a high-quality, reliable

form of public transport, something that has been lacking in the area. The extension will

increase the connectivity of the suburbs of Lahore with the main city and will also provide

the commuters with a faster means of travel. However such extension adversely affects the

commercial viability of the project on a pure BOT basis as it creates a competitive route for

the tollable public transport. As a result of this, the project has been conceived with

government financing for this enhancement of scope.

1.3.4: Project Breakup & Costs:

Initially the whole project consisted of an expressway from Shahdarah junction to Kala Shah

Kaku. However, in order to keep the project affordable, the project has been divided into two

phases:

1. Shahdarah - Rachna Town 0 - 5.8 km

2. Rachna Town to Kala Shah Kaku 5.8 - 10 km

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This document deals with the first phase of the project i.e. from Shahdarah junction to

Rachna Town.

The first phase consists of a 5.8 km long signal-free corridor starting from Shahdara and

ending near Kala Shah Kaku on the G.T. Road. 4.9 km of the project will be elevated and

placed on embankments retained on RCC walls while the remaining 0.9 km will be at grade

level. The project will include a flyover bridge, underpass and roundabout at Shahdara Mor.

Another flyover will be constructed near Imamia Mor over the railway line. Additionally, the

project will include 5 vehicular underpasses and 4 pedestrian underpasses, allowing residents

of nearby areas to cross the expressway unhindered.

The project construction cost is expected to cost Rs. 6.5 billion (excluding contingencies,

escalation, consultancies, etc.). This cost includes the cost of 3 lane dual carriage way and the

cost of 2 lanes of metro. The breakdown of the construction costs is given below (without

escalation):

Description Cost (PKR million) Earthwork 360 Sub-base and Base Courses 1,627 Surfacing 472 Structures

RCC Retaining Walls 1,559 Shahdara Mor Interchange 430

Imamia Flyover 135 Heavy Vehicular Underpasses 61 Light Vehicular Underpasses 54

Pedestrian Underpasses 52 Culverts 416

Drainage & Erosion Control Works 495 Electric Works (Road Lightening) 44 Ancillary Works 276 Expressway Toll Plaza 100 MBS Stations 421 Cost of Construction 6,509

Table 1: Cost Details

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Because development of the infrastructure for Metro Bus service comes under the domain of

Metro Bus Authority, it is proposed that MBA should bear the costs associated with the

structures and lanes associated with Metro Bus. For this purpose, the following methodology

was adopted to segregate the cost of Metro Bus from the project.

The costs of structures exclusively related to Metro Bus were included in the Metro Bus cost

i.e. pedestrian structures and bus stations. One sixth of the cost of earthwork, sub base and

surfacing was included in the cost of the Metro Bus as it consists of 2 out of the 12 lanes of

the project. A quarter of the remaining construction cost has also been allocated to the Metro

Bus.

Based on this formula, the contribution of the Metro Bus Authority (including contingencies)

is estimated to be Rs. 2.36 billion. Remaining cost of the project is Rs. 4.35 billion, which is

intended to be attracted from private investors.

Following table summarizes this cost breakdown (without escalation).

Government Metro Bus Authority PPP

Description PKR

(millions) Description

PKR (millions)

Description PKR

(millions)

Land Accusation

1,205 Bus Stations 421

Facility Relocation

50 Pedestrian Bridges

52

Construction Cost (25%)

2,290 Construction cost (75%)

4,218

Contingencies 68 Contingencies 126

Total 1,255 Total 2,358 Total 4,345

+ overheads

Table 2: Cost breakdown

15

Land required for the project has been valued at Rs. 1.2 billion, while relocation of utilities

near the project site will require another Rs. 50 million. It has been assumed that routine

maintenance costs will take up assumed 1.0% of construction cost per annum. Periodic

maintenance will take the shape of resurfacing and road overlays to be done every 10 years.

At current rates, cost of period maintenance is estimated to be Rs. 468 million, which will

escalate to Rs. 835 million in the tenth year and Rs. 1.5 billion in the 21st year.

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Part 2: Objectives and scope of the study

The objective of this feasibility study is to assess the financial viability of constructing the

G.T. Road Expressway. The study has been designed and constructed with the specific aim of

demonstrating that this project is viable enough to attract interest from potential investors.

2.1: Methodology

During the course of the project, data was collected from the following sources:

o Primary Sources:

o AAA Engineering Consultants conducted a number of studies including a

technical study of the project, project design, geotechnical studies and a traffic

study.

o For accurate land cost evaluation, prices were collected from various real

estate agents and dealers.

o Consultations and focus groups between various implementing agencies were

held to vet and refine the final product.

o Secondary Sources:

o Various secondary sources such as JICA’s 2010 traffic study and Lahore

Master Plan 2021 were used during the course of writing this report.

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Part 3: Situation Analysis

3.1: Current Traffic Situation

There are three main bridges from where traffic enters into / exits from Lahore namely (a)

Shahdara Bridge on National Highway N-5, (b) Saggian Bridge on Link to Lahore –

Sheikhupura Road and (c) Babu Sabu on Lahore Islamabad Motorway. The Ravi Bridge at

Shahdarah is the busiest of all of three bridges because it receives traffic to/from the National

Highway N-5, the Lahore Islamabad Motorway M-2 and Faisalabad – Pindi Bhattian

Motorway M-3.

