Monday 22 August 2016

Jawaharlal Nehru Port Trust to sign agreement with bankers for External Commercial Borrowing

Port projects, including connectivity projects, are critical to developing cargo handling capacity at Ports. With the thrust on port led development under the Sagarmala program, improving viability of projects is critical. One of the primary factors that impacts viability is the interest rate on borrowings to fund projects. Ports have surplus funds, but to achieve a quantum jump in the investment, borrowings would also have to be
made by ports. Minister of Shipping and Road Transport & Highways Shri Nitin Gadkari, had suggested an innovative means of raising low-cost external commercial borrowings, particularly when the port had revenues in foreign exchange, which provided a natural hedge to the ports. This would substantially eliminate the requirement of hedging the forex risk and would reduce the cost of borrowing. This suggestion was followed up by Ports. JNPT is the first Major Port to finalise the terms of external commercial borrowing.

Considering the need of the JNPT to cater to the increase in traffic, Shri Nitin Gadkari realised the criticality of project implementation especially for NPT’s cargo evacuation requirements and in a review meeting in July 2014, it was decided that the project for conversion of the existing road connectivity to 6/8 laning of NH-4B, SH-54 and Amra Marg on the boundaries of proposed Navi Mumbai International Airport in the state of Maharashtra, would be undertaken on EPC basis. Substantial investment would be required for this project, and cheaper funds would add to the viability of the project, reduce costs for end-users, and also ad to the profitability of JNPT. 

In line with Prime Minister Narendra Modi’s port-led development programme, India’s premier container port, Jawaharlal Nehru Port in Navi Mumbai, has signed an agreement with State Bank of India and Development Bank of Singapore for External Commercial Borrowing to the tune of USD 400 Million at a “very competitive” interest rate to improve the infrastructure required for “doubling” its existing capacity to 9.85 Million TEUs annually. 

The ECB of USD 400 Million ( USD300 Million from the SBI & USD100 from DBS) will be primarily utilised by the JNPT, which has US Dollar denominated foreign currency earnings which can be leveraged for a low cost foreign currency borrowing, for expansion of its existing roads network connecting to its port project as the existing road network for evacuation of traffic is currently operated at a capacity utilisation of 100%.

The agreement with the SBI & DBS was signed by the JNPT Chairman Anil Diggikar in the presence of the Shipping Secretary Rajive Kumar after the Reserve bank of India granted approval to JNPT for raising USD400 Million with an end use of on-lending to Mumbai JNPT Port Road Company Limited (MJPRCL) for implementation of road project. The ministry of shipping has already granted its approval as required under the Major Port Trusts Act, 1963. The two parties will exchange the documents tomorrow. 

Borrowing by JNPT is for Door-to-Door tenor of 7.5 years. However, lending by JNPT to MJPRCL is for 16 years (two years construction and 14 years repayment). 

The funding process involved assessment and structuring of cash-flows (both at JNPT level and MJPRCL level), bid process management, engagement of domestic and foreign lenders. 

Project will be developed by Mumbai JNPT Port Road Company Limited (MJPRCL), a joint venture company of NHAI, JNPT and CIDCO at a total estimated cost of Rs. 2895 crore. Considering the importance and urgency of implementation of the project, it will be taken up by MJPRCL on EPC mode and funding for the project would be carried out by JNPT. 

The rate of ECB loan of 2.025% plus Libor USD6M ( approx 3.15%) which is cheaper than any other Indian currency loan. 

The funding by JNPT is the first of its kind for major port and it opens up one more avenue for major and government ports to raise funds by accessing international markets for their requirements. 

The project will primarily benefit and cater to the needs of JNPT and an improved connectivity is essential for traffic evaluation from JNPT. It is of great significance to JNPT and will give a boost to the country’s economy. 

This project will cater to the additional cargo which will be handled at the 4th Container Terminal. JNPT is going to double its capacity in the next seven years. This evacuation corridor would help in supporting the EXIM trade besides providing economic opportunity to the local and region. 

With this beginning, other Major ports would also adopt these means and improve their capability to invest. The step is another milestone in infusing dynamism into the functioning of the ports, both in their operations and financing. 

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