India Infrastructure Report PDF

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Q1 2012
inDia
infrastructure Report
INCLUDES BMI'S FORECASTS
ISSN 1752-5403
Published by Business Monitor International Ltd.
INDIA INFRASTRUCTURE REPORT Q1 2012

INCLUDING 5-YEAR INDUSTRY FORECASTS BY BMI
Part of BMI's Industry Report & Forecasts Series

Published by: Business Monitor International Copy deadline: November 2011
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India Infrastructure Report Q1 2012
Business Monitor International Ltd
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CONTENTS
Executive Summary ......................................................................................................................................... 5 SWOT Analysis ................................................................................................................................................. 6
India Infrastructure Industry SWOT ...................................................................................................................................................................... 6
Market Overview ............................................................................................................................................... 7

India............................................................................................................................................................................................................................ 7
Building Materials .......................................................................................................................................... 14

Global ....................................................................................................................................................................................................................... 14 Industry Trend Analysis - Building Materials: China To Remain Demand Driver; Developed Markets Offer Little Support.............................. 14 Asia ...................................................................................................................................................................................................................... 20 Industry Trend Analysis - Building Materials: China Still Leading The Charge As Competition Heats Up ........................................................ 20
Industry Forecast Scenario ........................................................................................................................... 26

Table: India Construction And Infrastructure Industry Data............................................................................................................................... 26 Table: India Construction And Infrastructure Industry Data............................................................................................................................... 28 Construction and Infrastructure Forecast Scenario.................................................................................................................................................. 30
Transport Infrastructure ................................................................................................................................ 35

Table: India Transport Infrastructure Industry Data ........................................................................................................................................... 35 Table: India Transport Infrastructure Industry Data ........................................................................................................................................... 38 Transport Infrastructure Forecast Scenario ..................................................................................................................................................... 41 Transport Infrastructure Overview ...................................................................................................................................................................... 43 Table: Competitiveness Of India's Infrastructure ................................................................................................................................................ 43 Major Projects Table Transport ....................................................................................................................................................................... 55 Table: Major Projects - Transport ....................................................................................................................................................................... 55
Energy and Utilities Infrastructure ............................................................................................................... 72

Table: India Energy and Utilities Infrastructure Industry Data........................................................................................................................... 72 Table: India Energy and Utilities Infrastructure Industry Data........................................................................................................................... 74 Energy and Utilities Infrastructure Forecast Scenario ........................................................................................................................................ 78 India Electricity Generation Capacity Mix, 2011e .................................................................................................................................................. 79 Energy and Utilities Infrastructure Overview ...................................................................................................................................................... 79 Major Projects Table Energy And Utilities ....................................................................................................................................................... 94 Table: Major Projects Energy And Utilities...................................................................................................................................................... 94 Residential/Non-Residential Construction and Social Infrastructure .................................................................................................................114 Table: India Residential and Non-residential Building Industry Data ................................................................................................................114 Table: India Residential and Non-residential Building Industry Data ................................................................................................................114 Residential/Non-Residential Construction Forecast Scenario ............................................................................................................................116 Residential/Non-Residential Construction and Social Infrastructure Overview.......................................................................................................118 Table: World Bank Doing Business Report: Global Rankings 2010 ................................................................................................................122 Major Projects Table Residential/Non-Residential Construction and Social Infrastructure ............................................................................124 Table: Major Projects Construction And Social infrastructure .......................................................................................................................124
Business Environment ................................................................................................................................ 128

India Business Environment................................................................................................................................................................................128 Rewards ..............................................................................................................................................................................................................128 Risks ...................................................................................................................................................................................................................128 Regional Overview...................................................................................................................................................................................................130 Asia Pacific Infrastructure Business Environment Ratings ......................................................................................................................................130
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Table: Regional Infrastructure Business Environment Ratings...........................................................................................................................136
Company Monitor ......................................................................................................................................... 137

Gammon India Ltd. .............................................................................................................................................................................................137 Reliance Infrastructure .......................................................................................................................................................................................139 Larsen & Toubro ................................................................................................................................................................................................142
Global Overview ........................................................................................................................................... 145 Methodology ................................................................................................................................................. 152