Currently this road section faces severe traffic congestion, stemming primarily from the

presence of local traffic of Shahdara Town. Matters get even worse at Shahdara Mor and

Imamia Phattak because Shadara Mor lacks traffic signals and the old railway crossing

creates a bottleneck at Imamia Phattak .

Figure 5: Traffic Visuals

18

The situation is further aggravated because of residential and commercial localities on both

sides of the road. Other main residential colonies and localities contributing traffic on this

road are as follows:

Aziz colony ShahdraBagh

Barkat Town Mehmood Colony

Imamia colony Peoples colony

Rachna Town Ali Park

Jameel Park Taiba Town

Rasool Park Ferozwala

Al-Rehman Garden Pukhpura

Rana Town Sher e Bangla Labour Colony

Rehman City Al-Rehman Town

This situation is expected to deteriorate in the coming years. Some of the colonies that

contribute to the traffic on this route are not fully developed. As these localities develop with

time, the traffic volume on this route will increase. This traffic count is also expected to rise

sharply in the future as the population of the city and the number of vehicles in the city

increase. The figure below depicts the sharp increase in the number of vehicles in the city

over the years.

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Figure 6: Vehicle growth

Assuming that the pattern of population of growth and number of vehicles continues, this

main entry route of Lahore will see an exponential increase in the traffic count.

3.2: Traffic Count & Expected Growth Rates:

Currently, the average annual daily traffic in the project area is 33,336 vehicles. The

following table provides a breakdown of vehicular traffic in the project area:

Category % of Total

Traffic Volume Traffic Volume

Class 1 - Cars / Jeeps 57.20% 18,288

Class 2 - Wagons / Pickups 25.64% 9,294

Class 3 - Coasters/ Mini Buses/trucks 3.93% 1,423

Class 4 - Buses 2.36% 857

Class 5 - Rigid Trucks (2 & 3-Axle) 9.58% 3,064

Class 6 - Articulated Trucks 0.56% 178

Class 7 - Tractor Trolley 0.73% 232

Total Count 33,336 Table 3: GT Road Expressway Traffic Count

As can be seen from Table, the majority of traffic comprises of Category 1 (Cars/Jeeps).

After completion of this route and the extension of Metro Bus service, tollable traffic in Class

2, 3 and 4 is expected to reduce as commuters shift from other sources of public transport to

20

Metro Bus service (which shall not be tolled). Traffic study indicates that each day 19,752

passengers commute within the project area, out of which 4,373 use LTC buses on routes

49/49A while the remaining use a mix of public transport of non-tollable vehicles like

Qingqis and tollable ones from Class 2, 3 and 4. All such commuters will be fully served by

the Metro Bus service. To make the feasibility more robust, we assume that all such

commuters use tollable public transport vehicles and will completely switch to Metro Bus

service. In such case, the traffic count impact of Metro Bus will be as follows:

Category Reduction Traffic Volume

Class 1 - Cars / Jeeps 0 18,288

Class 2 - Wagons / Pickups 1,097 8,197

Class 3 - Coasters/ Mini Buses/trucks 168 1,255

Class 4 - Buses 101 756

Class 5 - Rigid Trucks (2 & 3-Axle) 0 3,064

Class 6 - Articulated Trucks 0 178

Class 7 - Tractor Trolley 0 232

Total Count 1,366 31,970 Table 4: Adjusted traffic count

In order to further strengthen the feasibility, this expected traffic count is assumed to be 75%

of the Metro Bus-adjusted AADT. This was done to account for seasonal variation in traffic,

impact of toll, etc. The financial analysis for the project thus has been done on AADT of

23,976.

The proposed public-private partnership agreement further protects the private partner’s

investment from construction of competing routes (such as the Eastern Bypass) to the extent

that such construction causes traffic to fall below the projected levels. In such case, the

government will be required to monetarily compensate the private investor on a quarterly

basis for the lost toll revenue, as established by electronic tolling records. The expected

traffic growth rates in the project area are given on the following page:

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Year

0 1 2 3 4 5 6 7 8 9 10 11 12

Class 1 - Cars / Jeeps

4.98% 4.54% 4.54% 4.54% 4.54% 4.54% 4.30% 4.30% 4.30% 4.30% 4.30% 4.10% 4.10%

Class 2 - Wagons / Pickups

4.98% 4.54% 4.54% 4.54% 4.54% 4.54% 4.30% 4.30% 4.30% 4.30% 4.30% 4.10% 4.10% Class 3 - Coasters/ Mini Buses/trucks

4.75% 4.40% 4.40% 4.40% 4.40% 4.40% 4.21% 4.21% 4.21% 4.21% 4.21% 4.03% 4.03%

Class 4 - Buses

4.75% 4.40% 4.40% 4.40% 4.40% 4.40% 4.21% 4.21% 4.21% 4.21% 4.21% 4.03% 4.03%

Class 5 - Rigid Trucks (2 & 3-Axle)

4.69% 4.42% 4.42% 4.42% 4.42% 4.42% 4.30% 4.30% 4.30% 4.30% 4.30% 4.19% 4.19%

Class 6 - Articulated Trucks

4.69% 4.42% 4.42% 4.42% 4.42% 4.42% 4.30% 4.30% 4.30% 4.30% 4.30% 4.19% 4.19%

Class 7 - Tractor Trolley

4.69% 4.42% 4.42% 4.42% 4.42% 4.42% 4.30% 4.30% 4.30% 4.30% 4.30% 4.19% 4.19%

Year

13 14 15 16 17 18 19 20 21 22 23 24 Class 1 - Cars / Jeeps

4.10% 4.10% 4.10% 3.92% 3.92% 3.92% 3.92% 3.92% 3.77% 3.77% 3.77% 3.77%

Class 2 - Wagons / Pickups

4.10% 4.10% 4.10% 3.92% 3.92% 3.92% 3.92% 3.92% 3.77% 3.77% 3.77% 3.77% Class 3 - Coasters/ Mini Buses/trucks

