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    Case Study: Airport Express Metro Line: Project Financing Model

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    rohitmahali
    1. The Airport Express Metro line project in Delhi connecting the airport to the railway station had a total cost of 38,110 million rupees to be implemented over 5 years from 2006 to 2010. 2. Three financing models were considered: the Phase 1 model with 70% debt and 30% equity, a PPP model with 67% debt and 33% equity plus viability gap funding, and a PPP model with civil works by a public enterprise and 69% debt financing. 3. Based on the financial analysis, the PPP civil works model required the lowest government subsidy of 260.90 rupees per ticket to achieve net present value parity compared to 231 rupees for the Phase 1 model

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    Case Study: Airport Express Metro Line: Project Financing Model

    Uploaded by

    rohitmahali
    424 views6 pages
    1. The Airport Express Metro line project in Delhi connecting the airport to the railway station had a total cost of 38,110 million rupees to be implemented over 5 years from 2006 to 2010. 2. Three financing models were considered: the Phase 1 model with 70% debt and 30% equity, a PPP model with 67% debt and 33% equity plus viability gap funding, and a PPP model with civil works by a public enterprise and 69% debt financing. 3. Based on the financial analysis, the PPP civil works model required the lowest government subsidy of 260.90 rupees per ticket to achieve net present value parity compared to 231 rupees for the Phase 1 model

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    252908927 Airport Express Metro Line

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    1. The Airport Express Metro line project in Delhi connecting the airport to the railway station had a total cost of 38,110 million rupees to be implemented over 5 years from 2006 to 2010. 2. Three financing models were considered: the Phase 1 model with 70% debt and 30% equity, a PPP model with 67% debt and 33% equity plus viability gap funding, and a PPP model with civil works by a public enterprise and 69% debt financing. 3. Based on the financial analysis, the PPP civil works model required the lowest government subsidy of 260.90 rupees per ticket to achieve net present value parity compared to 231 rupees for the Phase 1 model

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    424 views6 pages

    Case Study: Airport Express Metro Line: Project Financing Model

    Uploaded by

    rohitmahali
    1. The Airport Express Metro line project in Delhi connecting the airport to the railway station had a total cost of 38,110 million rupees to be implemented over 5 years from 2006 to 2010. 2. Three financing models were considered: the Phase 1 model with 70% debt and 30% equity, a PPP model with 67% debt and 33% equity plus viability gap funding, and a PPP model with civil works by a public enterprise and 69% debt financing. 3. Based on the financial analysis, the PPP civil works model required the lowest government subsidy of 260.90 rupees per ticket to achieve net present value parity compared to 231 rupees for the Phase 1 model

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Case Study: Airport Express Metro line: Project Financing model

    By

    Group Members Roll No.

    ABU ASIF HASAN MP13001

    AJIT KUMAR SINHA MP13003

    AKASH PRIYRANJAN MP13004

    ASHUTOSH K TRIPATHY MP13017

    GYANESH DUBEY MP13026

    SUMANTRA KUMAR KHAN MP13060

    XLRI

    JAMSHEDPUR
    Airport Express Metro line : Project Financing model

    New Delhi MRTS was implemented in two phases . Phase I consisting of 65 Km track was commissioned in 2006 . A new company Delhi Metro Rail
    Corporation was established in 1995 to execute the project . The company was a 50:50 JV between Government of India and the Government of Delhi NCR .
    Financing of Phase I was 38.78% GOI and Airport operator as equity ; 1.22% by Government as land cost ; 60 % as Debt .

    In Phase 2 the original scope of work was to install additional 121 Km of track to extend the coverage of the MRTS . The Airport Express Metro line
    [AEML] was included in Phase 2 after Delhi was selected as host of XIX Commonwealth Games . AEML linked Indira Gandhi International Airport to the
    New Delhi Railway Station through five stations over a route length of 19.2 Km consisting of 5.5 Km underground and 11.6 Km elevated track. The total
    project cost inclusive of escalation and taxes was ₹ 38110 million . The available time for the project was only three years . So financial closure had to be
    arranged quickly.

    Problem: Selecting the financing model

    The Capex year to year break up for AMEL is given below:

    Expenditure 10 6 ₹
    Land Construction Escalation Taxes Total
    2006 190 2050 0 320 2560
    2007 180 7330 370 1220 9100
    2008 8500 870 1490 10860
    2009 8500 1340 1560 11400
    2010 2050 440 400 2890
    2011 880 240 180 1300
    Total 38110

    Alternatives : Phase 1 Model : D:E = 7/3 PPP 1 Model : D:E = 3/2 + Viability gap funding
    PPP2 Model : Execution of Civil works by Public enterprise System cost borne by Concessionaire [D:E = 7/3]

