Canada's Brookfield Asset Management made its first significant investment in Indian infrastructure, buying six road and three power projects on Friday from India's Gammon Infrastructure Projects Limited. A consortium composed of Brookfield and the Core Infrastructure India Fund Pte Ltd are buying the projects, six of which are operational, said Ambit Holdings, which advised Gammon on the deal. Indian infrastructure firms have spent the last two years trying to sell assets to pay down debts after an economic downturn squeezed cash flows and damaged their balance sheets, although interest from foreign investors has remained muted. "This transaction represents Brookfield's first major investment in Indian infrastructure, and provides us a great platform to participate in the Indian growth story over the long term," Anuj Ranjan, Managing Partner at Brookfield, said in a statement. The deal includes an immediate cash payment of Rs 563 crore ($85 million) and future undisclosed sums based on certain performance targets being met, Rahul Mody, managing director at Ambit Corporate Finance, told Reuters. Recent government reforms, including a rule allowing developers to exit road projects two years after completion, have encouraged foreign investors to begin looking at investing in Indian infrastructure again, Mody said. "There is a steady increase in interest. But it needs to be tapped properly and it will take time," he said. Brookfield is a global asset manager with more than $200 billion in assets under management. Core Infrastructure India Fund is a private equity group run by India's Kotak Mahindra. The sale will allow Gammon, a medium-sized Indian infrastructure firm majority owned by parent Gammon India Ltd, to cut its consolidated debt to Rs 2,229 crore from Rs 3,947 crore. (Reuters)
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Move to unlock thousands of crore which could fund new highway construction, reports Ashish Sinha In a major move aimed at expediting award and implementation of highway projects by making additional funds available for investment in projects, the central government has allowed road developers to divest 100 per cent equity after 24 months of completion of all infrastructure projects constructed under the Build, Operate and Transfer (BOT) mode. On August 26, the Cabinet Committee on Economic Affair made amendments to its earlier approval of 13th May, 2015 . The move is expected to benefit at least 80 odd BOT projects that were awarded prior to 2009. Estimates suggest that the locked equity in such projects may be in excess of Rs 4,300 crore. Some reports suggest the unlocked amount could support at least 1,500 kilometres of new highways. Infrastructure companies like Ashoka Buildcon, IRB Infra, Reliance Infrastructure among others are expected to gain from this policy decision, experts said. In fact, the stocks of IRB Infrastructure Developers and Ashoka Buildcon had witnessed over five per cent gains on August 27, a day after the official announcement was made. Simply put, under BOT mode the developer builds and operates a stretch of road for a stipulated time period and earns through toll revenue or through timely payments from the government. Experts said the CCEA approval will now allow the concessionaire(s)/promoter(s) to use proceeds from the sale of divested equity in one or more of an incomplete National Highway Authority of India projects or any other highway projects. It will also help them retire their debt to financial institutions in any other infrastructure projects. “This will result in physical completion of languishing infrastructure projects. This in turn will bring relief to citizens /travellers in the concerned area,” an official statement issued by the government said. “Consequently, it will facilitate uplifting socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country. This will also lead to enhanced economic activity,” it added. On May 13, 2015, CCEA had approved the proposal of the Ministry of Road Transport and Highways, to make applicable mutatis mutandis the provision of Model Concession Agreement (MCA) pertaining to the exit option for selected bidder/consortium members together with their associates. Subsequently, NHAI issued policy circular dated 9th June 2015 with this effect. However, subsequent to the NHAI policy circular, the National Highways Builders Federation (NHBF) made a representation that all developers were not having incomplete highways projects thus were denied of this facility for no fault. NHBF said most developers in the infrastructure sector were carrying highly leveraged balance sheets at their Holding Companies level, as they have been simultaneously supporting various infrastructure Special Purpose Vehicles which were also under severe stress. “These developers can be allowed to utilize funds so generated to reduce their existing corporate debt or for investment in any new infrastructure project that need not alone be highways projects, as most developers have multiple verticals in the infrastructure sector,” NHBF had suggested. NHAI after examining the representation of NHBF is also of the opinion that full benefits of this policy decision/circular can also be leveraged, if certain amendments are made to the above said decision. NHAI has also suggested that the policy circular dated 9th June 2015 may be amended accordingly to make the policy applicable in its true spirit. This was endorsed by the CCEA on August 26. ashish.sinha@businessworld.in