4.03% 4.03% 4.03% 3.86% 3.86% 3.86% 3.86% 3.86% 3.78% 3.78% 3.78% 3.78%

Class 4 - Buses

4.03% 4.03% 4.03% 3.86% 3.86% 3.86% 3.86% 3.86% 3.78% 3.78% 3.78% 3.78% Class 5 - Rigid Trucks (2 & 3-Axle)

4.19% 4.19% 4.19% 4.10% 4.10% 4.10% 4.10% 4.10% 4.09% 4.09% 4.09% 4.09%

Class 6 - Articulated Trucks

4.19% 4.19% 4.19% 4.10% 4.10% 4.10% 4.10% 4.10% 4.09% 4.09% 4.09% 4.09% Class 7 - Tractor Trolley

4.19% 4.19% 4.19% 4.10% 4.10% 4.10% 4.10% 4.10% 4.09% 4.09% 4.09% 4.09%

Table 5: Expected Traffic Growth Rates

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Part 4: Technical Details

4.1 Project Specifications

The G.T. Road Expressway is being constructed to provide a signal free corridor between Shahdara Town and Kala Shah Kaku (Rachna Town). Cross sections and technical specifications of the project are given below:

Figure 7: Cross section of G.T. Road Expressway

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Figure 8: Cross section of G.T. Road Expressway flyover at Imamia Phattak

24

Following are detailed technical specifications of the project:

Design life Bridges and structures 50 years Pavement structures 10 years Electric Lighting System 15 years

Design speed (max) Flat terrain 100 km/h Horizontal curvature (min)

Flat terrain 435 m

Maximum super elevation

6.00%

Transverse slope (Camber)

Pavement 2.00% Shoulders 4.00%

Stopping sight distance (min)

Flat terrain 185 m

Passing sight distance (min)

Flat terrain 670 m

Gradient (max) Flat terrain 3.00% Length of vertical curve (min)

Flat terrain 60 m

Width of pavement on either sides

10.50 m

Width of pavement on either sides (MBS)

8.20 m

Width of service lane & parking area on either side

11.10 m

Width of inner shoulder on either side

0.60 m

Width of outer shoulder on either side

0.60 m

Pavement and shoulder

Sub grade MDD: 95% Granular sub base course Thickness: 30 cm

Compaction: 98% Aggregate base course Thickness: 30 cm

Compaction: 100% Asphalt base course Thickness: 13 cm Asphalt wearing course Thickness: 05 cm

Embankment height Varies Embankment side slope

Fill 1:5 to 1:3 Cut 1:4 to 1:1

Right of Way (“ROW”) (min)

Flat terrain ±220 ft

25

Pipe culverts diameter in meters (min)

For drainage 0.90 m

Slab culverts span in meters (min)

For cross drainage 1.00 m

Side drains width To be provided as per site conditions

Pavement design (As per AASHTO)

Lane distribution factor 0.5 Directional split 1 Design CBR (Sub-grade) 8 Resilient modulus (Sub-grade)

9669 psi

Reliability 90% Standard Deviation 0.45 Standard Normal Deviate -1.282 Initial Serviceability index 4.2 Terminal Serviceability Index 2.5 Drainage Co-efficient 1

Reflectors (cat’s eyes)

Distance: 10 m c/c Placement: i) Centerline of right and left and right carriageway ii) 4 inches from right edge of each carriageway iii) 4 inches from left edge of each carriageway) Specification: W1 – 120 mm

Paint L1 – broken guide line – white (Centreline of each carriageway) L4 – continuous edge line – yellow (4 inches from edges on either sides of each carriageway

Structural design criteria

Codes and standards Key code is AASHTO and supporting codes are West Pakistan Code of Practices for Highway Bridges (WPCHB), Pakistan Building Code, ASTM standards, American Concrete Institute (ACI).

Live load for all road structures

Class AA 70 ton tank (Military loading) & Class A.

26

Part 5: Financial Analysis:

5.1: Overview of financing options

The project has been evaluated on the basis of four different financing modes. Of these, 3 are

in PPP mode while 1 is in regular procurement mode. The PPP modes are:

1) Build Operate Transfer (BOT)

2) Build Lease Transfer (BLT)

3) BOT with government support

a. Viability Gap Funding

b. Project Cost Sharing

The fourth financing model is known as a deferred payment model and is not considered to

be a PPP model. The four models are described in the following paragraphs.

5.1.1: Build Operate Transfer (BOT)

Under a BOT agreement, the party that is awarded the contract, commonly referred as the

Concessionaire, is responsible for financing, constructing and operating the project. Revenues

accruing from operations of the facility are completely at the disposal of the Concessionaire

and it is expected that the Concessionaire will recover his/her investment through the

collection of tolls. At the end of the stipulated time period, ownership of the project is handed

over to the government. All revenue risks of the project are assumed by the Concessionaire.

