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