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Barring Jammu and Kashmir, all states have finalised the names of proposed Smart Cities through competition. Ashish Sinha reportsMaking cities smart will make them engines of economic growth besides giving decent life to the citizens, said Venkaiah Naidu, Union Minister of Urban Development releasing the list of 98 cities that will be part of NDA government’s ambitious Smart Cities project. The list is lead by Uttar Pradesh with 13 cities followed by Tamil Nadu with 12 cities. Other cities include 10 from Maharashtra, seven from Madhya Pradesh, three each from Bihar & Andhra Pradesh. Each smart city would get a Central assistance of Rs 100 crore per year for five years. Of those chosen for the project, 24 are capital cities, 24 are business hubs and 18 are cultural centres. Cities like Patna, Bengaluru, Kolkata, Gurgaon, Thiruvananthapuram and Shimla have failed to make the cut in round one. During the selection process, each state was assigned a specific number of Smart City slots based on urban population among other factors. Earning a Smart City tag requires the city to be in the forefront of service levels, existing infrastructure and track record for coping up with changes. Later in the year, a list of top 20 cities will be short-listed which will then be financed this year. As for the rest of the cities, they will be asked to improve upon their respective deficiencies and gear up for the next round of the competition, experts said. Continuous supply of water and electricity, advanced health facilities, hassle-free transportation system, wi-fi enabled zones, effective garbage collection and treatment of garbage and sewage are some of the essential components of the Smart City project. Uttar Pradesh, the most populous and politically vital state, will get the most number of Smart Cities - 13. The state government has also recommended Congress president Sonia Gandhi's constituency Rae Bareli. The Smart Cities project will impact 13 crore population, or 35 per cent of urban population, across 98 cities. Central government proposes to give financial support to Mission to the extent of Rs 48,000 crore over 5 years. As per the mission directives, the State/UTs and urban local bodies have an important role to play in the implementation of SmartCity Mission. Devendra Kumar Pant, the chief economist of India Ratings & Research said, “Selection of smart cities is first step. Major challenge is to provide quality urban services such as 24X7 water supply, sanitation, drainage, solid waste management, sewage treatment. Looking at finances of urban local bodies, which are far from healthy, provision of these services will be challenging.” Prime Minister Narendra Modi had launched the criteria and guidelines for 100 Smart Cities to be selected through city challenge competition in June 25. Barring Jammu and Kashmir, all states have finalised the names of proposed Smart Cities through competition. According to Pradip Bhattacharya, chairman of the Parliamentary Standing Committee on Home Affairs, Cyber security crime will be a major challenge for the 100 smart cities project. He recently said that it will require replacement of traditional laws with modern ones focusing on crimes related to digital information. "Traditional laws will need to be replaced by modern police laws that will recognise newer crimes and ensure appropriate focus on crimes related to cyber security like information and identity thefts, breach of data privacy and, hacking of websites and networks", Bhattacharya had said at a recent FICCI event. According to another expert, a smart city needs to have an integration of concepts like urban planning, energy conservation, smart traffic management and human management. This means cleaner water supply, 24x7 power supply, better health care, waste management among a whole host of systems and processes. “Smarter cities need to be able to generate employment options. There should be an ease of doing business. It should not be a chaotic city to say the least. But if such a city develops, what systems will be put in place to check the migration of rural poor from neighbouring or far-off states. I don’t think that aspect has been taken into consideration as there may be legal issues too,” said a senior executive of a tech company. Here is a look in detail on which state has which cities in line to become a smart city. Uttar Pradesh leads the pack with 13 cities (Moradabad, Aligarh, Saharanpur, Bareilly, Jhansi, Kanpur, Allahabad, Lucknow, Varanasi, Ghaziabad, Agra, Rampur) Tamil Nadu has 12 cities figuring in the list - (Tiruchirapalli, Chennai, Tiruppur, Coimbatore, Vellore, Salem, Erode, Thanjavur, Tirunelveli, Dindigul, Madurai, Thoothukudi). Next comes Maharashtra with 10 cities (Navi Mumbai, Nashik, Thane, Greater Mumbai, Amravati, Solapur, Nagpur, Kalyan-Dombivali, Aurangabad, Pune). North East had eight cities in Agartala, Namchi, Pasighat, Guwahati, Imphal, Shillong, Aizawl, and Kohima. Madhya Pradesh has seven cities in the list (Bhopal, Indore, Jabalpur, Gwalior, Sagar, Satna, Ujjain). Six city states include Gujarat - Gandhinagar, Ahmedabad, Surat, Vadodara, Rajkot, Dahod and Karnataka (Mangaluru, Belagavi, Shivamogga, Hubballi-Dharwad, Tumakuru, Davanegere). Rajasthan has four cities (Jaipur, Udaipur, Kota, Ajmer) so has West Bengal (New Town Kolkata, Bidhannagar, Durgapur, Haldia). Three cities states are Andhra Pradesh (Vishakhapatnam, Tirupati, Kakinada), Bihar (Muzaffarpur, Bhagalpur and Biharsharif), and Punjab (Ludhiana, Jalandhar, Amritsar). States with two cities each include Chhattisgarh (Raipur, Bilaspur), Haryana (Karnal, Faridabad), Odisha (Bhubaneshwar, Raurkela) and Telangana (Greater Hyderabad, Greater Warangal). Lone cities include Delhi, Chandigarh, Diu, Port Blair, Kochi, Ranchi, Kavarrati (Lakshadweep), Silvassa (Dadra and Nagar Haveli), Panaji, Dharamshala, Oulgaret and Dehradun.