27

5.1.2: BOT with government support

For projects that are not financially viable solely on a BOT basis, the government may

intervene by subsidizing the project to make it more attractive for investors. Government

support may come in two forms:

1) Viability Gap Funding

2) Project Cost Sharing

In the first option, the project operates as a BOT, however since the revenue is not enough to

make the project financially feasible, the government provides a fixed annuity cover as an

additional income stream in order to maintain IRR at a specified level. In case the toll

revenue performs better than projected, the government annuity is adjusted accordingly.

In the second option, the government bears a one-time cost to reduce the project cost to a

level that is feasible at the projected toll income. This second approach is more desirable for

the government as VGF results in inflated payments that incorporate debt servicing and

return on private investor’s equity.

5.1.3: Build Lease Transfer (BLT)

Under this agreement, the Concessionaire agrees to build and finance the project and at the

end of the construction period leases out the project to the government. Depending on the

terms of contract, the cost of operations and maintenance of the project are borne either by

the government or the Concessionaire. The Concessionaire is paid an annuity by the

government, which can either be fixed or variable depending on the terms of contract. Income

stream of the investor is from annuity payment by the government. In this case the

28

government bears the risk of revenue shortfall. At the end of the lease period, the project is

handed over to the government, conferring all the rights and privileges that come with

ownership.

5.1.4: Deferred Payment

Under a deferred payment agreement, the government hires a contractor to undertake a

project and pays the contractor the cost of the project in installments spread over a number of

years. The sole responsibility of the contractor is to construct the project according to

specification. In addition to the contractor’s profits, the contractor is likely to require interest

payments on contractor’s balance on construction costs.

5.2: Project Financials

As an investment destination, Pakistan has a relatively high risk-profile, especially for long-

term projects. With an economy that is struggling to take off and a political system that has

yet to cement its gains, companies operating in this environment require a larger return on

their investments to offset the higher perceived risk. Only projects that demonstrate an IRR of

at least 18% are expected to ignite investor interest, keeping in view that interest rates on

safer long-term investment/high quality bonds are currently at 10%.

In fact, a number of infrastructure projects are already being constructed under BOT basis at

equity IRR of 18% or above. The rehabilitation of the M-9 Karachi-Hyderabad Motorway is

being done at a cost of Rs. 27 billion with a project NPV of Rs. 18 billion and project IRR of

21%. The project has been awarded to M/s Binapuri Holdings of Malaysia.

29

Similarly, the Benazir airport link roads extension contract has been awarded to the Frontier

Woks Organization (FWO) with a project NPV of Rs. 2.6 billion and IRR of 17.55%. The

total cost of the project is Rs. 7.8 billion3.

3 Pakistan's PPP Program. (2013, November 11). IPDF (Infrastructure Project Financing Development Facility) Retrieved September 3, 2014. http://www.unescap.org/sites/default/files/3-Pakistan.pdf

30

The following table provides an overview of project costs and assumptions:

Assumption Value

Project Costs

Construction Costs Construction cost (private investor) 4,218,961,414 Construction cost (Metro Bus) 2,290,283,051 Land acquisition 1,205,785,147 Relocation of facilities 50,000,000 Operational insurance 0.2% of Construction Cost Contingency cost 3% of Construction Cost Design and consultancy fees 1% of Construction Cost Total project cost* 8,241,896,862

Operational costs

Operating expenses (Includes Operational Insurance)

1% of yearly revenues

Maintenance costs 0.3% of Construction Cost per annum Overlay cost (Every 10 years) 467,897,993 (PV)

837,934,043 (Y11) 1,590,648,986 (Y21) Construction time 1 year Financial close 1 year

Financial Assumptions Prevailing Interest Rate 1 year KIBOR + 4% Debt:Equity Ratio 70:30 Loan Term 7 years Grace Period 2 Years Project Discount Rate 10% Prevailing Corporate Tax Rate 33%

Table 6: Project costs and assumptions

*The total project cost includes 2-year construction with escalation of 6% and the cost of land accusation and facility relocation, however the feasibility has been developed on the assumption that the government will bear these costs

A financial model was built to evaluate this project’s viability, and the above assumptions

along with the following toll structure for different classes of vehicles were entered into it.

Findings for BOT, BOT with government support (project cost sharing) and deferred

payment are provided in the next section.

31

Vehicle Class Structure Toll (Rs.)

Class 1 - Cars/Jeeps 1 X 30

Class 2 - Wagons/Pickups 2 X 60

Class 3 - Coasters/Trucks 2.33 X 70

Class 4 - Buses 2.5 X 75

Class 5 - Rigid Trucks 5 X 150

Class 6 - Articulated Trucks 6 X 180

Class 7 - Tractor Trolleys 4 X 120

Table 7: Toll structure

32

5.3: Options Analysis

The project has been evaluated on a number of different models. The results of each are

presented below.

5.3.1: Build Operate Transfer (BOT)

Project Financials

Toll (Rs.) 30

Debt : Equity Debt - Rs. 4,890 million

Equity - Rs. 2,096 million

Net Present Value (NPV) Rs. 6,830 million

Project IRR 16.51%

Equity IRR 17.66%

Table 8: BOT Summary

Under the BOT agreement, the project has a comparatively low project IRR of 16.52% (in

comparison to the market desire of 18% IRR). The project NPV would be Rs. 6,838,040,065

over 25 years at a 10% discount rate.