Industry Forecasts ...................................................................................................................................................................................................152 Construction Industry .........................................................................................................................................................................................153 Data Methodology ..............................................................................................................................................................................................153 New Infrastructure Data Sub-sectors..................................................................................................................................................................153 Construction .......................................................................................................................................................................................................154 Capital Investment ..............................................................................................................................................................................................155 Construction Sector Employment ........................................................................................................................................................................156 Infrastructure Business Environment Rating ...........................................................................................................................................................157 Table: Infrastructure Business Environment Indicators .....................................................................................................................................158
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Executive Summary
BMI View: Construction activity for the first quarter of FY2011/12 (April-June) was weak, with inflation and interest rates in India remaining at elevated levels. As such, we continue to hold fast our view of a prolonged soft patch for the Indian construction sector in FY2011/12, with real growth forecast to reach 4.0% during the fiscal year. Looking further ahead, however, the sector's fortunes are likely to pick up in FY2012/13, as the government is gearing up for the 12th Five-Year Plan, releasing new infrastructure projects and addressing concerns about access to long-term financing and land acquisition. Key drivers affecting growth include: In October 2011, it launched an INR166bn (US$3.35bn) highways building plan under the National Highways Development Programme, reports News Resources International. The plan covers the construction of six-lane highways totalling 6,500km, four-lane highways totalling 24,700km and the expansion of other highways. The programme is to be funded through public-private partnerships (PPPs). Under the plan, four expressway construction projects have already been given the go-ahead, while the country's PPP appraisal committee has approved 10 roadwork projects, worth a total of US$1.1bn. In July 2011, GMR won the contract to construct the 555.5km Ahmedabad-UdaipurKishangarh expressway-widening project - the single largest highway project in the country, both in terms of value and length. It is the first of nine similar highway projects. In September 2011, three state-run financial institutions - the Indian Infrastructure Finance Company Limited (IIFCL), Life Insurance Corporation of India (LIC) and India Development Finance Corporation (IDFC) - signed a memorandum of understanding to boost the application of takeout financing in India. The MOU would allow the three companies to take out up to 50% of an infrastructure project's debt, potentially unlocking about INR300bn (US$6.2bn) in bank debts, which could be used to finance other projects and speed up the pace of Indias infrastructure development. This enhancement in takeout financing is critical, as it could mitigate the lack of size and sophistication in India's financial markets by boosting the liquidity and risk transfer opportunities for Indian banks. We are forecasting Indian construction industry real growth to reach 6.0% in FY2012/13 and 7.5% in FY2013/14. These relatively high growth figures indicate that there are still significant opportunities for greenfield projects in India and is reflected in BMI's key projects database, which shows that there are more than US$400bn in projects either under construction or in the pipeline in the country's infrastructure sector.
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SWOT Analysis
India Infrastructure Industry SWOT
Strengths
Proliferating domestic and offshore infrastructure funds target the Indian infrastructure market, driven by strong demand from the transport, power, urban infrastructure and irrigation segments. Indias government is keen to facilitate private sector participation in infrastructure. Growing private sector investment in infrastructure 38 infrastructure PE funds are currently looking at assets in India, with nine more to be launched in 2011, as cited by Livemint. Application of takeout financing boosted in India, potentially unlocking around INR300bn (US$6.2bn) in bank debts, which could be used to finance infrastructure developments in India. Lack of a structured regulatory and policy framework, or well-defined operating and financing regulations PPP framework and regulations are inconsistent and lack transparency. The country is overly bureaucratic this delays the absorption of funds and deters investors. Project delays, caused by issues with land clearance, and a nebulous bureaucratic system, continue to be a significant problem, with roughly half of planned projects running behind schedule in FY2009/10. There are low levels of domestic expertise, stemming from a shortage of skilled project managers and engineers. There is low mechanisation and limited use of modern technological equipment. th Downgrades to investment targets under the 11 Five-Year Plan, especially in transport infrastructure, which has been revised down by 20% in value terms. Limited long-term borrowing capability on the domestic banking sector immature bond market. Opportunities for greenfield projects across all infrastructure sub-sectors. There is the opportunity for the domestic industry to become more organised, with the creation of more large firms through organic growth and acquisitions. This would improve overall construction quality. Strong population growth and a growing economy is fuelling demand for infrastructure. The government is looking to attract private companies to invest in infrastructure through public-private partnerships (PPPs). th 12 Five-Year Investment plan targeting US$1trn in investment, with 50% to come from the private sector. Significant investment in electricity generating capacity with ambitious targets, including 470GW of nuclear power by 2050, 20GW of solar power by 2022 and 20GW of wind capacity by 2020. India may prove unable to cope with its burgeoning population, which has passed the 1bn mark, posing a major threat to the economy and political situation. Destructive flooding affects productivity. Obstacles such as red tape, lack of transparency and bureaucratic complexities will threaten five-year plan implementation. Land clearance issues cause major delays to infrastructure and construction projects. An inadequate system for compensation and environmental approvals is slowing investments and, in some cases, preventing projects from progressing.
Weaknesses
Opportunities
Threats
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Market Overview
India
Five-Year Plans Overview Following a conference organised by India's Planning Commission, which included presenting the findings of the Mid-Term Appraisal (MTA) of the 11th Five-Year Plan (2007/08- 20011/12), India's Prime Minister Manmohan Singh, has revised down growth targets for the period. However, at the same time, Singh has announced ambitious targets for the 12th Five-Year Plan, which will run from 2012/13 to 2016/17. The 11th Five-Year Plan India's 11th Five-Year Plan (2007/08-2011/12) originally targeted investment of INR20,562bn in infrastructure, including utilities and transport infrastructure, as well as telecoms and irrigation. However, based on revised estimates announced in the MTA, as detailed by Daily News & Analysis (DNA) India, investment is likely to reach INR20,542bn (US$453,856mn) a difference of around US$430mn. Although this is very close to target, especially taking into account the difficult economic environment, investments have been bolstered by better-than-expected interest in the telecoms sector, with transport infrastructure falling far below expectations. Indeed, investment in telecoms is expected to be 1.59 times the targeted amount, with 82% of this having come from private sector financing.
A t
The 11th Five-Year Plan, Original and Revised Investment Targets, INRbn
t h e
s a m e
t i m eSource: Planning Commission
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At the same time, Singh has downgraded real GDP growth forecasts for the 11th Five-Year Plan Period, stating that average growth is expected to come in at around 8% per year between 2007/08 and 2011/12. This is down from the 9% targeted for the period and has been in response to around 7% year-on-year (yo-y) growth seen over the past 18-24 months. Singh attributes this to a difficult economic environment, exacerbated by lower food production, which has been caused by below-normal rains in the 2009 monsoon. Although BMI's Asia Country Risk analysts are positive about India, especially in the context of the global economic situation, the fiscal situation is tempering growth expectations at below 8% y-o-y. With high levels of public debt pushing interest rates up, this will impact the price of loans within the country. This in turn will affect private sector access to financing within India, impacting potential investors as they attempt to raise funding for infrastructure projects. Indeed, levels of private sector financing have fluctuated considerably over the first half of the 11th FiveYear Plan, according to the MTA. On the whole, investment from the private sector has fallen below expectations. Projections for private sector investment have been reduced by 50-80% in some sectors, such as roads and railways, according DNA India. Ports There has been high private sector investment in ports, with 80% of the sector's total investment in the ongoing plan coming from private sources. This is hardly surprising; the port sector has seen some of the highest levels of private sector participation. A large number of port terminals are operated by the private sector, meaning expansion plans are supported by private finance. At the same time, a number of concessions for terminals have been awarded over recent years. Airports Airports have also seen a substantial amount of private sector investment, according to the appraisal, accounting for around 64% of investment. Once again, this is not a shock, as a number of larger airports in the country are being operated under concessions. Indira Gandhi International Airport in Delhi is being run by a GMR-led consortium under a 30-year concession, for example. Roads And Railways Despite successes in the port and airport sectors, roads and railways have underperformed in terms of private sector investment. According to the MTA, just 16% of investment in roads has come from the private sector and a paltry 4% in the railways sector. In terms of railways, the entire Indian railway network is run by state-owned Indian Railways, meaning private investors will find it very difficult to make any gains; however, in the recent 2010/11 budget, plans were put in place to incorporate publicprivate partnerships (PPPs) into investment plans.
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In the roads sector, there has been a drive to attract private investors. Indeed, Kamal Nath, India's former Minister for Road Transport and Highways, had embarked on an ambitious plan to get US$70bn of investment into the road sector over three years, with more than half the amount (US$40bn) to come from private sources. However, it appears that actual private investment is falling very short of targets. A number of issues have been highlighted with regard to concessions in the road sector; this includes issues with
Source: Planning Commission
Investment Into Roads And Highways Under 11th Five-Year Plan
land rights, environmental clearance, rigidity in the risk allocation of the Model Concession Agreement and the difficulty in acquiring financing. However, the most pertinent concerns are over wastage and rampant corruption. According to Indias Home Minister P. Chidanbaram, only half of the allocated government budget for roads was actually invested on intended projects, although Nath had been working hard to push through alterations in the concession agreements and bypass recurring causes of delays, such as land clearance. Consequently, BMI expects that this 16% figure will increase by the end of the plan. 12th Five Year Plan Despite private sector participation falling below expectations and downward revision in real GDP growth rate and planned investment, the Prime Minister has touted ambitious targets for the 12th FiveYear Plan, which will run from 2012/13 to 2017/18. The headline figure, which has grabbed the most attention, is the INR45,000bn (US$1trn) investment target double that of the 11th Five-Year Plan. Singh is hoping that through doubling investment targets, real GDP growth can be sustained at an average rate of 10% per year between 2012/13 and 2017/18; an ambitious target to say the least. BMI's average real GDP growth forecast for the period comes in only marginally lower than the 11th Five-Year Plan period, at 7.8% per year. While this is below the government's targets, the forecast is a good one and highlights Indias attractiveness. However, BMI believes that growth will not reach double figures due to the country's strained fiscal situation. India's public debt levels are very high, at around 80% of GDP. This should constrain the fiscal budget; however, if spending is not reduced, interest rates on government debt will be pushed higher, and this will constrain access to loans. In order to unlock the targeted double-digit growth, BMI believes that the private sector will be crucial. With financing constrained in the domestic project finance market and deep-rooted obstacles damaging the business environment, the private sectors ability to push growth this high is limited.
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During the 12th Five-Year Plan, the government is targeting 50% of investment to come from the private sector, equal to US$500bn. BMI notes that while India remains an attractive market for infrastructure investors driven by the strong fundamentals of economic and population growth this target is an ambitious one. Project Finance Concerns The biggest concern is access to finance, with local bank capacity not really up to providing the sort of long-term financing needed to support infrastructure projects. Due to the long-term nature of most projects, loans need to have a term of more than 10 years. However, local banks are unable to provide this type of financing due to the underdeveloped nature of Indian capital markets, a lack of precedent for longterm loans, limited liquidity and the fact that banks' funds mature over the medium-term. In order to get round this problem, in 2006, the government set up the Indian Infrastructure Finance Company, a government-owned company which provides long-term financing for infrastructure projects. The company has been very successful, with disbursements having reached US$2bn by the end of March 2010; these were expected to increase significantly by the end of March 2011, to US$4.4bn. Other ways of increasing financing options have been pursued. The FY2011/12 union budget saw the Indian government reaffirm its commitment to financing infrastructure, and outlined plans to release 23.3% more funding to the sector than in FY2010/11 reaching INR2,140bn (US$48bn) in FY2011/12; this is equal to 17% of total budgetary expenditure. Meanwhile, government authorities involved in infrastructure development have been allowed to issue tax free bonds, amounting to a total of INR300bn (US$6.7bn). This includes: the Indian Railway Finance Corporation INR100bn (US$2.2bn); the National Highway Authority of India INR100bn (US$2.2bn); the Housing and Urban Development Corporation INR50bn (US$1.1bn); and Ports INR50bn (US$1.1bn). In addition, the FY2011/12 budget will provide the government-owned India Infrastructure Finance Company Limited (IIFCL) with an additional INR5bn (US$1.1bn) for its takeout financing scheme. In takeout financing, a long-term financing institution such as IIFCL will agree to take an existing loan (possibly short- to medium-term) off a bank's balance sheet for a price, thus boosting the liquidity and risk transfer opportunities for Indian banks. This scheme, along with the refinancing services provided by IIFCL, are essential for the successful implementation of India's 12th Five-Year Plan (2012/13- 2016/17) due to the lack of size and sophistication in India's financial markets. In August 2011, it was reported that the IIFCL will take over the management of more than US$131.1bn in loans from the IDBI Bank. The Indian government has recognised the effectiveness of takeout financing for infrastructure development and has boosted the scope of the scheme. In September 2011, three state-run financial institutions - the Indian Infrastructure Finance Company Limited (IIFCL), Life Insurance Corporation of India (LIC) and India Development Finance Corporation (IDFC) - signed a memorandum of understanding to boost the application of takeout financing in India. The MOU would allow the three
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companies to take out up to 50% of an infrastructure project's debt, in the ratio of 20:20:10 respectively. According to Indian Finance Minister Pranab Mukherjee, this takeout financing agreement is expected to unlock around INR300bn (US$6.2bn) in bank debts, allowing banks to finance other projects and speed up the pace of infrastructure development in India. Originally, the takeout financing scheme is only carried out by IIFCL for up to 20% of a project's total cost. Restrictions on foreign institutions and investors (FIIs), which previously hindered investment in infrastructure-related bonds, have also been relaxed another positive move to improve long-term financing given FIIs' access to deeper and more varied pools of funding. FIIs are now able to invest up to US$25bn on bonds issued by infrastructure companies, an increase from an original US$5bn. FIIs are also allowed to invest in unlisted bonds from special purpose vehicles (SPVs) belonging to infrastructure companies, while new infrastructure debt funds that are exempt from taxes will be created to attract foreign funds for financing of infrastructure. In June 2011, the Indian government indicated that the structure for the SPVs for infrastructure financing commonly known as infrastructure debt funds (IDFs) is now in place. The newly-designed IDFs, which were proposed by Finance Minister Pranab Mukherjee in the Union Budget for 2011/12 (AprilMarch) and are expected to have a combined value of INR500bn (US$11bn), are aimed at accelerating and enhancing the flow of long-term debt for infrastructure financing. The government hopes that these IDFs will entice domestic and overseas institutional investors to commit long-term funding to infrastructure projects across the country. These investors would most likely include insurance and pension funds, as their long-term financial obligations make them well suited for financing infrastructure. As of October 2011, Indian officials are already promoting these IDFs to overseas investors. Economic Affairs Secretary R Gopalan was in discussion with investors in Singapore and had announced that the first IDF is set to be launched in the coming two months. The fund is expected to attract US$3bn in investment, and is currently undergoing the initial process of establishment. To date, insurance and pension funds have so far played a limited role in India's infrastructure sector. To boost the investment grade rating of these SPVs and IDFs, the government has launched a new financing tool known as credit enhancement. According to the Economic Times, the proposal, which was reviewed by the finance ministry in August 2011, envisages a guarantee by the IIFCL which will subscribe to 25-50 % of the bonds being issued by the infrastructure company. This will be backed by insurance cover from the Asian Development Bank (ADB) to the tune of 50% of IIFCL's exposure, which in any case enjoys sovereign guarantee. For example, if a SPV floated by a company for infrastructure development is raising INR40bn debt through bond issuance, and is approved for credit enhancement, IIFCL will subscribe to the bonds amounting to INR10bn, with half of these purchased bonds insured by ADB and the other half enjoying a government guarantee provided by IIFCL. This would boost the SPVs rating from BBB to AA, making it investment grade for long-term players such as pension and infrastructure companies, who are required to invest in bonds with a minimum rating of AA. Credit enhancement will
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therefore help long-term lenders to finance infrastructure projects, while freeing up banks to make investment that will match their liabilities, which are typically short-term deposits. The initial phase for credit enhancement is expected to provide funding support for around INR150bn and has since been expected to direct and indirect equity holders. In Sep 20111, it was reported by Reuters that the Reserve Bank of India further eased external commercial borrowing policy for the infrastructure sector by allowing direct and indirect equity holders to provide credit enhancement for domestic debt raised by Indian infrastructure companies and infrastructure finance companies. The direct foreign equity holder should have a minimum of 25% of paid-up capital in the debt issuing firm while the in direct foreign equity holder needs to have at 51%%.. These measures are meant to boost foreign investment particularly from private equity funds into Indias infrastructure sector, and they appear to be proving successful. Over recent years, the private equity (PE) funds focusing on India's infrastructure sector have increased in number. Perhaps the biggest is the Macquarie-SBI fund, which is currently in the process of raising US$1.5bn following its first close in April 2009. Other funds include the US$1.2bn 3i India Infrastructure Fund (the international private equity company plans to launch a second infrastructure fund of US$1.5bn) and ICICI Venture's US$1bn India Infrastructure Advantage Fund. More recently, in March 2011, Nomura Securities, Japan's leading securities company and subsidiary of financial conglomerate Nomura Group, announced plans to raise US$500mn from Japanese investors for an Indian infrastructure fund. These funds have made an impact on Indias infrastructure development. Between May and September 2011, six notable PE groups - 3i Infrastructure , Morgan Stanley , Kohlberg Kravis Roberts , Blackstone Group and JP Morgan Chase - invested a total of US$1.05bn into Indian companies or infrastructure projects. According to PE research house Preqin, there are 38 infrastructure PE funds currently looking at assets in India, with nine more to be launched in 2011, according to Livemint. In total, Preqin notes that the funds have raised US$9.5bn for investment in India's infrastructure sector and are seeking a further US$7.3bn. During 2010, 28 deals worth a combined US$2bn were made in India's infrastructure sector, compared to just 18 deals worth US$333mn in 2009, according to VCCircle research, also cited by Livemint. PE funds have seen some success, typically investing in a company or an established infrastructure asset. Indeed, brownfield opportunities are the most popular amongst the PE infrastructure funds, as the level of risk inherent in existing assets is significantly reduced. Reform Momentum Can Only Improve Policy reform, while still sluggish, is starting to move forward, following a virtual standstill in the last two parliamentary sessions. A key reform is the introduction of a new land bill to repeal the obsolete Land Acquisition Act of 1894 and replace it with a fresh National Land Acquisition and Rehabilitation & Resettlement Bill 2011. With the 2012 elections looming large, the land reform bill remains a hot political topic, with the Indian public still very much against the bill. This is in spite of the unfavourable terms for
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investors, as the financial cost of land purchases is expected to rise significantly under the current proposals. Construction companies would need to pay twice the market value for urban land and six times for rural development. In addition, 80% of the families involved will have to give approval for acquisitions to take place, and the bill would be implemented retrospectively. Nevertheless, if approved in FY2011/12, as we believe it will be, the legislation could bring much-needed speed and clarity in a process that has long been cumbersome and incoherent. Indeed, the savings on approval/litigation/execution cost factors are likely to make the bill a net positive for investors. Project delays have been a considerable drawback for India's business climate, and any improvements on this front will certainly help to re-ignite investor enthusiasm. In Conclusion... All of these moves and announcements show that the government is moving in the right direction, and is looking at innovative ways of increasing access to financing for private investors looking to invest in India's infrastructure market. In order to capitalise on Indias potential, these plans need to be implemented in a timely manner. At the same time, the issue of transparency and an over-intrusive bureaucracy needs to be addressed in order to attract investors into the market. The government appears serious about addressing these issues, and, in order to achieve its ambitious targets in the 12th Five-Year Plan, it needs to be.
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Building Materials
Global
Industry Trend Analysis - Building Materials: China To Remain Demand Driver; Developed Markets Offer Little Support
BMI View: The recent downturn in investor sentiment sparked by growing uncertainty over the US economic recovery and the ongoing fiscal situation in the eurozone reinforces our core view that demand for building materials will remain broadly muted in developed economies s through 2011 and into 2012. With persistent weakness in developed markets and political headwinds still weighing on growth in the Middle East and North Africa (MENA), demand in China will remain the key factor in determining the levels of growth in the global consumption of cement and steel over the coming quarters. Meanwhile, elevated raw material and energy prices will continue to weigh on producer margins across the globe. Key views for 2011: Asia and Latin America to outperform globally: emerging Markets (EM) demand for building materials to hit new highs in 2011 driven by robust economic growth. Europe/North America: cement production to remain depressed but stable; still below pre-crisis levels persistent market weakness driving asset sell-offs and increasing EM focus. The impact of the crisis in Middle East and North Africa (MENA) will lead to muted consumption growth in 2011, but this will rebound in 2012. Saudi Arabia and Indonesia to be global outperformers in terms of cement consumption growth. Steel prices to trend steadily higher through 2011 and 2012; Chinese overcapacity to alleviate some upside pressure. Risks: Elevated energy and raw materials costs represent a continued threat to producer margins and consumers. China to remain the key growth driver of cement and steel demand; though monetary tightening measures present downside risk to the demand outlook. Inflationary pressures a key concern for the sector across much of Asia.
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Asia Pulling Away Rising per capita income, demographic growth, urbanisation and industrialisation are the key growth drivers behind Asia's building materials consumption story. Indeed, while base effects, China's cooling measures and continued weakness in developed markets will likely see a moderation in cement and steel consumption in 2011, demand growth will remain robust. Across much of Asia and other key emerging markets, notably Brazil, the rate of cement and steel consumption will accelerate. Indeed, surging demand in Asia, particularly China, saw global cement and steel consumption increase by 8% and 13% respectively in 2010, offsetting an uncertain and broadly muted recovery in Europe and North America.
Asian Outperformance
Basket Of Four Largest Global And Asian Cement Firms By Market Capitalisation (Rebased Jan10)
Source: Bloomberg.
Having accounted for the lion's share of growth in global cement sales, and two thirds of global steel production in 2010, we expect key Asian markets such as China, India, Indonesia and the Philippines to further boost the region's share of the total in 2011. Moreover, Asia will be the key driver behind a steady shift in global steel consumption over the coming years, away from developed economies and towards emerging/developing economies. This will see emerging markets account for 72% of global steel consumption in 2012 (from 61% in 2007); while steel use in the developed world will still be 14% below the 2007 level, according to World Steel Association (WSA) forecasts.
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Of these markets, Indonesia, Asia's third most populous country, alongside the Philippines, Thailand and Vietnam, continue to drive the rampant consumption of building materials in the region, with residential construction, in particular, continuing to exert strong upward pressure on cement prices. We expect Indonesia to be a regional outperformer over the next couple of years, having recorded a 14.8% rise in cement sales in H111. Given its size and positive demographic and macroeconomic fundamentals, there is huge growth potential within the market, particularly in the cement sector where sales are soaring and capacity is still insufficient. India To Outperform China Although we expect demand to remain relatively robust in China, the raft of monetary tightening measures introduced over the last 12 months should see the growth in consumption of cement and steel in India outpace that of its fellow giant. However, despite the anticipated moderation in construction activity in China, we expect demand for building materials to be relatively well supported due to China's huge affordable housing programme, as well as extensive infrastructure projects. India, Asia's other giant, will see demand for building materials accelerate in 2011. Indeed, according to the WSA, demand for steel in the country is expected to grow by 13.6% year-on-year (y-o-y) in 2011 and 14.3% in 2012, as the country's insatiable demand for housing and infrastructure projects drives consumption of the metal. Demand for cement will also rise, although whether this will exert any upward pressure on prices is uncertain, as capacity is high and India's cement producers are able to absorb rising costs. However, there are significant risks to this outlook, notably those arising from the well- publicised shortcomings within India's business environment. Rising Input Costs And Inflation To Squeeze Margins Over the last 12 months inflationary pressures and the high cost of key raw materials (notably fuel and iron ore) have been, and remain, a key concern for the construction industry. Driven by strong demand in Asia and perpetuated by the ongoing unrest in the Middle East, rising input costs have put pressure on companies' operating margins and in many cases served to offset improving sales growth. These effects have weighed particularly heavily on the building materials industry given its energy and resourceintensive nature. Moreover, with input costs likely to remain elevated over the coming months, margins will be squeezed further, as well as the increased likelihood that these costs will be passed on to the consumer.
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Still Eroding Profits