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In a key step in Modi government's infrastructure push, Minister of Urban Development Venkaiah Naidu on Thursday (27 August) announced the list of ninety eight cities chosen for its Smart Cities project after a nationwide "competition" between states. While Uttar Pradesh has bagged as many as 13 smart cities projects, Tamil Nadu got 12 and Maharashtra 10. Madhya Pradesh will have seven smart cities and Gujarat and Karnataka will have six each. The winners include Lucknow and Prime Minister Narendra Modi's constituency Varanasi in Uttar Pradesh, Ahmedabad, Gandhinagar and Baroda in Gujarat, Greater Mumbai, Chennai, Coimbatore and Madurai in Tamil Nadu, and Bhagalpur and Muzaffarpur in Bihar. Cities like Patna, Bengaluru, Kolkata, Thiruvananthapuram and Shimla have failed to make the cut in round one. Each state will get at least one Smart City, which, in PM Modi's words, translates to "very high quality of life comparable with any developed European city". The NDA government plans to spend over Rs 3 lakh crore over the next 5-6 years to recast urban cities. Of the 98 smart cities, 24 are business and industry centres, 18 are cultural and tourist centres and 3 are education and health care hubs, Naidu said. According to Naidu, "13 crore population across 98 cities which is 35 per cent of urban population will be covered under smart city mission." "Making them (cities) smart will make them engines of economic growth besid .. To earn a Smart City tag, the city has to check all the boxes that include service levels, existing infrastructure and track record. Proposals from states were also judged on how realistic is its execution. The top 20 cities will be financed this year. The rest of the cities will be asked to get their act together, focus on deficiencies and prepare for Round 2 of the competition. During the selection process, each state was assigned a specific number of Smart City slots based on urban population among other factors. There is no universally accepted definition of a Smart City and varies from city to city and country to country, depending on the level of development, willingness to change and reform, resources and aspirations of the city residents. In the approach to the Smart Cities Mission, the objective is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart’ Solutions. The focus is on sustainable and inclusive development and the idea is to look at compact areas, create a replicable model which will act like a light house to other aspiring cities. The Smart Cities Mission of the Government is a bold, new initiative. It is meant to set examples that can be replicated both within and outside the Smart City, catalysing the creation of similar Smart Cities in various regions and parts of the country. The core infrastructure elements in a Smart City would include- i. adequate water supply, ii. assured electricity supply, iii. sanitation, including solid waste management, iv. efficient urban mobility and public transport, v. affordable housing, especially for the poor, vi. robust IT connectivity and digitalization, vii. good governance, especially e-Governance and citizen participation, viii. sustainable environment, ix. safety and security of citizens, particularly women, children and the elderly, and x. health and education.Dr Devendra Kumar Pant, Chief Economist, India Ratings & Research, says "selection of smart cities is the first step. Major challenge is to provide quality urban services such as 24X7 water supply, sanitation, drainage, solid waste management, sewage treatment. Looking at finances of urban local bodies, which are far from healthy, provision of these services will be challenging. Levying of user charges to recover cost of provision of these services will be crucial to maintain quality of these services. In the process of smart cities focus should not divert from providing urban services in other cities and make them more liveable.Anshuman Magazine, Chairman & MD, CBRE South Asia Pvt. Ltd, said, “The successful development of these Smart Cities will now hinge on their effective implementation and monitoring at a central as well as state level. Huge fund mobilisation, government capacity building at the state and city level and public private partnerships will be required for development of these cities. This can be a game changer for India as it can stimulate economic growth, besides improve the quality of life for millions of people.”Getamber Anand, President, Credai National, said: “It is a very positive initiative and we trust there will be a concrete action plan to make this ambition possible. The private sector is already well versed in making smart real estate developments which boast of all the ingredients a smart city must have, and must certainly be coaxed into partnership with respective state governments to contribute in every way possible towards this initiative."