5.3.2: BOT with Government Support (Project Cost Sharing)

In order to make the project viable for the private investor, government support is proposed in

the form of partial financing of the project to the extent of offsetting the cost of integrating

dedicated Metro Bus Service corridor into the project. This cost amounts to Rs. 2.35 billion

and is proposed to be borne by the Metro Bus Authority. The remaining scope of work with

total project management overheads is estimated to cost Rs. 4.63 billion and is sought through

private finance.

33

Project Financials

Toll (Rs.) 30

Debt : Equity Debt - Rs. 3,476 million

Equity - Rs. 1,490 million

Net Present Value (NPV) Rs. 8,444 million

Project IRR 20.02%

Equity IRR 22.55%

Table 9: BOT with Government Support

Under the BOT agreement with government support, the project is extremely viable at toll rate

of Rs. 30 for Class 1 vehicles. The project NPV is expected to be Rs. 8,444 million with equity

IRR of 22.55%.

5.3.3: BOT with Government Support Sensitivity Analysis

To further establish the viability of the project a sensitivity analysis on equity IRR was

performed for traffic volume, toll rate and construction cost. Detailed tables of sensitivity

analysis are given below. Equity IRR was observed for changes in traffic volume and

construction at ±10% and ±20% from the base value.

Change in Class I Vehicle Count

Class 1 Toll Rate

- -20% -10% - 10% 20%

5 #NUM! 1.05% 1.61% 2.14% 2.64%

10 7.14% 7.77% 8.38% 8.96% 9.52%

15 11.47% 12.20% 12.90% 13.58% 14.23%

20 14.96% 15.77% 16.56% 17.31% 18.04%

25 17.94% 18.84% 19.72% 20.56% 21.38%

30 20.64% 21.62% 22.55% 23.46% 24.36%

Table 10: Sensitivity analysis of equity IRR with Class I Vehicle Count and base toll rate

34

Changes in Construction Cost

Class 1 Toll Rate

-20% -10% - 10% 20%

5 3.15% 2.33% 1.61% 0.98% #NUM!

10 10.45% 9.33% 8.38% 7.55% 6.81%

15 15.43% 14.06% 12.90% 11.89% 11.01%

20 19.53% 17.91% 16.56% 15.38% 14.37%

25 23.04% 21.25% 19.72% 18.39% 17.24%

30 26.28% 24.23% 22.55% 21.11% 19.85%

35 29.39% 27.07% 25.17% 23.58% 22.22% Table 11: Sensitivity analysis of equity IRR with construction cost and base toll rate

5.3.4: Build Lease Transfer (BLT)

Under this contract, the government pays an annuity of Rs. 1.66 billion per year for a period of

7 years beyond the construction of the project (2 years). The annuity has been worked out with

a target of 18% equity IRR (as substantiated in Section 5.2). The government will reimburse

the Concessionaire for the cost of operations, debt servicing and equity return. Naturally, this

mode is not desirable, but might need to be adopted in case the investor environment is risk

averse. Ring Road is an example in which this mode was approved due to low confidence in

traffic count.

5.3.5: Deferred Payment

Under the deferred payment model, the government will take over the facility at the end of

construction and pay the contracting party the cost of construction along with the industry

acceptable contractor profit of 18%. The period of agreement is expected to be four (4) years

and the contracting party will be paid annual payment of Rs. 1.96 billion for four (4) years.

Details of the deferred payment are given below:

35

Present Value Year 1 Year 2 Year 3 Year 4

Instalment 1.4 1.4 1.4 1.4

Construction Expense 2.37 2.6 . .

Contractor Cash Flow -.97 -1.21 1.4 1.4

Contractor Cash Balance -.97 -2.18 -.78 .62

Total Annuity 6.136 1.53 1.53 1.53 1.53

Total Annuity Net of Toll 4.810 1.53 1.53 .92 .82 Table 12: Deferred Payment

5.4: Recommendation

Given the above analysis and project parameters, the project is viable on BOT with

government support in the form of project cost sharing for a period of 25 years. Under this

option the government finances the Metro Bus component of the project.

36

Part 6: Economic Analysis

For economic analysis, we take into account the explicit, as well as implicit costs and benefits

of the project. This gives us a holistic view of the overall impacts of the project on economy

and society. In case of infrastructure projects, such as this, even if a project is not financially

viable it might still be justified due its economic benefits.

For this particular project, the main implicit benefits will accrue in the form of fuel savings,

time savings, increased property prices and increased commercial activity. Implicit costs that

will reduce due to faster travel time will be environment damage, noise pollution and air

pollution. In this document, we will focus on the implicit benefits of the project.

6.1: Vehicle Operating Costs

To arrive at VOC/km, the physical values of fuel consumption, engine oil consumption, tyre

wear, maintenance cost, depreciation, interest and wages etc. at various speeds as applicable to

the existing situation and after completion of the proposed road are required. Limitations in

estimating these parameters make the results inaccurate. The Pakistan Transport Plan Study

undertaken by JICA in 2006 provides an estimate for VOC values for different vehicle classes

at different speeds for different road surface conditions. VOC has been calculated with project

and without the project. An operating speed of 30kph and 60kph has been adopted to calculate

VOC for without the project and with the project conditions respectively. Tables below

summarize the VOC per km:

37

Vehicle Class

Tractor Trolley

Car/Taxi/ Pickup Jeep Wagon Mini

Bus Bus 2-Axle Truck

3-Axle Truck

4-Axle Truck

5-Axle Truck

Without Project

13.96 11.63 12.79 27.86 44.58 55.73 22.66 24.93 26.06 27.16

With Project

10.78 8.98 9.88 21.48 34.36 42.95 16.94 18.6 19.48 20.33

Table 13: Vehicle Operating Cost (Rs. Per KM)

As a result of project implementation, major economic benefits are expected to accrue from

the VOC savings. Based on the graphs and tables given above, vehicle operating cost per

kilometer by type of vehicle under “without” and “with project” conditions have been worked

out and multiplied with the average annual daily traffic likely to use the road and distance

travelled in a year both under “without” and “with project” conditions.