Brent Crude, Newcastle Coal And Chinese Iron Import Price Index (Rebased Jan-2010)
Source: Bloomberg.
However, the decidedly negative turn in investor sentiment through recent weeks has seen the price of a barrel of oil fall significantly. This is broadly in line with BMI's view that there will be a correction in oil prices in H211 and should help alleviate operating cost pressures for cement and steel producers. In South East Asia, such issues regarding negative turns in investor sentiment are accentuated by the constant threat of inflation, which remains a key concern for a number of countries in the region in 2011, particularly Indonesia and Vietnam. Although local supply-demand dynamics can drive up prices in a particular market on a short-term basis; factors such as transport and distribution costs, as well as uncertain electricity supply, also remain notable constraints for the building materials sector in many emerging markets. These heightened operating costs can serve to substantially erode positive sales growth. This latter issue is an especially pertinent one in sub-Saharan Africa (SSA), where the biggest obstacle facing large cement producers is the huge infrastructure deficit. This often makes the manufacturing and transport of building materials from country to country - a highly energy-intensive process at the best of times - often impossible. While encouraging efforts to ramp up capacity in countries such as Nigeria, Kenya, Angola and Zimbabwe have been seen over recent quarters, the price of key materials such as cement will remain highly vulnerable to price volatility for the foreseeable future.
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Developed Markets Trailing With weak economic data from the US continuing to erode confidence in the country's fragile recovery and the ongoing eurozone debt crisis, the outlook for the global cement majors with heavy exposure to these regions remains a subdued one. Indeed, high debt burdens and economic uncertainty led to a string of asset sell offs in the first half of 2011 as firms sought to reduce exposure to these struggling markets. Lafarge is a case in point, having sold off 'non-core' assets in the US and Europe as it bids to reduce its substantial debt pile. While uncertainty persists, the worst appears to be over for the European building materials market and we anticipate volumes and prices of building materials to stabilise in 2012. Even in the US, the latest figures support our view that residential construction has bottomed (adding 0.08% to overall GDP growth in Q211) which is positive news for the sector as a whole.
Developed Economies With Declining Share

Cement Production (thousand tonnes), 2010
Source: USGS.
Steel: Demand To Grow, With Moderate Price Rises Following a contraction of 6.6% in 2009, apparent steel use (i.e. steel consumption) increased by 13.1% in 2010 to 1,272 million metric tonnes (mmt), according to WSA estimates. It is forecast by the WSA that growth will moderate in 2011, but still rise by 5.3% to reach an all time high of 1,340mmt. This moderation in growth is due to factors such as base effects as well as China's raft of measures aimed at curbing its rampant property and construction sectors. Moreover, much of the growth seen in developed markets in H110 reflected inventory restocking and stimulus measures that have now unwound.
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Global Steel Growth Outlook

Steel Consumption Growth Forecast (%)
Source: WSA.
Although 2011 will likely see a relative slowdown in Chinese demand for the metal, global steel consumption will continue to be driven by the Asian giant. Indeed, China's construction and automobiles industries - two major steel consuming sectors - are forecast to expand by 9% and 15.8% respectively.
China Steel The Driving Force

Asia And China Steel Production (Thousand Metric Tonnes)
Source: WSA.
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Over the next two years we expect steel prices to rise steadily. Three-month LME steel billet prices will average US$580/tonne in 2011 and US$620/tonne in 2012, according to BMI's commodities team, though this is still a long way off pre-crisis peak levels. Over the coming quarter we expect the metal to trade between US$500/tonne and US$600/tonne, with a number of factors combining to prevent any potential price surge. One notable issue is that of significant overcapacity in China, which, along with the Chinese government's concerted efforts to cool industrial production,; reduce the likelihood of any supply-side constraints. While we believe that overcapacity will play a key role in curbing potential gains in steel prices there are a number of dynamics that could precipitate upward price pressure over the coming months. Indeed, cost pressures arising from the high cost of raw materials have continued to mount in recent months, forcing steel producers to increase prices as margins came under pressure.
Asia Industry Trend Analysis - Building Materials: China Still Leading The Charge As Competition Heats Up
BMI View: Attractive macroeconomic and demographic fundamentals across key Asian markets continue to underpin our positive outlook for global building materials consumption in 2011 and 2012, as well as over the longer-term. While China's belt tightening measures may conceivably see some softening in the region's cement and steel consumption growth over the coming quarters, heavy investment in infrastructure and social housing should ensure that demand levels are well-supported. Indeed, across the region, rising demand is driving robust sales growth which, in turn, is fuelling capacity expansion and increasing overseas investment. Key views: Inflationary pressures to remain a concern until end-2011, particularly in Indonesia and Vietnam high costs to continue to erode profit and drive market consolidation Strong domestic sales driving overseas expansion for a number of large regional cement producers competition intensifying in Indonesia Robust economic growth across region to drive global consumption of building materials in 2011/2012 and beyond - driven by demand for infrastructure and housing High cost of energy and raw materials to continue to weigh on the industry over the short-term, at least - squeezing margins and exerting upward price pressure
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China's cooling measures present demand side risk through 2011 and 2012 ...but sizeable social housing and infrastructure projects to provide significant respite - steel output proved to be robust through H111 Robust Fundamentals Drive Growth in 2011 and Beyond Rising per capita income, demographic growth, urbanisation and industrialisation are the key drivers of growth behind Asia's building materials consumption story. Indeed, we expect the strong demand for housing and infrastructure in large dynamic Asian markets, such as India, China, Indonesia and Philippines, to underpin robust growth in the sector over the medium- to long-term. This trend is highlighted in the outperformance of Asian cement companies relative to their global, Western-based competitors. In contrast to global cement majors such as Lafarge and Holcim who, despite a growing presence in emerging markets, have faced substantial headwinds over the last 18 months, Asian cement majors, such as China-based Anhui Conch, Thailand's Siam Cement and Indonesian firm Indocement, have performed strongly. Indeed, with Asia accounting for an expanding slice of the world's cement output China and India are the world's largest and second largest consumers of the building material by some distance - there is huge potential growth and consolidation within these markets over the coming years.
Strong Sales Growth, But Costs Weigh On Margins Asian Cement Firms (Rebased As Of 02/08/2010)
Source: Bloomberg
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Steel production in the region grew by 11.8% year-on-year (y-o-y) in 2010, increasing its proportion of the global total from 63.5% to 65.5%, according to the World Steel Association (WSA). Indeed, the region's insatiable demand for the metal has seen the price of iron ore soar over the last 18 months, symptomatic of the steady shift in steel consumption away from developed economies and towards emerging/developing economies. Moreover, despite the Chinese government's efforts to cool the economy, steel production reached a record high in June 2011, with apparent steel consumption for the period January to June up by nearly 9% compared to the same period in 2010. Furthermore, with steel rebar - most commonly used in building construction - the single largest product in the country's steel mix, the construction sector, remains a key driver behind this resilient growth. BMI notes that, while our expectation that fixed-asset investment in China will moderate significantly from 2011 onwards, in line with monetary tightening measures, the sheer size of the planned investments in social housing and infrastructure should help sustain solid growth levels and capacity utilisation rates. Meanwhile, over the short-term, we expect elevated input costs to continue to squeeze the margins of cement and steel producers over the coming months. Ramping Up Capacity As China's consumption growth moderates over the next couple of years, India, Asia's other giant, will see the demand for building materials accelerate in 2011 and beyond. According to the WSA, demand for steel in the country is expected to grow by 13.6% y-o-y in 2011 and 14.3% in 2012, as the country's insatiable demand for housing and infrastructure projects drives consumption of the metal. Demand for cement will also rise, although whether this will exert any upward pressure on prices is uncertain, as capacity is high and India's cement producers are able to absorb rising costs. There are significant risks to this outlook; however, it is noted that these arise from the well-publicised shortcomings within India's business environment. These shortcomings have manifested themselves in costly delays to major planned steel and mining projects in the country, inhibiting production levels and leaving investors wary. However, the Indian building materials industry received a major boost in May 2011, when the Environment Ministry finally granted final approval for a US$12bn steel mill to be operated by South Korea's POSCO, following years of delays. While this does little to paper over the major fissures still present within India's business environment, it is nonetheless a positive development for the sector. Dynamic and Increasingly Competitive Indonesia - the continent's third most populous country -, the Philippines, Thailand and Vietnam will be key growth markets for the consumption of building materials in the region over the coming years.
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Vietnam is expected to see a 9-10% rise in cement consumption in 2011 (according to Ministry of Industry and Trade), while in Thailand, cement consumption is anticipated to increase by nearly 10%, according to Siam City Cement, in spite of an expected slowdown in residential construction. Meanwhile, in Indonesia, cement consumption is likely to increase substantially, with the 14.8% rise in sales in the H111 period putting the country on course to beat the Indonesian Cement Association's estimates for the year of 6-8%.
Robust Growth Potential Cement Production (thousand tonnes)
Source: US Geological Survey
Indeed, given its size and positive demographic and macroeconomic fundamentals, there is huge growth potential within the market, particularly in the cement sector where sales are soaring and capacity is still insufficient. This has been illustrated by the recent performance of the country's largest cement producer Indocement Tunggal Prakasa (Indocement), which saw Q211 revenues grow by 27.9% year-on-year (y-oy) to reach US$394mn - although net profits continue to be eroded by high costs (a theme across much of the region). While energy prices look set to remain elevated, cost pressures should still ease, as we expect inflation in Indonesia to trend downwards over the coming months.
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Riding High With The Komodo Dragon Indocement Q2 Revenues, Net Profits And Operating Margin
Source: Indocement, Bloomberg
This robust growth potential has not gone unnoticed and is attracting the attention of foreign cement companies from within the region. In July 2011, Thailand cement maker Siam Cement announced plans to spend US$219mn on developing its ceramic and construction material businesses in Indonesia, while China's Anhui Conch is also planning to invest US$2.35bn in the construction of four new cement plants in the country. These investments will bring welcome new capacity online for the country, as well as stimulating increased competition within a market which holds significant potential for consolidation over the coming years. Vietnam is another market that looks set for increasing consolidation. Indeed, despite our positive long-term outlook for the sector, over-supply and high energy and transport costs will put increasing pressure on less-competitive companies. China Cools Regional Outlook, But Risks Remain Upside Apparent steel consumption in China for the period January to June 2011 grew by nearly 9% compared to 2010, despite indicators that the government's monetary tightening measures are beginning to take an effect on manufacturing and other industries, including residential construction. Indeed, steel production in the country averaged a record high of approximately 2mn tonnes in June 2011, according to the WSA, driven by strong demand from China's mass affordable housing programme and infrastructure projects. The key role of the construction sector in this resilient growth is reflected in the sizeable contribution 16% - of steel rebar (used primarily in building construction) in the country's steel mix.
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China Steel The Driving Force Asia And China Steel Production (Thousand Metric Tonnes)
Source: WSA
With a greater number of affordable homes due to be built over the second half of 2011, and in the years to follow, we expect steel and cement output in the country to be well-supported in the face of a wider softening in demand, as tightening measures take effect. A breakdown of WSA estimates shows that they expect China's apparent steel use in 2011 to increase by 5.0% to 605mnt, following 5.1% growth in 2010. Moreover, the given the pace of steel production in the first half of 2011, Chinese steel use could be even higher than expectations. However, given that utilisation rates remain below pre-crisis levels, we see few immediate risks from supply side constraints. Overcapacity therefore remains an issue in the country, coupled with high input costs, which are squeezing the margins of some of the country's main producers.
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Industry Forecast Scenario