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Indian finance ministers have always enjoyed the times when crude oil price hovered around less than $50 per barrel in the global market. Lower crude oil prices augur well for an economy that imports 75 per cent of its domestic requirement. However, the same falling price will also ensure that India remains an oil importing nation in the long run as the Indian upstream companies are forced to lower their capital expenditure on exploration business. Cairn India Ltd, a unit of London listed Vedanta resources Plc, has already reduced its capital expenditure for FY16 by about 60 per cent to $500 million from $1.2 billion. While ONGC has claimed that it will spend Rs 36,000 crore as capital expenditure in FY16 as against Rs 32,309 crore spent as capex in FY15, it would be difficult for other Indian companies to do the same as they try to cover their margins. The benchmark Brent crude on 24 August fell below $45 a barrel for the first time since March 2009. The stocks of ONGC, Oil India (OIL) and Cairn India have touched 52-week low this year. Lower crude prices bring a double whammy for companies that operate the Pre-Nelp blocks as they are paying a fixed amount of Rs 4,500 per tonne of oil produced from their fields. According to industry sources, the companies have been lobbying hard with the government to get rid of this cess. Apart from this, ONGC has 165 marginal fields (86 onshore and 79 offshore). These fields become financially unviable for production at the current price of crude oil. The government wanted to put 69 of these blocks for auctions, as it was felt that the private sector would be able to extract crude oil or gas from such blocks, but given the falling realisations for the upstream companies, it is unlikely that the private sector would like to put money into these fields. Some experts also feel that none of the international players would be interested in exploration business in India if the price of crude oil remains below $50 per barrel. The hydrocarbon fields in India are difficult and require higher investments compared to African countries. A silver lining for the upstream sector in such a scenario is the reduction in the price of rigs and other assets required for exploration business. It would be interesting to see, how the Indian companies negotiate their contracts for rigs to safeguard their margins. Deepak Mahurkar, , Leader Oil & Gas PwC says, "While crude oil prices sustaining around $40 in mid and long term is hard to think of, but the producers clearly are getting ready to be fit at $50. Marginal fields' developments around the world have to wait in these circumstances. In general, companies which adeptly take up efficiencies induction will do well. Unbelievable success has been achieved on cost reduction and technology deployment in the US including in the shale play. Service providers as much as operators have understood the sensitivities of costs."
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The government's 10 per cent stake sale in Indian Oil Corp (IOC) will not have any impact on the company's ratings, said Moody's Investors Service and Fitch Ratings. In separate statements issued, the two global agencies said that after the stake sale, the government will continue to hold a majority stake of 58.57 per cent in IOC. The government on Monday (24 August) sold 10 per cent stake in IOC through an offer for sale and raised over Rs 9,300 crore. Moody's Investors Service said IOC's ratings remain supported by its strategic importance to the country, given its position as India's largest refiner and distributor of petroleum products. "The government will retain its majority stake in the company after the stake sale, and as such does not affect our assessment of sovereign support for IOC," Moody's VP and Senior Credit Officer Vikas Halan said. Fitch Ratings said refiner Indian Oil Corporation's ratings is "unaffected" by lower state stake. The other two smaller state-controlled oil refining and marketing companies - BPCL and HPCL - historically have had lower state ownership at 55 per cent and 51 per cent, respectively, it added. "Fitch believes that the state continues to have close operating and strategic linkages with these entities despite the recent reforms in fuel prices and subsidy schemes. "We believe these three companies will continue to be important policy tools that the state will use to meet socio-economic objectives when required," it further said. Moody's added that it would reassess the level of government support incorporated in the company's ratings only if the government's shareholding falls below 51 per cent, or if there are other indicators of a change in the relationship between the government and IOC. "However, we see this as an unlikely scenario, given the strategic importance of IOC as the country's largest downstream oil company with a 31 per cent share of the domestic refining capacity," Halan said.(PTI)