The difference of the annual vehicle operating costs under without and with project conditions

represents benefits on account of savings in vehicle operating costs. These are given in Table

on next page.

38

Years Without Project With Project VOC Saving (Million Rs.)

0 123 150 27

1 128 156 28

2 134 163 29

3 140 171 31

4 146 178 32

5 153 186 34

6 159 194 35

7 166 203 37

8 173 211 38

9 181 220 40

10 189 230 41

11 196 239 43

12 204 249 45

13 213 260 47

14 222 270 49

15 231 281 51

16 240 293 53

17 249 304 55

18 259 316 57

19 269 329 59

20 280 342 62

21 291 355 64

22 302 369 67

23 314 383 69

24 326 398 72 Table 14: Annual Vehicle Operating Cost Savings

6.2: Value of Travel Time

Parameters considered for working out value of travel time for various classes of vehicles are:

Average annual income per passenger

Annual working hours

Number of occupants/vehicle

Based on the above parameters, economic value of travel time expressed in Rs. per hour has

been worked out for occupants of all vehicular classes. Various assumptions regarding

monthly income, working hours etc. made in this regard which are given on next page. Same

as VOC calculations, operating speeds of 30kph and 60kph have been adopted to calculate

39

Travel Time Value for “without the project” and “with the project” conditions respectively.

Basic parameters required for valuing total travel time savings for various types of passenger

vehicles have already been determined above. These have been related to the operating speeds

both under without and with project conditions. Value of travel time per kilometer for various

types of vehicles have been calculated under without & with project conditions by dividing

value of time per hour by the respective speeds.

Annual value of travel time (AVTT) is a function of VTT per km, AADT and annual distance

covered at various speeds. Based on these parameters worked out earlier, the estimated AVTT

both for conditions have thus been worked out. The difference of the AVTT under without and

with project conditions represents benefits on account of savings in travel time value, as shown

in table below.

40

Description Car Mini Van

Medium Bus

Bus Tractor Trolley

Jeep 2-Axle Truck

3-Axle Truck

4-Axle Truck

Articulated

Truck

Average Income of Passenger (Rs. /Month)

24,000 10,000 13,000 9,200 16,000 45,000 20,000 21,500 22,000 23,000

Average Income of Passenger (Rs. /Annum) 288,000 120,000 156,000 110,400 192,000 540,000 24,000 258,000 264,000 276,000

Working Hours /Annum 2,496 2,496 2,496 2,496 2,496 2,496 2,496 2,496 2,496 2,496

Rate of passenger Rs. /Hour 115.38 48.08 62.50 44.23 76.92 216.35 96.15 103.37 105.77 110.58

No. of Occupants 2.60 14.00 25.00 40.00 2.50 1.50 2.60 2.60 2.60 2.60

Travel Time Value of occupants (Rs. /Hour) 300.00 673.08 1,562.50 1,769.23 192.31 324.52 250.00 268.75 275.00 287.50

Table 15: Value of Travel Time (Rs. Per Hour)

41

Years Without Project With Project VOC Saving (Million Rs.)

0 141 314 173

1 147 329 181

2 154 343 189

3 161 359 198

4 168 375 207

5 176 392 216

6 184 409 225

7 192 427 235

8 200 445 245

9 208 464 256

10 217 484 267

11 226 504 278

12 236 525 289

13 245 546 301

14 255 568 313

15 266 592 326

16 276 615 339

17 287 639 352

18 298 664 366

19 310 690 380

20 322 718 395

21 334 745 410

22 347 773 426

23 360 802 442

24 374 833 459 Table 16: Annual Vehicle Travel Time Savings

6.3: Total Project Benefits

Total benefits consisting of savings in vehicle operating costs and savings in travel times are detailed in Table.

42

Years VOC VTT VOC Saving (Million Rs.)

0 141 314 173

1 147 329 181

2 154 343 189

3 161 359 198

4 168 375 207

5 176 392 216

6 184 409 225

7 192 427 235

8 200 445 245

9 208 464 256

10 217 484 267

11 226 504 278

12 236 525 289

13 245 546 301

14 255 568 313

15 266 592 326

16 276 615 339

17 287 639 352

18 298 664 366

19 310 690 380

20 322 718 395

21 334 745 410

22 347 773 426

23 360 802 442

24 374 833 459 Table 17: Total Economic Savings

43

Part 7: Risk and Mitigation

7.1: Risk management

Risk management is a structured and disciplined approach that aligns strategy, processes,

people, technology and knowledge with the purpose of evaluating and managing the

uncertainties of a commercial venture such as this.

7.1.1: Risk management in toll roads

Successful PPP project depends upon fair distribution of risks and responsibilities between

public and private entity, keeping in view each entity's ability to manage them effectively.

The private sector is generally better at managing commercial risks and responsibilities, such

as those associated with construction, operation and financing. The main risks facing this

project include preconstruction, construction, toll revenue, force majeure and political.