    Phase 1 Model

    Project_cost Debt Equity Tax_rate


    38110 70% 30% 30%
    Fare ₹ Rides 2011 Rides 2021 Rides growth_2021
    100 42500 86000 6%
    Year 2006 2007 2008 2009 2010
    Ridership 0 0 0 0 0
    Revenue Mill. ₹ 0.00 0.00 0.00 0.00 0.00
    O&M Mill. ₹ 0 0 0 0 0
    EBITD 0.00 0.00 0.00 0.00 0.00
    Depreciation 0 0 0 0 0
    Interest 2667.7 2667.7 2667.7 2667.7 2667.7
    Tax 0.00 0.00 0.00 0.00 0.00
    Investment -2560.00 -9100.00 -10860.00 -11400.00 -2800.00
    Free cash flow -2560.00 -9100.00 -10860.00 -11400.00 -2800.00
    Discounted cash flow -2560.00 -8387.10 -9225.08 -8925.15 -2020.41
    NPV -23227.33
    Fare for which NPV is zero ₹ 227.75
    PPP Viability Model

    Project_cost Debt Equity Tax_rate


    38110 67% 33% 30%
    Fare ₹ Rides 2011 Rides 2021 Rides growth_2021 O&M_ growthrate
    100 42500 86000 6% 7%
    Year 2006 2007 2008 2009 2010 2011 2012
    Ridership 0 0 0 0 0 42500 46850
    Revenue Mill. ₹ 0.00 0.00 0.00 0.00 0.00 1551.25 1710.03
    O&M Mill. ₹ 0 0 0 0 0 792.6 848.082
    EBITD 0.00 0.00 0.00 0.00 0.00 758.65 861.94
    Depreciation 0 0 0 0 0 3811 3811
    Interest 2553.37 2553.37 2553.37 2553.37 2553.37 2553.37 2553.37
    Tax 0.00 0.00 0.00 0.00 0.00 0.00 0.00
    Investment -2560.00 -9100.00 -10860.00 -11400.00 -2800.00 -1300.00 0.00
    Free cash flow -2560.00 -9100.00 -10860.00 -11400.00 -2800.00 -541.35 861.94
    Discounted cash flow -2560.00 -8375.52 -9199.63 -8888.24 -2009.27 -357.54 523.96
    NPV -23292.49
    Expected return of
    concessionaire 1509.156 1509.156
    Government subsidy 7114.88 7011.58
    PV subsidy 68937.72307 7114.876 6492.20648

    Fare for which PV subsidy is zero ₹ 364.74


    Fare for which N PV is zero ₹ 231.00
    PPP Civil Model

    Project_cost Debt Equity Tax_rate


    14862.9 69% 31% 30%
    38110 Fare ₹ Rides 2011 Rides 2021 Rides growth_2021 O&M_ growthrate Debt_cost
    100 42500 86000 6% 7% 10%
    Year 2006 2007 2008 2009 2010 2011 2012 2013
    Ridership 0 0 0 0 0 42500 46850 51200
    Revenue Mill. ₹ 0.00 0.00 0.00 0.00 0.00 1551.25 1710.03 1868.80
    O&M Mill. ₹ 0 0 0 0 0 792.6 848.082 907.44774
    EBITD 0.00 0.00 0.00 0.00 0.00 758.65 861.94 961.35
    Depreciation 0 0 0 0 0 3811 3811 3811
    Interest 1028.97 1028.97 1028.97 1028.97 1028.97 1028.97 1028.97 1028.97
    Tax 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
    Investment -2560.00 -9100.00 -10860.00 -11400.00 -2800.00 -1300.00 0.00 0.00
    Free cash flow -2560.00 -9100.00 -10860.00 -11400.00 -2800.00 -541.35 861.94 961.35
    Discounted cash flow -2560.00 -8384.12 -9218.55 -8915.67 -2017.55 -359.38 527.20 541.75
    NPV -23244.32
    Expected return of
    concessionaire 548.784 548.784 548.784
    Government subsidy 4630.10 4526.81 4427.40
    PV subsidy 42590.19668 4630.104 4191.49167 3795.78338

    Fare for which PV subsidy is zero ₹ 260.90


    Fare for which N PV is zero ₹ 237.26
    Conclusion:

     The project is not a commercially viable project at 100 / ticket.


     So assistance from government is essential.
     The three modes of financing are ranked in the table below based on NPV and minimum Government support [calculated /ticket] .

    Viability funding Subsidy for 12% ROE


    Fare at NPV =0 Minimum subsidy
    Rank Financing model NPV ₹ 10 6
    over 20 years to investor
    ₹/ticket ₹/ticket
    NPV ₹ 106 ₹/ticket

    1 Phase 1 Model -23227 227.75 127.75

    PPP : Civil works


    2 -23244 237.26 137.26
    by Gov.

    PPP: Viability
    3 -23292 231 131 68937.72 264.74
    funding by Gov

    It is clear from the above table that PPP method is not feasible if fare is kept at 100 / ticket because it is not desirable that private operators

    be supported with government aid . So the AEML should be financed in the same manner as Phase 1.

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