Table: India Construction And Infrastructure Industry Data
2008/09 Construction Industry Value, INRbn Construction Industry Value, US$bn Construction Industry Real Growth, % chg y-o-y Construction Industry, % of GDP
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
4,514.1
5,017.1
5,918.6
6,699.4
7,667.9
8,874.7
10,316.3
11,859.8
13,590.3
103.7
103.6
129.5
145.6
163.1
194.0
237.2
287.5
339.8
5.4
7.0
8.1
4.0
6.0
7.5
7.7
7.0
6.6
8.1
7.7
7.5
7.3
7.4
7.5
7.6
7.7
7.8
Total Capital Investment, INRbn Total Capital Investment, US$bn Total Capital Investment, % of GDP Capital Investment Per Capita, US$ Real Capital Investment Growth, % y-oy
19,735.3
23,441.8
27,383.1
31,143.0
35,338.0
40,904.5
47,145.1
53,731.8
61,039.2
428.4
496.3
601.5
673.4
821.8
997.7
1,193.5
1,395.6
1,606.3
35.4
35.8
34.8
34.1
34.0
34.4
34.7
34.9
34.9
359.8
410.9
491.2
542.4
653.1
782.4
924.0
1,066.8
1,212.8
1.5
7.3
9.0
6.5
7.5
11.0
10.0
9.0
8.5
Construction Industry Employment, '000 Construction Industry Employment, % y-o-y Total Workforce, '000 Construction Industry Employees as % of total labour force
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A 759,958.6
#N/A 774,780.9
#N/A 789,749.6
#N/A 803,769.7
#N/A 818,273.7
#N/A 832,851.9
#N/A 847,141.0
#N/A 860,948.4
#N/A 873,803.4
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
Page 26
Table: India Construction And Infrastructure Industry Data
2008/09 Infrastructure Industry Value As % of Total Construction Infrastructure Industry Value, INRbn Infrastructure Industry Value, US$bn Infrastructure Industry Value Real Growth, % chg y-o-y Infrastructure Industry Value as % of GDP
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
45.7
46.5
47.0
47.8
48.5
49.7
50.4
51.1
51.6
2,063.3
2,332.9
2,781.8
3,200.3
3,722.7
4,413.3
5,204.3
6,059.4
7,016.8
47.4
48.2
60.8
69.6
79.2
96.5
119.6
146.9
175.4
12.8
11.1
8.7
5.9
7.8
10.3
9.4
8.4
7.8
3.7
3.6
3.5
3.5
3.6
3.7
3.8
3.9
4.0
Residential and NonResidential Building Industry Value As % of Total Construction Residential and NonResidential Building Industry Value, INRbn Residential and NonResidential Building Industry Value, US$bn Residential and NonResidential Building Industry Value Real Growth, % chg y-o-y Residential and NonResidential Building Industry Value as % of GDP
54.3
53.5
53.0
52.2
51.5
50.3
49.6
48.9
48.4
2,450.9
2,684.1
3,136.9
3,499.1
3,945.2
4,461.4
5,112.0
5,800.4
6,573.6
56.3
55.4
68.6
76.1
83.9
97.5
117.5
140.6
164.3
-2.5
7.5
6.3
2.4
4.2
4.8
6.1
5.5
5.3
4.4
4.1
4.0
3.8
3.8
3.8
3.8
3.8
3.8
f = BMI forecasts. Sources: Census and Statistics Department/ILO
Page 27
Table: India Construction And Infrastructure Industry Data 2013/14f Construction Industry Value, INRbn Construction Industry Value, US$bn Construction Industry Real Growth, % chg y-o-y Construction Industry, % of GDP 2014/15f 2015/16f 2016/17f 2017/18f 2018/19f 2019/20f 2020/21f 2021/22f
8,874.7
10,316.3
11,859.8
13,590.3
15,472.0
17,565.5
19,917.4
22,500.2
25,425.3
194.0
237.2
287.5
339.8
396.7
462.2
524.1
592.1
669.1
7.5
7.7
7.0
6.6
5.8
5.5
5.4
5.0
5.0
7.5
7.6
7.7
7.8
7.8
7.8
7.8
7.8
7.8
Total Capital Investment, INRbn Total Capital Investment, US$bn Total Capital Investment, % of GDP Capital Investment Per Capita, US$ Real Capital Investment Growth, % chg y-o-y
40,904.5
47,145.1
53,731.8
61,039.2
68,884.0
77,519.9
87,128.3
97,559.2
109,270.3
997.7
1,193.5
1,395.6
1,606.3
1,812.7
2,040.0
2,292.9
2,567.3
2,875.5
34.4
34.7
34.9
34.9
34.7
34.5
34.2
33.8
33.5
782.4
924.0
1,066.8
1,212.8
1,352.4
1,504.2
1,671.6
1,851.1
2,051.2
11.0
10.0
9.0
8.5
7.6
7.2
7.0
6.5
6.5
Construction Industry Employment, '000 Construction Industry Employment, % y-o-y Total Workforce, '000 Construction Industry Employees as % of total labour force
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A 832,851.9
#N/A 847,141.0
#N/A 860,948.4
#N/A 873,803.4
#N/A 886,229.8
#N/A 898,389.5
#N/A 910,552.4
#N/A 922,846.1
#N/A 934,482.0
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
#N/A
Infrastructure Industry Value As % of Total Construction
49.7
50.4
51.1
51.6
52.1
52.4
52.7
53.0
53.2
Page 28
Table: India Construction And Infrastructure Industry Data 2013/14f Infrastructure Industry Value, INRbn Infrastructure Industry Value, US$bn Infrastructure Industry Value Real Growth, % chg y-o-y Infrastructure Industry Value as % of GDP 2014/15f 2015/16f 2016/17f 2017/18f 2018/19f 2019/20f 2020/21f 2021/22f
4,413.3
5,204.3
6,059.4
7,016.8
8,055.7
9,210.0
10,504.9
11,924.6
13,530.5
96.5
119.6
146.9
175.4
206.6
242.4
276.4
313.8
356.1
10.3
9.4
8.4
7.8
6.8
6.3
6.1
5.5
5.5
3.7
3.8
3.9
4.0
4.1
4.1
4.1
4.1
4.1
Residential and NonResidential Building Industry Value As % of Total Construction Residential and NonResidential Building Industry Value, INRbn Residential and NonResidential Building Industry Value, US$bn Residential and NonResidential Building Industry Value Real Growth, % chg y-o-y Residential and NonResidential Building Industry Value as % of GDP
50.3
49.6
48.9
48.4
47.9
47.6
47.3
47.0
46.8
4,461.4
5,112.0
5,800.4
6,573.6
7,416.2
8,355.5
9,412.5
10,575.6
11,894.7
97.5
117.5
140.6
164.3
190.2
219.9
247.7
278.3
313.0
4.8
6.1
5.5
5.3
4.8
4.7
4.7
4.4
4.5
3.8
3.8
3.8
3.8
3.7
3.7
3.7
3.7
3.6
f = BMI forecasts. Sources: Census and Statistics Department/ILO
Page 29
Construction and Infrastructure Forecast Scenario

