The Orissa government has decided to give leasehold rights to International Seaports (India) Private Ltd which is implementing the Dhamra port project on the east coast.
International Seaports is a joint venture between engineering major Larsen & Toubro, Precious Shipping of Thailand and SSA International of the United States.
Two states that have given leasehold rights to port or road projects are Gujarat and Karnataka.
Gujarat government has given leasehold rights to Adhani port and Pipapav port.
Karnataka government has given leasehold rights to the Bangalore-Mysore expressway project. Leasehold rights allow project developers to mortgage fixed assets of the project. In ports, these are jetties and port land.
The leasehold rights were given in place of state government guarantees for the projects. Besides, project promoters are also not prepared to give any form of corporate guarantee to creditors because this will expose the parent company's balance sheet to the revenue risks of the project.
Consequently, in private sector ports the revenue risk is project-specific and is borne by promoters.
Debt servicing is exclusively from project revenues. Besides, financial institutions have been insisting on iron-clad securities as a precondition to disbursement of loans.
This includes physical asset cover of 1.5 times the value of the debt.
The Dhamra port is being executed on a build-own-operate-share-transfer basis. During the concession period of 30 years, the project promoters will have ownership rights over the physical assets unlike in a build-operate-transfer format.
In a build-own-operate-share-transfer format the promoters are also obliged to share project revenues with the state government. Port projects have vessel-related and cargo-related revenue.
The port, when completed, will have a draught of 18 metres and will be able to berth two Panamax class vessels of 80,000 dead weight tonnes each and oneHandymax vessel of 25,000 dead weight tonnes.
Alternatively, the port can accommodate a single Capesize vessel of 1,65, 000 dead weight tonnes.
International Seaports is financing the Rs 1,200 crore project on a 70:30 debt-equity ratio. Sources said the entire equity would be brought in by promoters. This project has not yet gone into financial closure with the environmental clearance still pending.
