Financial close is achieved when the private partner has arranged the required funds for implementing the project and has a commitment from the lenders that all the requirements for the financing and the initial disbursement of funds have been fulfilled. In short, financial close means that the private. partner has access to funds for development of the project. In order to achieve financial close, the private partner should have submitted the financing agreements and a proof of fulfilment of all conditions precedents by both the public entity and the private partner, if required to the lenders/ bankers.

PROJECT

Hyderabad Metro Project

L&T Metro Rail (Hyderabad) Limited, the SPV incorporated to implement the Hyderabad Metro Project, achieved financial close in a record time of six months. This is the largest fund tie up in India for a PPP project to date.

Hyderabad Metro Project was announced by the Government of Andhra Pradesh (GoAP) in PPP mode under the Design-Build-Finance-Operate-Transfer (DBFOT) basis and the bidding process was as per the guidelines specified by the Government of India (Ministry of Urban Development, Planning Commission and Ministry of Finance). L&T emerged the lowest bidder in the face of stiff competition (the bid winning criteria was the minimum grant quoted by the bidder) and signed the concession agreement on 4th September, 2010.

A consortium of banks led by the State Bank of India sanctioned the entire debt requirement of Rs.11,480 crores. The equity component for the project, around Rs.3,440 crores, was infused primarily by the L&T Group. The project received a viability gap grant of Rs.1,458 crores from the Central Government through the Government of Andhra Pradesh.

A total of 10 banks participated in the funding for this prestigious project. The leading banks which associated with the project, besides the State Bank of India, included Canara Bank, Indian Bank, Indian Overseas Bank, Jammu& Kashmir Bank, Punjab & Sind Bank, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and Syndicate Bank.

L&T Metro Rail (Hyderabad) Limited gave a performance guarantee for Rs 360 crores to GoAP underlying its clear intent to do the prestigious project in the stipulated time frame. As per the provisions of the Concession Agreement, construction will have to be completed in five years. The concession period for the project is 35 years (including five years of the construction period) and is extendable by an additional 25 years.

Source: http://toolkit.pppinindia.com/ports/module3-rocs-hm1.php?links=hm1