A slowdown in India's infrastructure sector continues to unfold in FY2011/12 (AprilMarch). The latest statistical data from India's Ministry of Statistics and Programme Implementation (MOSPI) showed that real growth for the Indian construction industry came in at just 1.2% year-onyear (y-o-y) for the first quarter of FY2011/12 (April-June), compared to 7.7% y-o-y in the same period in FY2010/11. For the rest of FY11/12, we remain bearish towards India's construction sector due to adverse monetary conditions. Inflation persists at an elevated 9.7% y-o-y in September 2011, despite 11 rate hikes since March 2010. This is placing pressure on the Indian central bank, the Reserve Bank of India (RBI), to initiate further rate hikes to cut inflation. The RBI raised the policy repo rate by 25 basis points to 8.50% on October 25 2011. Meanwhile, global external conditions are turning for the worse in recent months, and we believe this further sets the stage for weak construction growth throughout the remainder of FY2011/12. The combination of costly debt levels and high raw material prices will deter or prevent construction companies operating in India from carrying out large-scale projects, due to a lack of adequate financing. We do, however, believe that this cyclical downtrend in construction has bottomed out, with inflation already at its peak. Although rate cuts are unlikely to take place until mid-2012, the RBI has expressed a clear desire to pause monetary tightening, and this should provide a measure of certainty to infrastructure investors in search of financing. As such, we believe that construction activity could improve at the tailend of FY2011/12, and we have only revised down our real growth forecast for the Indian construction industry for FY2011/12 to 4.0% (previously 7.3%).
BMI f=forecast, Source: BMI, BMI Calculation
Infrastructure Moving Centre Stage Construction Industry Value And Infrastructure Share
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Activity To Bound Back In 2012/13 Looking further ahead, we are confident that the sector's fortunes will start to improve in FY2012/13. The Indian government is making serious attempts to kick-start infrastructure development for the 12th FiveYear Plan (FY2012/13-FY2016/17), approving major infrastructure projects and pushing forward plans to accelerate and enhance the flow of long-term financing. In June 2011, India's Ministry of Railways announced that it will conduct the sale of INR100bn (US$2.2bn) of tax-free bonds in India by September 2011, while other ministries involved in roads, ports and urban development will also be conducting their bond issuances during FY11/12. In September 2011, three state-run financial institutions - the Indian Infrastructure Finance Company Limited (IIFCL), Life Insurance Corporation of India (LIC) and India Development Finance Corporation (IDFC) - signed a memorandum of understanding to boost the application of takeout financing in India. The MOU would allow the three companies to take out up to 50% of an infrastructure project's debt, potentially unlocking around INR300bn (US$6.2bn) in bank debts, which could be used to finance other projects and speed up the pace of infrastructure development in India. This enhancement in takeout financing is critical, as it could mitigate the lack of size and sophistication in India's financial markets by boosting the liquidity and risk transfer opportunities for Indian banks. Meanwhile, special purpose vehicles developed by India for infrastructure financing - commonly known as infrastructure debt funds (IDFs) - are being promoted by Indian officials to overseas investors. In October 2011, India's Economic Affairs Secretary R Gopalan was in discussion with investors in Singapore and had announced that the first IDF is set to be launched in the coming two months. The fund is expected to attract US$3bn in investments and is currently undergoing the initial process of establishment. Investments from foreign sources also accelerated at the start of FY2011/12, as the high cost of domestic financing has made Indian infrastructure companies more receptive to capital investments from overseas companies. Between May and September 2011, six notable private equity groups - 3i Infrastructure , Morgan Stanley , Kohlberg Kravis Roberts , Blackstone Group and JP Morgan Chase - invested a total of US$1.05bn into Indian companies or infrastructure projects.
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Boosting The Pipeline Besides greater access to financing, another indication of a rebound in construction activity is the growing number of infrastructure projects being implemented and announced by the Indian government. BMI 's Key Projects Database has once again seen an increase in project backlogs for several infrastructure sectors over the past quarter, with the value of total projects (particularly power projects) under construction or in the pipeline in India's infrastructure sector growing from US$400bn as of August 2011 to around US$430bn as of October 2011. This does not include projects that have not provided cost estimates, which would make the actual value of infrastructure projects available in India even higher.
Value Of Key Infrastructure Projects in India*
Source: WSA
The road sector is a key example of this increase in pipeline projects. In October 2011, the Indian government launched an INR166bn (US$3.35bn) highways building plan under the National Highways Development Programme, covering the construction of six-lane highways totalling 6,500km, four-lane highways totalling 24,700km and the expansion of other highways. Under the plan, the government has already approved four expressway construction projects, while the country's public-private partnership appraisal committee has approved 10 roadworks projects, worth a total of US$1.1bn. Therefore, we expected several infrastructure projects to be awarded at the start of FY2012/13 and begin construction in late-2012 or 2013. This view is reflected in our forecasts, with real growth for India's construction sector to reach 6.0% in FY2012/13 and 7.5% in FY2013/14. This also supports our view that
Page 32
infrastructure (one of the two sub-sectors which form the construction industry value, according to BMI 's definition) will continue to be the main driver of construction industry value, substantially outperforming its counterpart - the residential and non-residential building sector. However, these growth rates are still lower than the double-digit figures seen in the early 2000s, and far below potential growth levels. Our forecast is motivated by a number of factors: India's business environment continues to be plagued by a convoluted and incoherent legal framework, rampant corruption and an environmental ministry that is over-zealous in prosecuting infringements, but slow in implementing policies. Unclear and ineffective land clearance regulations are delaying projects, and complex and convoluted bureaucracy is slowing down planning and tendering processes These issues have led to lengthy delays, with the latest figures from the Ministry of Statistics and Programme Installation (MOSPI) showing that 284 out of 496 construction projects in India were delayed as of December 2010. A downgrade of investment targets in the 11th Five-Year Plan (2007/07-2011/12), announced in March 2010 due to lower than expected investment in the transport infrastructure sector was the first sign that investment targets were not eventuating at the rate anticipated. Foreign Direct Investment (FDI) is being thwarted by the need to partner with a local player, meaning only those who are able to form local partnerships can follow through on intentions to invest. Risks In Reforms We believe that the success of the 12th Five-Year Plan is still dependent on the level of regulatory reforms carried out by the government to facilitate infrastructure development. Structural weaknesses in India's business environment remain considerable and could still significantly delay projects that have reached financial closure. At present, it remains to be seen if reforms that are conducive for construction companies will be carried out. A key reform is the introduction of a new land bill to repeal the obsolete Land Acquisition Act of 1894 and replace it with a fresh National Land Acquisition and Rehabilitation & Resettlement Bill for 2011. With the 2012 elections looming large, the land reform bill remains a hot political topic, with the Indian public still very much against the bill. This is in spite of the unfavourable terms for investors, as the financial cost of land purchases is expected to rise significantly under current proposals. Construction companies would need to pay twice the market value for urban land and six times for rural development. In addition, 80% of the families involved will have to give approval for acquisitions to take place, and the bill would be implemented retrospectively.
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Nevertheless, if approved in FY2011/12 as we believe it will be, the legislation could bring much-needed speed and clarity in a process that has long been cumbersome and incoherent. Construction companies continue to face lengthy delays due to hold-ups in land acquisition. Larsen & Toubro , one of the largest construction companies in India, is currently thinking of re-evaluating the viability of its US$2.8bn railway project in Hyderabad because it has only been about to acquire 50% of the land for the 71.2km project. On balance, we believe that the Bill would be a net positive for the industry, and potentially help galvanise construction sector activity over the medium-term. (Note: Over Q2 2010 we aligned our data with the Indian standard of using financial year from April 1 to March 31. Furthermore, in Q111 we extended our forecasts to 2010, as such we are now forecasting from FY2010/11 to FY2020/21. This brings infrastructure data in line with BMIs Country Risk team, which also uses the financial year rather than the calendar year.)
Page 34
Transport Infrastructure
Table: India Transport Infrastructure Industry Data
2008/09 Transport Infrastructure Industry Value As % Of Total Infrastructure Transport Infrastructure Industry Value, INRbn Transport Infrastructure Industry Value, US$bn Transport Infrastructure Industry Value Real Growth, % chg y-o-y Transport Infrastructure Industry Value As % Of Total Construction
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
40.7
40.0
40.0
39.7
39.9
40.4
40.8
40.9
41.0
839.8
933.4
1,113.0
1,269.5
1,487.1
1,783.7
2,123.9
2,477.5
2,874.0
19.3
19.3
24.3
27.6
31.6
39.0
48.8
60.1
71.8
15.0
9.1
8.7
4.9
8.6
11.7
10.6
8.7
8.0
18.6
18.6
18.8
18.9
19.4
20.1
20.6
20.9
21.1
Roads and Bridges Infrastructure Industry Value As % of Transport Infrastructure Roads and Bridges Infrastructure Industry Value, INRbn Roads and Bridges Infrastructure Industry Value, US$bn Roads and Bridges Infrastructure Industry Value Real Growth, % chg y-o-y Roads and Bridges
35.0
35.1
35.1
36.0
36.3
36.9
37.2
37.6
38.0
293.9
327.6
390.7
456.4
539.1
657.8
790.2
932.0
1,091.0
6.8
6.8
8.5
9.9
11.5
14.4
18.2
22.6
27.3
36.2 14.2
9.4 14.0
8.7 14.0
7.7 14.3
9.6 14.5
13.8 14.9
11.6 15.2
9.9 15.4
9.1 15.5
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2008/09 Infrastructure Industry As % of Total Infrastructure Roads and Bridges Infrastructure Industry As % of Total Construction
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
6.5
6.5
6.6
6.8
7.0
7.4
7.7
7.9
8.0
Railways Infrastructure Industry Value As % of Transport Infrastructure Railways Infrastructure Industry Value, INRbn Railways Infrastructure Industry Value, US$bn Railways Infrastructure Industry Value Real Growth, % chg y-o-y Railways Infrastructure Industry As % of Total Infrastructure Railways Infrastructure Industry As % of Total Construction
16.5
16.1
16.1
16.3
16.1
16.0
15.9
16.0
16.0
138.6
150.3
179.2
207.2
239.7
284.5
338.2
395.6
459.9
3.2
3.1
3.9
4.5
5.1
6.2
7.8
9.6
11.5
27.7
6.4
8.7
6.5
7.2
10.5
10.3
9.0
8.3
6.7
6.4
6.4
6.5
6.4
6.4
6.5
6.5
6.6
3.1
3.0
3.0
3.1
3.1
3.2
3.3
3.3
3.4
Airports Infrastructure Industry Value As % of Transport Infrastructure Airports Infrastructure Industry Value, INRbn Airports Infrastructure Industry Value, US$bn Airports Infrastructure
20.5
20.8
20.8
19.2
19.5
19.3
19.0
18.5
18.1
172.2
194.1
231.5
243.7
289.3
343.9
404.4
458.6
519.3
4.0 -7.9
4.0 10.8
5.1 8.7
5.3 -3.9
6.2 10.2
7.5 10.6
9.3 9.1
11.1 5.4
13.0 5.2
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2008/09 Industry Value Real Growth, % chg y-o-y Airports Infrastructure Industry As % of Total Infrastructure Airports Infrastructure Industry As % of Total Construction
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
8.3
8.3
8.3
7.6
7.8
7.8
7.8
7.6
7.4
3.8
3.9
3.9
3.6
3.8
3.9
3.9
3.9
3.8
Ports Harbours and Waterways Infrastructure Industry Value As % of Transport Infrastructure
28.0
28.0
28.0
28.5
28.2
27.9
27.8
27.9
28.0
Ports Harbours and Waterways Infrastructure Industry Value, INRbn
235.1
261.4
311.6
362.2
419.0
497.4
591.1
691.4
803.8
Ports Harbours and Waterways Infrastructure Industry Value, US$bn Ports Harbours and Waterways Infrastructure Industry Value Real Growth, % chg y-o-y Ports Harbours and Waterways Infrastructure Industry As % of Total Infrastructure Ports Harbours and Waterways Infrastructure Industry As % of Total Construction
5.4
5.4
6.8
7.9
8.9
10.9
13.6
16.8
20.1
6.5
9.1
8.7
7.1
7.2
10.5
10.3
9.0
8.3
11.4
11.2
11.2
11.3
11.3
11.3
11.4
11.4
11.5
5.2
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
e/f = BMI estimate/forecast, Source: BMI Research
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2013/14f Transport Infrastructure Industry Value As % Of Total Infrastructure Transport Infrastructure Industry Value, INRbn Transport Infrastructure Industry Value, US$bn Transport Infrastructure Industry Value Real Growth, % chg y-o-y Transport Infrastructure Industry Value As % Of Total Construction
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
40.4
40.8
40.9
41.0
41.0
41.1
41.2
41.2
41.3
1,783.7
2,123.9
2,477.5
2,874.0
3,305.1
3,784.8
4,323.7
4,915.4
5,585.6
39.0
48.8
60.1
71.8
84.7
99.6
113.8
129.4
147.0
11.7
10.6
8.7
8.0
7.0
6.5
6.2
5.7
5.6
20.1
20.6
20.9
21.1
21.4
21.5
21.7
21.8
22.0
Roads and Bridges Infrastructure Industry Value As % of Transport Infrastructure Roads and Bridges Infrastructure Industry Value, INRbn Roads and Bridges Infrastructure Industry Value, US$bn Roads and Bridges Infrastructure Industry Value Real Growth, % chg y-o-y Roads and Bridges Infrastructure Industry As % of Total Infrastructure Roads and Bridges Infrastructure
36.9
37.2
37.6
38.0
38.2
38.5
38.7
38.8
39.0
657.8
790.2
932.0
1,091.0
1,263.8
1,456.1
1,672.2
1,909.4
2,178.1
14.4
18.2
22.6
27.3
32.4
38.3
44.0
50.2
57.3
13.8
11.6
9.9
9.1
7.8
7.2
6.8
6.2
6.1
14.9
15.2
15.4
15.5
15.7
15.8
15.9
16.0
16.1
7.4
7.7
7.9
8.0
8.2
8.3
8.4
8.5
8.6
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2013/14f Industry As % of Total Construction
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
Railways Infrastructure Industry Value As % of Transport Infrastructure Railways Infrastructure Industry Value, INRbn Railways Infrastructure Industry Value, US$bn Railways Infrastructure Industry Value Real Growth, % chg y-o-y Railways Infrastructure Industry As % of Total Infrastructure Railways Infrastructure Industry As % of Total Construction
16.0
15.9
16.0
16.0
16.0
16.1
16.1
16.1
16.1
284.5
338.2
395.6
459.9
529.9
607.7
695.2
791.2
900.0
6.2
7.8
9.6
11.5
13.6
16.0
18.3
20.8
23.7
10.5
10.3
9.0
8.3
7.2
6.7
6.4
5.8
5.7
6.4
6.5
6.5
6.6
6.6
6.6
6.6
6.6
6.7
3.2
3.3
3.3
3.4
3.4
3.5
3.5
3.5
3.5
Airports Infrastructure Industry Value As % of Transport Infrastructure Airports Infrastructure Industry Value, INRbn Airports Infrastructure Industry Value, US$bn Airports Infrastructure Industry Value Real Growth, % chg y-o-y
19.3
19.0
18.5
18.1
17.7
17.4
17.1
16.9
16.7
343.9
404.4
458.6
519.3
585.3
658.8
741.4
832.0
934.7
7.5
9.3
11.1
13.0
15.0
17.3
19.5
21.9
24.6
10.6
9.1
5.4
5.2
4.7
4.6
4.5
4.2
4.3
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2013/14f Airports Infrastructure Industry As % of Total Infrastructure Airports Infrastructure Industry As % of Total Construction
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
7.8
7.8
7.6
7.4
7.3
7.2
7.1
7.0
6.9
3.9
3.9
3.9
3.8
3.8
3.8
3.7
3.7
3.7
Ports Harbours and Waterways Infrastructure Industry Value As % of Transport Infrastructure
27.9
27.8
27.9
28.0
28.0
28.1
28.1
28.1
28.2
Ports Harbours and Waterways Infrastructure Industry Value, HKDbn
497.4
591.1
691.4
803.8
926.1
1,062.1
1,214.9
1,382.7
1,572.7
Ports Harbours and Waterways Infrastructure Industry Value, US$bn Ports Harbours and Waterways Infrastructure Industry Value Real Growth, % chg y-o-y Ports Harbours and Waterways Infrastructure Industry As % of Total Infrastructure Ports Harbours and Waterways Infrastructure Industry As % of Total Construction
10.9
13.6
16.8
20.1
23.7
27.9
32.0
36.4
41.4
10.5
10.3
9.0
8.3
7.2
6.7
6.4
5.8
5.7
11.3
11.4
11.4
11.5
11.5
11.5
11.6
11.6
11.6
5.6
5.7
5.8
5.9
6.0
6.0
6.1
6.1
6.2
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Transport Infrastructure Forecast Scenario

Indias transport infrastructure needs substantial investment; however, while some modes of transport are experiencing a boom in investments, others are falling far short of targets, with high levels of bureaucracy and inefficient planning regulations stalling project approvals. For this reason, transport infrastructure industry value growth will marginally outperform compared to its counterpart, with annual average real growth of 9.5% between 2012/13 and 2016/17 (compared to 8.2% for energy & utilities infrastructure). The bottlenecks in transport infrastructure funding have meant that investment has fallen short of targets under the 11th Five-Year Plan, according to the mid-term appraisal. Transport investment targets declined by 20% overall, knocked by substantially lower than anticipated investment in ports, railways and even roads, in the first half of the five-year plan period. Although we are pessimistic for the countrys business environment, the sheer level of demand and number of projects in the planning phase means growth will be assured. Bearing this in mind, it is inevitable that certain sectors will outperform others. Among the sub-sectors, railways is an outperformer in growth terms, with the sub-sector forecast to average real growth of 9% between 2012/13 and 2016/17 . While we have previously highlighted that this outperformance was due to the growth in urban railway projects, the launch of the bidding process for the 1,800km Eastern and 1,490km Western Dedicated Freight Corridors represents a major upside to our forecast. Both railway lines are expected to offer up to INR100bn (US$2.3bn) worth of contracts over the coming years and have already acquired land and financing a positive signal that the projects will move forward. As for urban railways, India is planning to develop metro systems in all of its large cities, as they are facing high levels of congestion due to a rapidly urbanising population. Plans for greenfield
BMI f=forecast, Source: BMI, Local news sources, industry sources, BMI Research (Key Projects Database)
Airports And Railways To Outperform Transport Infrastructure Breakdown
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and brownfield urban railway projects are moving forward in cities like Mumbai, Delhi, Bangalore, Chennai and Hyderabad. Roads on the other hand, which account for the largest portion of transport infrastructure industry value and have received the greatest attention in investment plans, are likely to fall short of targets. The subsector has been most afflicted by poor project execution issue, and in December 2010, only 10 out of 145 road projects in India were on schedule, while around 135 projects were delayed or faced additional delays, according to MOSPI. Nevertheless, given the sheer pipeline of projects and robust interest from foreign participation, the roads sector retains significant growth potential. We are forecasting real growth for the sector to average 10.8% per annum between 2012/13 and 2016/7. Ports, harbours and waterway infrastructure industry value accounts for the second-largest share of transport infrastructure value 28.2% equal to INR419bn (US$8.9bn) in 2012/13. Despite undeniable opportunities in Indias port sector, bureaucratic inconsistencies and issues with competitiveness are presenting a number of deep-rooted obstacles in the countrys port sector. This has meant the sector has failed to unlock or live-up to potential. Although projects are being delayed, a number of investments are going ahead and this will eventually translated into industry value, albeit at a slower pace than its potential would suggest. While the airports sub-sector is expected to see negative growth in 2011/12, we believe that there is significant potential for further upside. This is driven by a strong project pipeline for both regional and international airports, and investor confidence in Indias aviation sector. Airports were one of the few sectors to have investment targets revised upwards following the mid-term appraisal of the 11th FiveYear Plan (2007/08 - 2010/11), up from INR310bn (US$6.8bn) to INR361bn (US$7.9bn). This is a clear indication that funding is flowing into the sector, perhaps due to better planning procedures, but also because of the private sectors willingness to invest. We are forecasting real growth for the airport sector to average 8.1% per annum between 2012/13 and 2016/17.
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Transport Infrastructure Overview