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Oil prices dipped on Wednesday, trading near six-year lows ahead of the latest US energy report after jitters over China's faltering economy spurred heavy losses this week, analysts said. US benchmark West Texas Intermediate for October delivery fell 13 cents to $39.18 in Asian trading, while Brent crude for October eased 13 cents to $43.08 in late-morning trade. Both contracts gained on bargain-hunting on Tuesday, after plummeting to their lowest levels since early 2009 a day earlier as investors fret about falling demand in the face of a world supply glut. "US crude inventories continue to be the weekly constant mover for oil prices in this period of stagnant fundamentals," said Daniel Ang, investment analyst at Phillip Futures in Singapore. "If inventories turn out lower than estimates, we may see prices get more support and vice versa," he added. Ang said China's rate cut prevented oil prices from finding a new low. ANZ said China's rate cuts had calmed commodity markets, but they remained cautious and gains would be limited. "The displacement of high-cost supply from the United States is taking much longer than expected, and it's likely to keep the market substantially oversupplied in the short term," it said. Industry group American Petroleum Institute reportedly said on Tuesday that US crude reserves shrank by 7.3 million barrels in the week to August 21. The numbers signalled healthy demand in the world's top crude consumer ahead of the more closely watched official stockpiles report from the US Energy Information Administration later on Wednesday. Oil prices have come under pressure from concerns that China's slowing economy will curb demand for the commodities that have helped feed its astonishing growth over the past three decades. The devaluation of the yuan two weeks ago fuelled economic fears, sparking a slump in world equities sending commodities, as measured by the Bloomberg Commodity Index of 22 raw materials, to a 16-year-low on Monday. Losses continued in Shanghai shares today, while other Asian markets were mixed, after China's central bank cut its benchmark lending and deposit interest rates in a bid to boost confidence. "Although this did not revive the markets, it did put a stop to the bleeding and markets remain quiet at the start of the day," Ang said. (Agencies)
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Once upon a time, talk of an emergency OPEC meeting would have rippled through oil markets, likely triggering at least a brief rally in prices. The last extraordinary meeting to discuss a price slump, in 2008, resulted in the Organization of the Petroleum Exporting Countries' largest ever production cut, paving the way for prices to double within a year. Nowadays, however, calls for an unscheduled meeting to address spiralling prices are more a sign of growing friction within the group than a leading indicator of policy action. Although OPEC's statutes say support from a simple majority of the 12 members can trigger an extraordinary meeting, none will occur without support from Saudi Arabia, which has yet to give its blessing, OPEC delegates say. With oil falling further, support is growing among non-Gulf members for action and even some Gulf officials are concerned about the latest drop in prices. But the top OPEC producer's policymakers have remained publicly silent. Without the Saudis on board, even some OPEC members who are desperate to shore up prices say an abrupt public gathering is not the way to go and might only make matters worse. "The environment here is not to have any meeting without reaching unity in the position and measures of the majority at least," said an OPEC delegate. "Otherwise, the meeting will be meaningless. And it might be even worse and add pressure to prices if no agreement came out." Oil fell to almost $42 a barrel this week, its lowest since early 2009, pressured by abundant supplies and concern about the economic health of China, the world's second-largest oil consumer. Prices deepened their decline after OPEC's 2014 change in policy to defend market share and discourage competing supply sources from rival producers, rather than cut its own supply. Saudi Arabia and its Gulf allies led the policy shift. Non-Gulf members want OPEC to take action. Algeria has written to OPEC expressing concern about the market, delegates say, and Iran said on Sunday an emergency OPEC meeting may be "effective" in stabilising prices. But two other delegates doubted OPEC will meet before its next scheduled gathering on Dec. 4. "There is no emergency OPEC meeting - nothing," said one. No country has formally requested such a meeting, said another. Unwilling To CutSaudi Oil Minister Ali al-Naimi has made no public comment on prices since June 18, when with Brent above $63 he said he was optimistic about the market in coming months. As prices sank this week, Saudi officials remained silent. OPEC delegates and industry sources say it would be hard for Saudi Arabia to reverse the policy it championed, particularly at a time when Iraq has boosted exports to a record and Iran is hoping to expand supplies if and when sanctions are lifted. Since 2011, OPEC has met just twice a year. It gathered more frequently to deal with previous price collapses and held as many as eight meetings annually in the early 2000s, sometimes convening gatherings with just days' notice. As well as an extraordinary meeting, OPEC can also convene a "consultative meeting" at the request of its president. The last one took place in late 2008, when prices had collapsed due to the financial crisis and OPEC made its record output cut. The difference now, though, is the willingness to curb supply is not there. "No one is ready to decrease production," said the first delegate from one of OPEC's larger producers. A Gulf OPEC delegate said he didn't see Saudi Arabia changing strategy and that Brent may fall to $40 before recovering. Signs of lower exports from OPEC countries would be more likely to boost prices than talk of a meeting. Iraq's oil exports fell by at least 250,000 barrels per day in the first 17 days of August, according to loading data, making it less likely a steady rise in OPEC output will be sustained this month. "Reducing production will have an immediate strong reaction on the market - better than a meeting with no outcome," he said. "Calling an emergency meeting will not help at all." (Reuters)
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