7.1.2 Risk responsibilities

The following table shows the different risk categories and the responsible entities for the

construction of the roadway:

Category LDA Private Partner Sponsor risk Environment risk Political risk Force majeure risk Operating risk Design risk Traffic toll risk Completion risk Financial close Private party defaults Competing route Contractual disagreement Below average O&M Hand back Cost overrun risk

Table 18: Risk Responsibilities

44

7.1.2.1. Competing Routes

Government will bear the risk associated with the decrease in traffic due to creation of a

competing route for the period of the concession. For GT Road Expressway, the government

will pay adequate monetary compensation on a monthly basis for the difference between

actual traffic and expected traffic. The expected traffic is taken as the lower of (a) last

electronically counted traffic multiplied with a growth rate, or (b) the traffic count projected

for the year in the traffic model provided in the bid. In case of (a), the growth rate will be

derived form the average of the last three electronically counted traffic counts, or in case the

competing route is built within 3 years of operation, a constant value of 6%. For better

understanding a hypothetical situation is explained as follows:

Assume a competing route is completed at end of Year 6 and the traffic count falls below the

projected traffic in Year 7. In this case the government will pay monetary compensation from

Year 7 till Year 25. The annuity will be calculated separately for all class of vehicles. We

take the example of Class 1 vehicles only.

In Year 7, we only have electronically recorded non-affected data for Years 3-6, so there is

no way of knowing what the non-affected traffic count would have been in Year 7 except

through extrapolation. We have the following electronic vehicle count:

Year 1 2 3 4 5 6 7*

Class 1: Cars/ Jeeps

- - 14,990 15,671 16,334 17,086 16,054*

* Reduced traffic count due to competing route

Table 19: Impact year & growth rate assumption

45

We use the counts to generate growth rates for each year:

Growth Rate - - - 4.54% 4.24% 4.30% ?

We then take the average of the last three years of observed traffic count growth, which

comes to 4.36%. This growth rate is applied to traffic count of Year 6, i.e. 17,086, giving us

an expected traffic count of 17,872.

This expected traffic count is compared to the projected traffic provided in the bid. Assuming

the model submitted provided a fixed growth rate of 5% on a base value of 14,000 for Year 1,

the projected traffic for Year 7 would be 18,761.

Comparing the expected traffic count calculated from observed electronic count and growth

rate with the projected traffic count, the lower of the two will be used to calculate monetary

compensation. In this case it is the former count of 17,872.

Assuming the toll structure indicated a toll of Rs. 40 for Year 7, the monetary compensation

will be (17,872 – 16,054) x 40 = Rs. 72,720 daily, Rs. 2,181,600 monthly, or Rs. 796,284,000

yearly.

Calculation of monetary compensation of subsequent years will similarly be difference of

expected traffic growth (or projected traffic, whichever is lower) and electronic count of

traffic for the affected year. The numbers for the next five years will be as follows:

Year 7 8 9 10 11 12

Traffic Projection (Bid) 18,761 19,699 20,684 21,719 22,805 23,945

[n] 1 2 3 4 5 6

Traffic Compounding Factor (to multiply with Expected

Traffic Count [1])

1.04360 1.0436 1.04362 1.04363 1.04364 1.04365

=1 =1.0436 = 1.0891 = 1.1366 = 1.1861 = 1.2379

Expected Traffic Count [n] 17,872 18,651 19,464 20,313 21,198 22,123

46

7.1.2.2. Competing Routes

Similar to the revenue risk associated with the construction of competing route, the risk of

forced reduction of toll, either through government action or as a result of judicial

intervention, is borne by the government. In such a case the government will provide

monetary compensation in the amount of the difference between the toll rate for the year as

provided in the bid against the reduced or non-escalated toll rates applied to the electronically

counted traffic, or the traffic projection, whichever is lower.

7.1.3: Risk matrix

Lahore Development Authority (LDA) has developed a risk matrix to plot major risks faced

by the government agency and the private partner. The matrix determines likelihood of the

risk and matches it with the impact which gives a score e.g. a risk with low likelihood and

minor impact would score two.

G.T. Road Expressway Heat Map

Lik

elih

ood

Cer

tain

5

Lik

ely

4

Mod

erat

e

3

Unl

ikel

y

2

Rar

e 1

1 2 3 4 5

Insignificant Minor Moderate Major Catastrophic

Table 20: Risk Matrix

47

7.1.4: Risk register

The following is the risk register specifying some of the major risk’s faced in successful

planning of the project with their risk score and mitigation strategies:

Category Risk Implication Likelihood Impact Score Risk Mitigation

Sponsor risk LDA may scrap the

project. | ||||

Rare-Major

Termination payments in-case of LDA

scrapping the project.

(Clause 18.9 / Annexure L)

Environment risk

Adverse impact on surrounding environment.

|| ||||| Unlikely-Moderate

Environment Impact Assessment to identify

all risks in advance.

(Clause 3.3, Clause 25.8)

Political risk

Change in government may put the project in

jeopardy.

||| |||| Moderate-

Major

Termination payments in-case of LDA

scrapping the project.

(Clause 18.9 / Annexure L)

Cost overrun risk

Project cost increases beyond reasonable limits.

|| ||| Unlikely-Moderate

Private Partner to bear complete project costs.

(Clause 8.2.4)

Design risk Over or under design of the

project. || |||

Unlikely-Moderate

Project design to be finalized in mutual

agreement of Concessionaire and

LDA.