Indias transport infrastructure must cater for a booming population, a growing economy and a demanding import and export sector. Indias population is expected to expand rapidly over BMIs medium-term forecast period, from an estimated 1.26bn in 20121/13 to 1.32bn by 2016/17. The countrys economy is also expanding rapidly, with average real growth of 7.7% y-o-y between 2012/13 and 2016/17 forecast.
Table: Competitiveness Of India's Infrastructure
Rank/133 in 2009/10* Quality of Roads Quality of Railroad Infrastructure Quality of Port Infrastructure Quality of Air Transport Infrastructure Quality of Overall Infrastructure 89 20 90 65 89
Rank/139 in 2010/11** 90 23 83 71 91
Rank/142 in 2011/12*** 85 24 82 67 86
*Rank out of 133 countries in 2009/10. ** Rank out of 139 countries in 2010/11. *** Rank out of 142 countries in 2011/12. Source: World Economic Forum, Global Competitiveness Report 2009/10, 2010/11 and 2011/12
Roads India boasts the third-largest road network in the world after the US and China, with a total of 3,320,410km of roadways, of which 1,517,000km (45%) is paved. The majority of the countrys freight is transported by road, with around 65% of total cargo carried via this method. India still has a relatively low vehicle density (2.5 vehicles per km) compared with other developing countries (4.06 in Brazil) and with developed economies (46.5 in the US, 101.4 in the UK). However, the vehicle fleet circulates in tightly defined high-density corridors. Roughly one-quarter of state and national highways are heavily congested. Partly as a result of this, average truck and bus speeds are only 30-40km per hour (km/h), in comparison with more developed countries, where they could be expected to be double that level. In some respects, India's road network is better than China's, a country of similar population and larger size; this is due to India having a larger road network. Geographic coverage of India's road network, at 0.66km of highway per km2, is comparable to that of the US (0.65) and four times greater than China's (0.16). On the other hand, many of China's highways were built in the last 10 years and consist of modern four- to six-lane expressways linking major cities.
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India, in contrast, has few direct links between key cities and most of its highways have two lanes or fewer. Additionally, there is widespread overloading of older rigid two-axle trucks, which leads to significant road damage. India also has a poor road safety record, with an average of 75,000 deaths on the road every year. It can take four to five days for a truck to travel from Delhi to Kolkata, a distance of 1,500km, and about a quarter of the total travel time will be spent at state border checkpoints. A modern expressway system is clearly needed.
Aware of this deficiency in the highway system, the government has been supporting the construction of roads, and India's road building plan has been one of the flagship aspects of the country's road map for infrastructure. The 20km target has been one of the most oft-cited when illustrating the potential opportunities in India's infrastructure sector. In July 2009, the previous Minister for Road Transport and Highways, Kamal Nath, aimed to build 20km of roads per day, but failed to hit the much-touted target, which had to
Investment Into Roads And Highways Under 11th Five-Year Plan

