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ISLAMABAD: The National Highway Authority (NHA) terminated the concession agreement with M/s Techno-CMC (TECMC) Private Limited, for construction of Sukkur-Hyderabad Motorway (M-6) project– the largest Public-Private Partnership (PPP) project in the country with a total cost of Rs307 billion, after the Concessionaire failed to achieve the financial close within given time.

The termination of the agreement would further delay the mega project, official sources revealed to Business Recorder.

Official revealed that an agreement was signed on December 02, 2022 between National Highway Authority (NHA) and M/s TECMC (Private) Limited for the construction of Hyderabad—Sukkur Motorway (M-6) on build-operate-transfer basis (“PPP Agreement”).

Financial close of M-6: NHA approves extension of time

In accordance with Section 10.4.1 of PPP Agreement, the Concessionaire was obligated to achieve Financial Close within six months from the Effective Date. However, upon Concessionaire’s request, the time period for achievement of Financial Close was extended in good faith for four months, i.e., until September 30, 2023 pursuant to Section 10.4.2 of PPP Agreement.

The Concessionaire failed to achieve the Financial Close within the prescribed time and accordingly NHA issued the “NHA Preliminary Notice” in compliance with Section 21.2.2 (a) of the PPP Agreement on 16th October, 2023 to cure the breaches and achieve Financial Close within 43-days cure period, in line with the PPP Agreement.

Concessionaire, in the meanwhile, submitted a letter, wherein it sought certain confirmations from NHA in contradiction to terms and conditions of PPP Agreement.

Accordingly, NHA responded as per the stipulations of PPP Agreement and requested the Concessionaire to remedy its defaults and achieve the Financial Close on or before 30th November, 2023 as per the stipulations of the PPP Agreement.

However, notwithstanding the opportunity to cure afforded to the Concessionaire and grant of extension in time, the Concessionaire has failed to cure the defaults, breaches and or deficiencies as mentioned in the NHA Preliminary Notice and has failed to achieve Financial Close within stipulated period.

In light of the aforesaid, NHA issued the “Termination notice in accordance with Section 2 1.2.2 (b)-i read with Section 10.4.3 further read with Section 21.2.1 (c) and Section 21.2.1 (a) together with other enabling provisions and encash the Bank Guarantee (Financial Close Bond) in accordance with Section 2 1.6.1 (a)-i read with Section 10.2.2 together with other enabling provisions of the PPP Agreement without prejudice to any other right or remedy which NHA may have under the PPP Agreement and or under the applicable laws. Accordingly, the PPP Agreement stands terminated, effective from the date hereof, official documents revealed.

The concession agreement for construction of M-6 project, was approved by the Public Private Partnership (P3A) Authority Board with total cost of Rs307 billion.

Under the transaction structure approved by the P3A Board, government of Pakistan had to contribute only Rs9.5 billion over the construction period while the remaining project cost of Rs297.5 billion were to be arranged by the private party through equity and commercial debt.

The private party was also required to pay minimum Rs408 billion to the NHA and estimated corporate taxes of Rs908 billion over the concession period. In addition, the project was to be transferred to the NHA at no cost at the end of the concession period.

The motorway spanning over a length of 306 kilometres was designed to be comprised on six lanes. Designed to be constructed as a climate resilient project, the private party shall construct and operate the project for 25 years commencing from the date of execution of the PPP Agreement.

Given shrinking fiscal space and the prevalent economic crunch, the project was termed a landmark achievement in the PPP sphere. However, after the latest development the project is once again delayed for indefinite period, official added.

Copyright Business Recorder, 2024

Comments

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Rebirth Jan 01, 2024 10:06am
It’s sad that we’re following in the footsteps of the US, a nation that caused the recent global supply chain disaster because of its lack of infrastructure. We also rely on trucks instead of freight trains running from our ports. Inbred Punjabis built the Lahore ring road from Karachi’s taxes, allowing incompetent and corrupt officials to access land they grabbed in the vicinity of the city. While in Karachi, all of the freight that is to be transported to feed the insatiable appetite of these self-entitled tax evaders, goes from within the city’s streets. Not only do we not have freight trains, there’s no ring road for the trucks to avoid the city traffic either. Then, the trucks don’t even have a motorway link to get to Punjab, where those who manufacture nothing except inbred babies to become a majority, continue to increase the import bill. As if that wasn’t bad enough, we now have Afghanistan to transport goods to, and in return we get attacks from US assets based on their soil.
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FAISAL HUMAYUN Jan 01, 2024 01:07pm
@Rebirth, My friend, with all due respect, after 18th amendment, the vicinity of karachi came under the provincial domain. moreover the polpular ppp party reigned 20 years especially 2008 to 2013 both fedral n province. pity they could not initiate any such project. even the lyari expressway (27km) was completed in 11 years (2004-2013). on the other had lahore ring road 70 km was completed in a record 2.5 years. this was due to the utter / solemn efforts of the CM punjab. if your provincial govt is sleeping and not optimising their possibilities, then don't refuge your minds with ethnicity. instead press your govt to improvise
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John Jan 01, 2024 01:19pm
Who is pocketing so much money in the land of unlimited corruption!
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Twain pen di Jan 01, 2024 04:15pm
maybe a bigger under the table deal is being set.
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Mahfooz Jan 01, 2024 09:17pm
FWO will get it and Bhutto and Khaki will make money now. Watch and see.
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Tahir MALIK Jan 02, 2024 09:17pm
It is unfortunate that this Nation important project is being delayed for the last two decades. This is totally failure of Governments.
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Mazher Jan 03, 2024 12:36am
Yet again. How come this part of the motorway is left with negligence and city like Karachi is deprived of connections with other main cities.
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