(Clause 8.2)

Traffic count

Decrease in minimum number

of traffic in the first year.

|| ||| Unlikely-Moderate

Traffic count as per the Traffic Survey by Private Partner.

(Clause 4.10.1)

(Clause 10.1 / Annexure G)

Financial close

Private partner fails to complete within the specified time

||| |||| Moderate-

Major

Penalty on Financial Bid Bond for delay in completing financial close. (Clause 13.1)

48

Private party defaults

Private partner is unable to continue due to insolvency

||| |||| Moderate-

Major

LDA invokes Step In Clause and pays private

partner 80% of the book value of the project as per the

concession agreement.

(Clause 18.8.3)

Competing route Traffic reduced due

to competing route || ||||

Unlikely-Moderate

LDA would guarantee that no competing route

is built within three kilometres river

segment

(Clause 7.4)

Completion risk

Completion of project is delayed, inconvenience to

citizens.

|| |||| Unlikely-

Major

Penalty clauses for time over run in the

concession agreement.

(Clause 10.10.2)

Below average O&M

Substandard road during O&M period

/ operations are stalled

||| ||| Moderate-Moderate

Operations Bond as per the concession

agreement worth 5% of projected annual toll

revenues.

(Clause 11.4)

Low quality facilities

transferred

Sub standard road and other facilities are transferred to

LDA upon completion of

contract.

||| |||| Moderate-

Major

Transfer Bond as per the concession

agreement before twenty four months of

expiry of contract.

(Clause 19.2)

Force majeure risk

Project is abandoned.

|| ||||| Unlikely-

Major

Force majeure clauses in the concession agreement. Fifty

percent of the cost is compensated by LDA

after revenue adjustments.

(Section 15)

Metro Bus grant usage

Funds allocated for extension of MBS

are misappropriated || |||||

Moderate-Major

Funds are transferred to Escrow Account, usage

is limited to construction of Works

and funds are disbursed after verification of

works by Independent Engineer (Section

13.3)

49

Contractual disagreement

Dispute between LDA and private

partner || ||||

Unlikely-Major

Disputes would be handled through Panel of Experts/ Arbitrators as per the concession

agreement.

(Clause 21.2)

Table 21: Risk Register

50

Annexure

51

Annexure 1: PPP Process

52

Annexure 2: Sensitivity Analysis of Equity and Toll Rate on Equity IRR

Project Equity

Equity IRR 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Project Tolls

5 #NUM! #NUM! 1.32% 1.61% 1.90% 2.18% 2.47% 2.74% 3.02% 3.28% 3.54%

10 7.94% 8.10% 8.24% 8.38% 8.51% 8.63% 8.75% 8.85% 8.95% 9.03% 9.09%

15 12.99% 12.96% 12.93% 12.90% 12.87% 12.83% 12.79% 12.74% 12.68% 12.59% 12.51%

20 17.33% 17.04% 16.78% 16.56% 16.33% 16.13% 15.93% 15.71% 15.51% 15.32% 15.15%

25 21.38% 20.73% 20.19% 19.72% 19.29% 18.88% 18.51% 18.18% 17.88% 17.61% 17.36%

30 25.38% 24.24% 23.33% 22.55% 21.88% 21.32% 20.82% 20.38% 19.99% 19.63% 19.31%

35 29.43% 27.59% 26.23% 25.17% 24.31% 23.58% 22.95% 22.40% 21.92% 21.48% 21.09%

40 33.46% 30.86% 29.06% 27.70% 26.61% 25.72% 24.96% 24.30% 23.72% 23.20% 22.74%

45 37.71% 34.16% 31.85% 30.16% 28.84% 27.76% 26.86% 26.09% 25.42% 24.82% 24.29%

50 42.24% 37.52% 34.63% 32.57% 31.00% 29.74% 28.70% 27.81% 27.04% 26.36% 25.76%

55 47.07% 40.96% 37.40% 34.96% 33.12% 31.67% 30.47% 29.47% 28.60% 27.84% 27.17%

53

Annexure 3: Sensitivity Analysis of Equity and Toll Rate on NPV

Project Equity

Project NPV 7,844,573,491 0% 10% 20% 30% 40%

Project Tolls

5 (2,825,493,899) (2,825,493,899) (2,825,493,899) (2,825,493,899) (2,825,493,899)

10 (421,672,061) (424,435,286) (427,198,511) (430,998,424) (437,427,427)

15 1,906,254,323 1,895,608,443 1,883,786,262 1,871,964,081 1,859,403,865

20 4,173,471,021 4,154,355,522 4,135,240,023 4,115,995,734 4,087,496,762

25 6,386,668,918 6,358,169,946 6,329,670,974 6,298,690,967 6,258,509,354

30 8,571,845,186 8,535,518,622 8,495,337,009 8,444,025,445 8,390,299,914

35 10,732,164,663 10,680,470,273 10,626,744,742 10,573,019,212 10,519,293,681

40 12,863,189,570 12,809,464,040 12,755,738,509 12,702,012,978 12,648,287,448

45 14,992,183,337 14,938,457,806 14,884,732,275 14,831,006,745 14,777,281,214

50 17,121,177,103 17,067,451,573 17,013,726,042 16,960,000,511 16,906,274,981

55 19,250,170,870 19,196,445,339 19,142,719,808 19,088,994,278 19,035,268,747