900 800 700 600 500 400 300 200 100 0 2007/8 2008/9 2009/10 2010/11 2011/12
Source: Planning Commission
be lowered to 12-13km per day, substantiating our earlier fears that the private sector will not participate to the level required. Issues with land clearance, the complexity of regulations, the high level of bureaucracy and the collection of toll revenues have deterred potential investors, despite the government allowing 100% foreign direct investment (FDI) in the sector. Although targets are being downgraded, the scale of infrastructure development is still considerable, relative to other emerging markets. Building 1213km of roads per day is still a sizeable target, which, if achieved, will drive growth in industry value over our forecast period. This target looks increasingly unlikely to be met, as the sub-sector continues to be heavily affected by poor project execution issues. In December 2010, only 10 out of 145 road projects in India were on schedule, while around 135 projects were delayed or faced additional delays, according to MOSPI. This problem of projects delays was highlighted by a top official at the National Highways Authority of India, J.N Singh, where in June 2011, he stated (cited from the Economic Times) that around 20-25% of current road projects under construction have been delayed by months or years, often due to land acquisition problems. The government has, however, made attempts to resolve these execution issues. On May 5 2011, an empowered group of Indian ministers (EGOM) decided that 95% of roads projects in 2011 should be awarded through a build-operate-transfer (BOT) model, rather than on an engineering, procurement and
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construction (EPC) basis (these contracts will now be limited to just 5% of all road projects). They believe that the BOT model will incentivise companies to complete road projects quickly and efficiently, and then encourage them to maintain the roads keeping them in pristine condition once they are finished. Furthermore, the move will reduce the expense to the Indian government, as private investors will be expected to generate their returns through a self-funding toll road system. The announcement comes after a number of measures have already been implemented to improve the tendering process in the road sector. On May 3 2011, India's Transport Minister CP Joshi announced that from January 1 2012, the Ministry would use an e-tendering process to introduce greater transparency. . The Ministry has also introduced an annual pre-qualification process for project bidders to speed up the tendering process and reduce delays to road projects, while tweaking the building contract rules to give more flexibility to companies wishing to sell their project to another developer. The Road Ministry has also set monthly targets for road construction works to ensure greater accountability.Previously, the ministry, under Joshi's predecessor Kamal Nath, only reviewed the status of projects using yearly targets a strategy that may have potentially contributed to project delays. Projects will now be monitored through the use of satellite imagery, according to Joshi. Consequently, we believe improved transparency will send out a positive signal, which will attract private investors particularly foreign private equity funds and encourage investment in road projects, under a private-public partnership (PPP) framework. The National Highways Authority of India (NHAI) plans to award 59 road contracts, with a combined length of 7994km and a total cost of INR600bn in 2011/12, thus reaching its previously unattained goal of constructing 20km of roads per day. We expect the bulk of these projects to be BOT projects, with 60% of them to be toll-based and 30% to be paid by the government through annuity payments. Over the 12th Five-Year Plan (2012-17), the Ministry is looking to invest over INR2.64trn in the highways sector, with INR1.77trn (65%) to come from the private sector. This will aid India in reaching its target of 35,000 new roads by 2014.This plan to aggressively expand Indias roads was reiterated by the government, where, in October 2011, it launched an INR166bn (US$3.35bn) highways building plan under the National Highways Development Programme, reports News Resources International. The plan covers the construction of six-lane highways totalling 6,500km, four-lane highways totalling 24,700km and the expansion of other highways. The programme is to be funded through PPPs. The government has since approved four expressway construction projects in lateOctober 2011, reports News Resources International. The construction projects comprise the VadodaraMumbai, Delhi-Meerut, Bangalore-Chennai, and Kolkata-Dhanbad expressways. PPPs are to be used to raise funding. The countrys PPP Appraisal Committee (PPPAC) has also approved several road projects. In August 2011, the PPPAC approved 10 roadworks projects, worth a total of US$1.1bn, according to INFRAnews. The proposals approved include two-laning the road connecting Bikaner to Suratgarh and four-laning the road between Vijayawada and Machlipatnam, on a BOT basis. In September 2011, the PPPAC approved five road and highway infrastructure projects, worth a total of INR70bn (US$1.41bn). The road projects,
Page 45
which have secured approval, encompassed the Agra-Etawah, Rampur-Kathgodam and Raipur-Bilaspur highway projects. The PPP Approval Committee, chaired by Economic Affairs Secretary R Gopalan, has also directed the relevant ministries and departments to update status reports on various PPP infrastructure projects that were approved by the panel in earlier sittings. A key road project tendered in 2011 is the 555.5km Ahmedabad-Udaipur-Kishangarh expresswaywidening project, a key part of the Golden Quadrilateral, a 5,846km expressway network that links India's four largest cities Delhi, Mumbai, Chennai and Kolkata. In July 2011, GMR won the contract to construct the road-widening project, which will stretch from the city of Kishangarah in Rajasthan to the city of Ahmedabad in Gujarat via the city of Udaipar. It will be completed through a PPP and is estimated to cost around INR57bn (US$1.26bn). More than 40,000 vehicles are believed to travel on this section, making the 26-year concession a lucrative one for the successful bidder, according to the Economic Times. The Ahmedabad-Udaipur-Kishangarh expressway-widening project is the single-largest highway project released so far by NHAI, both in terms of value and length, and is the first of nine such planned highway projects. This strong project pipeline is positive for the sector, as overseas private funds continue to show a great appetite for investing in Indias roads. In May 2011, Spanish-based Isolux Corsan and Morgan Stanley Infrastructure formed a US$400mn joint venture (JV) to target road projects in India. Both parties will invest US$200mn and Isolux will incorporate three of its previous BOT road concessions, worth a combined US$1.6bn. The three projects have secured financing and are expected to be completed in 2012/13, with an 18 to 30-year concession period. In June 2011, Indian financial services firm Infrastructure Development Finance Company (IDFC) and Malaysian state investment company Khazanah announced that they were set to form an infrastructure development JV, with an emphasis on road projects in India. The JV's first investment will be in Jetpur Somnath Tollways , a special purpose vehicle (SPV) that holds the concession to add four lanes to the Jetpur-Somnath section of the National Highway-8D in Gujarat. Ports A major element of transport infrastructure within India and an area that is expected to grow considerably is Indias ports. The country has 13 major ports and 187 minor ports along its extensive coastlines. The 13 major ports account for about 67% of the country's external sea trade and 569.9mn tonnes of cargo for the year ending March 2011. The most important ports are located at Chennai (Madras), Kochi (Cochin), Jawaharal Nehru, Kandla, Kolkata (Calcutta), Mumbai (Bombay), Sikka and Vishakhapatnam. The major ports are operated by port trusts set up by central governments, while the minor ports tend to be operated by state authorities. Efficiency levels at Indian ports are relatively low. While the total number of berths appears to be adequate to deal with current cargo turnover, the use of mechanised equipment for loading and unloading
Page 46
operations is limited, meaning that turnaround times are quite high and handling costs for general cargo and for containers are also high. India's rapidly expanding trade requirements are expected to put immense strain on the country's existing port infrastructure, with India's Planning Commission predicting tonnage throughput at 12 major ports to double to 1bn tonnes by 2012, according to Bloomberg. Meanwhile, India's largest governmentcontrolled east- and west-coast container ports, Kolkata and Jawarhalal Nehru - which serves Mumbai have experienced congestion in recent weeks. This congestion puts India's businesses at a disadvantage compared with regional competitors in countries such as China. M Unnikrishnan, Managing Director of Thermax, a power-equipment maker, is quoted by Bloomberg as saying: 'It takes 45 days transportation for incoming cargo for me and a similar time when I send it to my customers overseas. The Chinese can possibly do it in seven days.' The private sector is being targeted to provide much of this investment, and in June 2011, the government announced plans to award contracts for 24 projects across the country, with a combined capacity of 232mn tonnes per annum. According to Bloomberg, India is aiming to invest US$60bn into its ports by 2020 as part of Prime Minister Manmohan Singh's wider US$1tn investment in the country's choked transport and power networks. The aim is that the investment will help India's ports' handling capability grow from 963mn tonnes in 2010 to 3.1bn tonnes in 2020. Despite undeniable opportunities in Indias port sector, bureaucratic inconsistencies and issues related to competitiveness are presenting a number of deep-rooted obstacles in the countrys port sector. In late 2009, two container terminal auctions were dropped, both of which had encountered problems with companies that were dissatisfied with the reasons given for their ejection from the tender process and subsequently took the respective port trusts to court. Issues related to competitiveness arose again in 2011, with regard to a 30-year concession to develop the fourth container terminal at the Jawaharlal Nehru Port, India's largest port in terms of box throughput. The INR67bn (US$1.5bn) BOT project, which is managed by the Jawaharlal Nehru Port Trust (JNPT), originally received government go-ahead in January 2010, but has since suffered numerous delays due to a number of legal hurdles. The project first faced a legal challenge mounted by the world's third-largest container terminal operator, APM Terminals (APMT), which sought to be allowed to bid for the project the company was initially barred as it already operates a terminal at the port. Although APMT was finally allowed to bid in May 2011, it announced in June that it was pulling out of the process. It has since announced that once it was qualified to bid and allowed to see the tender documents, it became apparent to the company that the fourth terminal would be 'financially unviable'. Following the APMT saga, the project faced another legal challenge, when the Adani Group, the operator of the port of Mundra, was also excluded from the initial bidding for undisclosed security
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reasons. The company, through the Mundra Port Special Economic Zone (MPSEZ) company, is challenging this in the courts. A petition against the decision could have significantly delayed the project as the validity of the existing bids from five different parties was due to expire on June 30 2011. However, not wishing to lose any more time, the JNPT went to the Mumbai High Court, seeking to open the bids early. As the MPSEZ was not the highest bidder, it is now seeking permission to award the contract to ABG and PSA. Another example which highlights the problems in India ports sector is the exclusion of certain countries from bidding on projects based on national security concerns. Since 1997, Chinese firms, or groups with Chinese connections, have been banned from participating in Indian port projects, according to Mint. In February 2009, Mint reported that firms from the UAE had also been banned. However, according to Mint, this regulation is enforced inconsistently, as some companies are allowed to participate and others are not. In addition, certain ports such as the proposed Vizhinjam International Seaport and Container Transhipment Terminal are subjected to India's strict cabotage rules, which only allow domestic shipping companies to operate along the country's coastline. A further threat to India's port sector comes from bureaucratic inconsistency. In August 2009, India's Ministry of Environment and Forestry imposed a three-month moratorium on proposals for new ports and harbours unless they were expansions of existing projects. The moratorium is in place until the ministry develops a policy for assessing the impact of new port projects on the country's coastline. However, at the same time, the Shipping Ministry is pushing to get clearance for port projects, and the Finance Ministry has requested that it stick to the original model concession agreement for ports, according to the Economic Times. Another issue that is dampening investor interest in the sector is the lack of sophistication in its policy framework. In June 2011, India's Planning Commission and Shipping Ministry started talks to revise the model concession agreement (MCA) for PPPs in port projects, as the framework, which was originally based on the MCA for the roads sector, was found to be unfeasible and unattractive to investors. The dialogue to alter the PPP policy for port projects comes after private investors pulled out of a project to build a new container terminal at the Mangalore Port. As a result, the New Mangalore Port Trust, the corporate entity in charge of the project, will have to finance and implement the civil infrastructure for the terminal through public funds, which is contrary to the government's original plan to use the PPP model for all new port projects. According to India's Shipping Secretary, K Mohandas, the Mangalore port project was affected by 'unrealistic tariff structures' fixed by the Tariff Authority for Major Ports. He latter stated that only 'minor changes' have been proposed to the MCA and it is unlikely to lead to a complete overhaul of the policy. The port sector also faces stiff financing practices implemented by the banks due to substantial risks. According to the joint secretary in India's Shipping Ministry, loans made to port projects typically have a clause that allow banks to revise interest rates after the first two years, thus creating significant financial
Page 48
risks for investors as port projects typically take years to be implemented. Port projects or project developers are also unable to get a credit rating for the first few years of the project, which results in a penalty of an additional 1% of interest to be paid for loans. Lastly, unlike roads, port projects don't get any viability gap funding from the government, thus private developers need to raise the initial capital expenditure for the project on their own. In October 2011, it was reported by the Economic Times that the union government's proposal to come out with the Indian Ports Bill for replacing the existent Indian Port Act, 1908 and the Major Port Trusts Act, 1963 in order to corporatise the port sector, faced opposition from various stakeholders, including maritime states. The maritime states are concerned that the Bill would not only curtail the state's right over the ports under their territorial limits, but also adversely affect the port and fishing development activities. While these issues do not detract from the opportunities in Indias port sector, they highlight that investors should be aware of the risks related to India's immature PPP framework and the inconsistencies associated with bureaucracy and legal regulations. The Indian government is also looking to attract more cruise ships to Indian ports. In October 2011, it was reported by the Economic Times that the Ministry of Shipping has set up a steering committee to looking into this issue. The Ministry has identified five ports Mumbai, Mangalore, Kochi, Chennai and Tuticorin as potential cruise ship destinations, and are working on plans to attract investments to improve the facilities in these ports. However, one key stumbling block is the high port charges for passenger ships, where, according to Anand Sharma, Director at Mantrana Maritime Advisory, port charges for passenger ships are very high because they have a higher tonnage as compared with other vessels. The India government had set a target of 1mn cruise passenger landings for 2010, but local media sources state that almost no landings took place, according to PortWorld. Railways India has railways totalling a length of 64,015km, of which approximately 82% is broad gauge (52,808km). About 28% of the total railway system is electrified. India has the worlds fourth-largest rail network after the US, Russia and China, and the second-largest under single management. Indias railway sector has suffered from underinvestment (only around 6,500 miles of new track were laid in over 50 years) and the Ministry has a poor track record of completing projects on time and within budget. According to figures (December 2010) from India's Ministry of Statistics and Programme Implementation, 24 railway projects are proceeding on schedule, while 26 projects are delayed. At the same time, 85 out of 147 railway projects suffer from cost overruns. There is, however, positive news for the sector, with the Indian Ministry of Railways having announced in June 2011 that it planned to conduct the sale of INR100bn (US$2.2bn) of tax-free bonds in India. This was due to occur by September 2011, and it is hoped that the move that could go a long way towards
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addressing the perennial problem of financing in the railway sector. The offering will be conducted by the Ministry's financing arm, Indian Railway Finance Corporation (IRFC), and will be divided between a private placement and a subsequent tranche for retail investors. The funds raised from the sale will be used to expand and modernise India's railway network, with some of the expenditure plans including INR53bn (US$1.2bn) to be spent on new railway lines, INR21bn (US$468mn) on widening tracks and INR8.5bn (US$189mn) on railway electrification. Meanwhile, multilateral financial institutions have shown an interest in helping India to develop its railway network. In September 2011, the Asian Development Bank (ADB) will provide US$500mn to Indian Railways (IR), the state-run organisation responsible for most of India's rail transport, The loan will help IR in its aim to add 15,000 miles of new lines to the existing network over the coming decade, and will be issued in a number of tranches, the first being US$150mn with a 25-year term. According to a statement from the ADB, the funding will be targeted at routes between the major Indian cities of Chennai, Kolkata, Mumbai and New Delhi. It will go towards new lines, the installation of new signalling, and the electrification of existing track. In June 2011, India's long-delayed national freight railway project, the Dedicated Freight Corridor (DFC), finally entered the tendering process. The Dedicated Freight Corridor Corporation of India (DFCCIL), the special purpose vehicle in charge of the US$17bn dedicated freight railway corridor project, has decided that the project's 1,490km western section will be implemented by a JV between Indian and Japanese infrastructure companies. Prospective developers for the US$6.7bn project, also known as the Western Corridor, will be selected through a bidding process, where pre-qualification bids for the first phase a 1000km stretch from Rewari in Haryana to Vadodara in Gujarat were to be accepted starting in mid-June. The Western Corridor, which is funded by Japan's Overseas Development Assistance coordinator Japan International Cooperation Agency (JICA), is expected to begin construction in March 2012 and should be completed by December 2016. The DFC consists of six freight corridors (railway lines), but only two corridors will be launched initially. They are the 1,800km Eastern Corridor, which will run from Ludhiana in Punjab to Dankuni in West Bengal, and the 1,490km Western Corridor, which will run from Tughlakhabad in New Delhi to the Navi Mumbai port in Maharashtra. The two freight corridors are estimated to be worth INR770.0bn (US$17.4bn) and would involve the construction of high-speed tracks, which could transport goods at up to 100km/h. The initial contracts on offer would involve engineering works for 650km of the Western Corridor and 350km of the Eastern Corridor. The DFCCIL was expected to invite pre-qualification bids for the Western Corridor in May 2011, while pre-qualification bids for the Eastern Corridor are currently being evaluated (there are 27 bidders for the Eastern Corridor, according to latest documents from DFCCIL). Both freight corridors are expected to be completed by December 2016. The benefits of the DFC are undeniable. The demand for additional rail freight capacity in India has surged over the past few years, due to the rapid growth in the Indian economy. The country's current
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freight transport system is straining under this surge in demand, and the construction of the DFC will alleviate these demand pressures and provide a fast and efficient means of moving freight between different states. Furthermore, many of these infrastructure companies such as Tata and Reliance have steel production and petrochemicals operations throughout India. These operations need an efficient freight railway system to ensure raw materials and finished goods are delivered within a specified timeframe. While there are compelling factors driving the need for the DFC i.e. Indias rapid economic growth and the need for a fast and efficient means of moving freight between different states it has been the perennial problems associated with raising the necessary funds and acquiring land that have stalled the project. The land acquisition process for the DFC started in 2008 and the project was originally slated for completion by 2013. India secured a INR300bn (US$6.8bn) loan from JICA for the Western Corridor in March 2011, while the World Bank is expected to lend about US$2.4bn for the Eastern Corridor, having provided US$975mn in June 2011. Meanwhile, the DFCCIL has reported that 90% and 50% of the land needed for the first phase of the Western and Eastern corridors respectively has been acquired. Another important railway line is the connection between India and Bangladesh. In September 2011, the Indian government approved a INR2.6bn (US$53mn) rail link to Bangladesh, reports News Resources International. The 15km line will link Agartala in India to Akhaurah in Bangladesh, which has links to the Chittagong international sea port. The line, which could potentially facilitate the transportation of India exports, is due to be completed by 2014 Urban Railways Urban railways are also expected to experience significant growth over the long term as Indias population continues to urbanise and demand for public transportation services grows. According to UN data, the urban/rural split in India was 28% urban to 72% rural in 2000; by 2011, BMI estimated that the urban population reached around 30% of the total, meaning that 376mn people now live in India's cities. This trend is set to continue through 2020 (33.5% of the population) and 2030 (38%), while Indias finance ministry believes that over 500mn people will be expected to live in urban areas by 2020. India's rapid economic growth has significantly increased the size of its middle-class and their demand for car ownership. Delhi in particular is suffering from severe traffic congestion because it has the highest number of vehicles per square kilometre in India, with more vehicles than Mumbai, Kolkata and Chennai combined. Therefore, in order to match this urbanisation rate and to keep the economy functioning in India's cities, we believe that investment in urban transport such as commuter railways and monorails will be crucial to improving traffic conditions. The appointment of Kamal Nath as Urban Development Minister is an indication of a change in the government's attitude towards private sector involvement in this sector. Indeed, Nath was widely credited with harnessing greater private sector involvement in his previous post at the Road Transport Ministry.
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In July 2011, the Finance Ministry was readying a blueprint on financing of urban transport systems, favouring a new PPP approach as opposed to the existing model of joint development by the Planning Commission and states, which often lead to cost overruns and projects delays, due to lack of coordination and oversight. The PPP approach is also favoured because the Planning Commission and Urban Development Ministry has limited fiscal strength to meet the necessary investment. A recent study by Wilbur Smith Associates for the Ministry (cited by the Economic Times) estimated that the total funding required for transport projects in 87 cities in India by 2030 is INR4354bn, approximately INR230bn a year. Indias fiscal budget for 2011/12 has only allocated INR80bn to the Urban Development Ministry. There has been significant progress in the development of urban railway systems in several major Indian cities in the second half of 2011. In August 2011, the Indian government approved the third-phase expansion of the Delhi Metro, according to Railway-Technology. The latest phase of the project has been budgeted at US$7.7bn, and will service 67 stations and 15 interchange points across its lines. By 2016, the Delhi Metro is projected to have capacity for 3.9mn passengers, which will almost double to 6.5mn by 2031. In September 2011, it was announced that the first phase of construction of the Mumbai Metro rail line was set to be completed by the end of 2012, reports News Resources International. The Mumbai Metropolitan Region Development Authority has said that the US$510mn project is 80% complete. Construction is being led by Indian utilities company Reliance Infrastructure. The entire line will total 146.5km, and is projected to cost US$4.3bn. In October 2011, the first metro line (6.7km) in Bangalore, known as the Namma Metro, became operational, reports Yahoo. The project begun in 2006, but suffered delays and budget problems. The remaining 42.3km network is set for completion by March 2013 and has received several loans for the project. India's Housing and Urban Development Corporation (HUDCO) has approved an INR7bn (US$139mn) loan for the project in October 2011, while the Asian Development Bank provided a US$250mn loan in April. The project has also obtained INR6.83bn (US$138mn) from the Karnataka government from the 2011-12 budget, while, Bangalore Metro Rail Corporation (BMRCL) has already invested INR40bn (US$814mn) in the project. Airports The country has been developing its airport sub-sector, not only for the transport of goods, but also to accommodate the growing numbers of international business travellers and tourists. India currently has 352 airports, of which 249 have paved runways. Investment in airports has been a clear outperformer in the transport sector, and this is driven by a strong project pipeline and investor confidence. Airports were one of the few sub-sectors to have investment targets revised upwards following the mid-term appraisal of the 11th Five-Year Plan (2007/08-2010/11). While transport investment targets declined by 20% overall, conversely, investment targets for airports
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were raised from INR310bn (US$6.8bn) to INR361bn (US$7.9bn). This is a clear indication that funding is flowing into the sub-sector, perhaps due to better planning procedures, but also because of the willingness of the private sector to invest. Airport infrastructure is being upgraded to support both international air travel and domestic travel. An expansion in the number of International Airports in Tier I cities has been seen, including a new airport in Navi Mumbai, the satellite city of Mumbai, as well as expansions at existing airports. As for Tier II and Tier III cities, demand for air infrastructure is also on the rise as these cities grow in wealth and population. However, it remains to be seen if there is sufficient air traffic to support private investment or create financially viable PPPs. In May 2011, momentum for the construction of the Navi Mumbai international airport took a big leap forward, with the project steering committee comprising civil aviation and state government officials granting final approval of the airport's draft master plan. The approval means that the state urban development authority, the City and Industrial Development Corporation of Maharashtra (CIDCO), can start the bidding process for the INR87.2bn (US$1.9bn) project. The tendering process was expected to start in July 2011, but was postponed after delays to land acquisition. Construction of the airport will be carried over four phases, with the first phase to begin in 2012 and be completed by 2014. The Navi Mumbai airport is proposed to be developed through public-private participation, in which the CIDCO and the Airports Authority of India will each hold a 13% stake in the airport and the rest is to be held by the private developer. The airport is expected to have two runways and will be designed to accommodate new extra-large aircraft. The proposed airport is necessary due to the growing size of Mumbai and its satellite cities in the neighbouring Thane district (the Navi Mumbai city, located just 10km away from Mumbai, is one such city). The city and suburban districts of Mumbai have a combined population of 12.4mn people and have one airport, the Chhatrapati Shivaji International Airport (CSIA), to meet its air traffic demands this airport is currently able to handle 25mn passengers a year and is expected to reach its saturation mark of 40mn passengers a year by 2016. While the latest data from the Indian government shows that the Mumbai urban area grew at a moderate rate over the past decade (the Mumbai suburban district grew by 8% in 2001-2011), the Thane district grew by 35.9% to reach a population of 11.0mn over the same period. This suggests that the Mumbai urban area could be reaching saturation level and the city's growing population is moving towards the satellite cities in the Thane district. This trend is likely to continue over the next decade, making the construction of a new airport in Navi Mumbai the largest of Mumbai's satellite cites a logical decision. As Mumbai's population become increasingly affluent, air transport will gradually become the preferred means of travel and the growth in aviation facilities needs to keep pace to meet this demand.
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The Navi Mumbai airport project is expected to be fiercely contested, as it is the largest greenfield airport project in India since the privatisation of the airport sector in 2006. Although the existing operators of the CSIA, a consortium led by India-based GVK, have first right of refusal, this clause does not guarantee GVK will win the bid, as its offer cannot be less than 10% of the highest bid received. We expect bidders to not only include established players such as GVK, Reliance and GMR, but also domestic companies that are not heavily exposed to the industry, but are eager to capitalise on India's booming aviation sector. These companies include HCC, Gammon and infrastructure financier Infrastructure Leasing & Financial Services. A number of international airport operators, such as Singapore-based Changi Airport and France-based Aeroports De Paris, have also expressed interest in the Navi Mumbai airport project, but we believe that the project will likely go to a domestic player or at least a domestic-led consortium.
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Major Projects Table Transport

