Gammon Infrastructure’s iron ore berth planned at Paradip port in Orissa will see financial closure by March 2010
The iron ore berth planned at Paradip port in Orissa will see financial closure by March 2010, say company officials from Gammon Infrastructure Projects Ltd (GIPL). Along with the port project, two other projects in roads and hydro-power are also likely to achieve financial closure.
“We will see financial closure for the Paradip port project, the Muzzaffar–Patna road project and the hydro-power project in Sikkim by March 2010,” said Parvez Umrigar, managing director, GIPL.
GIPL, in a consortium with Noble Group and Minerals and Metals Trading Corp (MMTC), is developing a deep draught iron ore berth at Paradip port in Orissa. This Rs505 crore build-operate-transfer (BOT) project was awarded to the consortium in July 2009.The concession period for this project is 30 years, including the construction period of 3 years.
GIPL’s 66MW hydro-power project in Sikkim will also achieve financial closure by March 2010. The power project is being developed by GIPL’s wholly owned subsidiary Sikkim Hydro Power Ventures Ltd. The concession period of this project is 35 years, excluding the construction period. The hydro project has been with GIPL since 2007.
GIPL also plans financial closure for its Patna-Muzzaffar road project by March 2010. The road is being developed on a BOT annuity basis. This Rs900-crore project is being developed by a wholly owned subsidiary of GIPL. The company had received the notification of interest (NOI) for this project from the National Highway Authority of India (NHAI) in October 2009. NHAI currently is in the land-acquisition process for the project. The concession agreement for this project is likely to be signed by January or latest by February 2010.
High interest costs will feature as a permanent expenditure on these companies’ books, leaving almost nothing for shareholders of these cash-guzzling businesses
The December quarter results have thrown up a new reality show for two top television channels: large interest costs that are leading to relentless net losses.
Here is the grim financial picture. IBN18 has reported a small operating profit of Rs4.98 crore for the three months ended December 2009. But net loss was Rs10.96 crore. The reason: IBN18’s consolidated interest costs and other financial charges are up by a whopping 82%, an increase of Rs6.51crore to Rs14.5crore, from Rs7.98crore for the corresponding year-ago period. On a nine-month basis, interest costs and other financial charges are up by a massive 123% in December 2009, an increase of Rs18.08 crore to Rs32.77crore, from Rs14.69crore last year.
TV18 too has registered a huge net loss of Rs41.52 crore for the same quarter. For TV18, although December quarter interest costs have come down by 14%, the nine-monthly interest costs have registered a rise of 25% to Rs85.01 crore, from Rs67.94 crore for the same period last year. Clearly, unless the business turns cash-flow positive, continuous borrowing would lead these companies into a deadly spiral of more and more debt just to keep the operations going.
For over six quarters now, these companies are making losses, requiring them to borrow money to fund their operations. TV18 made a rights issue last year—but at the rate money is flowing out, it will again need additional capital. Will this mean further borrowings? If so, how will the increased debt be serviced with cash flows continuing to be negative? Analysts and experts have all along assumed that all this borrowing was temporary. But it now appears that TV18 has been forced to pile up debt in large quantities just to ensure business survival. With losses continuing even after a full year of economic revival, these interest costs—and net losses—will not disappear easily. High interest costs will feature as a permanent expenditure on their books, leaving almost nothing for shareholders of these cash-guzzling businesses.
Keeping in mind the immediacy to develop roads, the finance ministry has said that it has currently sought $1 billion from the World Bank out of the $2.96 billion sanctioned, so that the amount can be paid back on time
The World Bank's $2.96-billion (about Rs12,385.90 crore) loan that the transport ministry has sought is likely to come in tranches, with the finance ministry favouring only $1 billion currently over repayment concerns, reports PTI.
"Roads are a multiplier for the economy. Keeping in mind the immediacy to develop roads, we have currently sought $1 billion from the World Bank out of the $2.96 billion sanctioned, so that it can be paid back on time. The remaining will come in tranches," a senior finance ministry official said.
The transport ministry had sought the loan in August 2009 for double-laning of 6,372 km of single-laned highways, out of the total 19,702 km single-laned ones in the country, under the National Highways Development Project (NHDP) Phase IV.
The World Bank had, in December last year, given an 'in-principle' approval to the total loan. "Of this amount ($2.96 billion), the Department of Economic Affairs (DEA) has currently requested the World Bank to deliver a loan of $1 billion and the balance in the next country strategy period starting from 2012," the World Bank said in an email reply.
The World Bank has a periodic country strategy for monetary assistance to different nations. The latest one is up to 2012 for India, the multilateral lender said.
Neither the DEA official nor the World Bank gave specifics of the terms of the loan.
"A clearer picture on the scope of this assistance will be available in the next couple of months," the World Bank's email added.