Table: Major Projects - Transport
Project Name Airports Sikkim airport Modernisation of the Kolkata airport
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
54 980.4
na 20 mn passengers
Punj Lloyd na Airports Authority of India, City and Industrial Development Corporation (CIDCO) na na
2011 -2010
Contract Awarded Work underway Tendering process to start in Dec 2011 due to delays in land acquisition (October 2011) Approved Plans announced Gov has allotted funds for land acquisition Concession awarded At planning stage
International airport at Navi Mumbai (first phase) New International Airport near Ludhiana, Punjab Two new airports: Shrawasti and Kushinagar, UP International Airport, Meerut City, UP Greenfield Airport Maharashtra Shimoga, Gulbarga Airports Indira Gandhi International Airport, New Delhi, modernisation and management of airport Thiruvananthapuram International Airport expansion Phase II
1950 4200 na
40mn passengers na na
July 2011-2014 na na
na 64.8 na
na na na
na IRB Infrastructure Developers Maytas Infrastructure
na 2009-2011 2009-
2600
34 mn passengers 1.95mn passengers 23 mn passengers
GMR Group Consolidated Construction Consortium Ltd Consolidated Construction Consortium Ltd
2007 - 2034
New terminal completed
53
na
Project awarded
Chennai airport expansion
50.7
2008-2011
Project awarded Project announced by the Indian Chamber of Commerce and Industry in Tuticorin Land has been acquired Under construction; December 2012 completion date to be delayed by 3-4 months (June 2011)
Upgrades to the Tuticorin Airport Maharana Pratap runway expansion
na na
na na
na na
20082008-
Chhatrapata Shivaji International Airport (Mumbai) modernisation
2000
20 mn passengers
MIAL, GVK, ACSA
2008- April 2013
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Project Name New airport at Bijapur, Karnataka Karnataka regional airports (Bellary, Bijapur, Hassan, Shimoga and Gulbarga) International airport (BOT) concession in Goa
Value (US$mn)
Capacity/Length 876000 passengers
Companies
Timeframe
Status Contract awarded At planning stage/governmen t seeking PPP partners Awaiting tender Plans for transport links and land approval in progress Expansion plans announced Plans under review Project approved for PPP procurement (October 2010) Four construction Sites Identified
na
MARG Limited
na
261 400
na na
na na
na na
Bengaluru International Airport terminal 1 expansion Bangalore and Mumbai airport expansions International Aviation Hub, Greater Noida
214 1000 na
17 mn passengers na 3.9 mn passengers
na GVK Power & Infrastructure na
Due to begin in September 2010 na na
Kushinagar international airport Kerala Airport for Guruvayoor Sri Krishna temple Cochin International Airport expansion (includes a railway station and metro extension as well as leisure facilities, a hotel and a hospital)
na
1mn passengers
na Airports Authority of India
na
na
na
na
24.3
5 mn passenger
Cochin International Airport
2010-
At planning stage Under construction (July 2011); Runway to start construction during 2012 Project announced At planning stage Land acquisition approval received; Seeking US$17mn grant for land acquisition from state government Construction to start July 2011 Contract awarded
Kannur International Airport, Kerala Overhaul of Biju Patnaik Airport, Bhubaneswar Cargo facility at the Delhi International Airport (DIAL)
252 32.2 35
1.3mn passengers na 37 mn passengers
na Airport Authority of India Celebi Holdings
2010-2014 (first stage) 2010-November 2011 2011-2015
Vijayawada airport expansion, Andhra Pradesh Harni airport expansion (new terminal) Airport terminal expansion, Bangalore
45 255
na na 17mn passengers
na NA Larsen & Toubro (L&T)
2011july 2011 - end 2012 June 2011 December 2012
221
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Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
Jharsuguda airport, Orissa Air Traffic Control tower complex, part of Delhi International Airport Ports LPG import terminal at Ennore
na
na
AirPort Authority of India
June 2011 July 2011 November 2013
Construction to start (June 2011); 191 acres of land allocated Inviting bids for contract (July 2011);
77.7
na
na
57
800000 tonnes
Punj Lloyd
na
Contract awarded Under construction; On schedule to increase capacity to 55mn tonnes Construction awarded
Tuticorin Port expansion project, Tamil Nadu
225
600000TEU
Tuticorin Port Trust Essar Shipping Ports and Logisitics PSA International, ABG Shipyard Limited, Jawaharlal Nehru Port Trust (JNPT)
2010- March 2011
Coal berth at Paradip Port
98
16mn tonnes
2009-2012
Jawaharlal Nehru Port 4th container concession
1500
6mn TEU
July 2011 -
Concession awarded (July 2011) Plans to secure a loan for the project na MoU signed Construction underway Plans confirmed by Indian government; 30 year concession offered At the tendering stage; Bidding deadline extended to Aug 2011; Environmental study completed by 2012 At planning stage Under Construction/ Possibly to open in August 2010
Gangavaram port expansion Krishnapatnam port Sea port in Bhadrak Dharam Port in Orissa
147 161 322 505.5
26 mn tonnes 100 mn tonnes 3 mn tonnes 100mn tonnes
na 3i Aditya Birla Group Tata Steel, Larsen & Toubro
2009-2011 30 year concession na -April 2010
Mega terminal and Chennai Port
800
4 mn TEU
na
2010- (Seven years)
Vizhinjam International Container Terminal, Kerala Hazira Port cargo berthing facilities International Container Transhipment Terminal Vallarpadam, Kerala
1120 400-500
4.1mn TEUs na
Vizhinjam International Seaport, Shipping Corporation of India Hazira Port Private Ltd.
2012 - 2015 na
500
5.5mn TEU
DP World
2005-2010
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Project Name Coal terminal at Mormugao, Goa
Value (US$mn) na
Capacity/Length 6.5 mn tonnes
Companies Mundra Port
Timeframe 2009-2012
Status Concession Awarded concession agreement signed in July 2009 Project awarded
Paradip port new deep draught Dredging of Kandla Port
na na
na 93 mn tonnes
Blue Water Iron Ore Terminal na Maytas Infra Ltd, Nagarjuna Consortium Company, SREI Infrastructure, Sarat Chatterjee Punjab National Bank/ Bank of India/ State Bank of India/ State Bank of Travancore/ Dena Bank/ Oriental Bank of Commerce/ Union Bank/ Indian Bank and UCO Bank Grup MarAtim TCB, ObrascA3n Huarte Lain (OHL), Lanco Infratech, Eredene Capital
na 2008-
Machilipatnam Deep Water Port
343
17 mn Tonnes
2008-
Construction underway
All Weather Port Project
299.82
54 mn tonnes
2010 - 2011
Loan secured
Ennore Port Container Terminal
312
1.5 mn TEU
2010-2013
BOT contract awarded (June 2010) Project announced in August 2010 Operation and maintenance contractor to be chosen near end of 2010/early 2011 Civil infrastructure financed by public funds; Seeking private investors for handling equipment Contract awarded (October 2010) At land acquisition stage
Mundra port expansion and SEZ
1200
30 mn tonnes
Adani Group
2010-2015
Kattupalli Container Terminal
na
1 mn TEU
Larsen and Toubro (L&T)
Scheduled to be completed by December 2011/January 2012
New Mangalore Port Trust new container terminal
63
2500 TEU
New Mangalore Port Trust Dredging Corporation of India
2011 -
Ennore Port dredging
na
34 mn tonnes
2010-2012
Indian Machilipatnam Port
na
na
na
na
Page 58
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status At the bidding stage (High Valley Infra Projects sole bidder) Mundra Port withdraw bid; Tender process to be relaunched Completion date delayed till January 2011 Partnership formed to expand coal import capacity At planning stage; Holding negotiations with state governments Earmarked by Indian ministry of shipping Construction and five years maintenance contract awarded First phase (1mn TEUs per year) completed 14 bids received (February 2011) Received government approval; Have plans to expand to 60mn tonnes of cargo by 2022 Tendering process relaunched
Ponnani port expansion
171
na
High Valley Infra Projects
na
Azhikkal port, Kannur
104
180000 tonnes
na Tata Steel, Larsen & Toubro Coal India, Port of Visakhapatnam
2011-
Dhamra Port Project
na
100 mn tonnes
- 2011
Visakhapatnam port
na
63.9 mn tonnes
2010-
Six ports in Kerala, Tamil Nadu, Andhra Pradesh and Orissa Expansion of four ports (Jawaharlal Nehru port, Kochi port, Chennai port, Visakhapatnam port)
na
200mn tonnes
Adani Group
2011-2015
63000
na
na SardarSarovar Narmada Nigam, Hindustan Construction
2010-2020
57km Kutch Canal Construction Project International Container Transhipment Terminal, Vallarpadam Island Iron ore export terminal
75
na
January 2013
na 159.57
4mn TEU 46 mn tonnes
na Mormugao Port Trust (MPT)
2011August 2011 March 2014
Gopalpur Port expansion (0.7mn tonnes to 12mn tonnes)
282
4.3 mn tonnes
na
2011-2013
Beypore port, Kerala
36.9
100000 tonnes
na Adani Group, HCC, GVK, GMR and ABG Shipping
2011Gujarat Maritime Board intends to sign a letter of intent (LoI) by July 2011
Nargol Port tender
391
na
18 qualified bidders shortlisted Kolkata Port Trust seeking private partners; Construction include four berths (4mn
Indian Haldia Dock II construction project
289
16mn tonne
Kolkata Port Trust
2011-
Page 59
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status tonne each)
New box terminal, Diamond Harbour, Kolkata Port
na
20mn TEU
na
2011 -
Set to invite bids (June 2011) To seek government approval and port clearance for port project (July 2011)
Kuda port project, Gujarat Rail Delhi Metro Extension
337.2
na
Indian Potash
July 2011 -
32
na
KMB, Era Infra Engineering Delhi Metro Rail Corporation (principal advisor) DLF, IL&FS, ITNL ENSO Rail Systems
2008-September 2010
Completed First phase under construction/ Japan loan agreed for Phase II Achieved financial closure (June 2010) Approval granted by the Planning Commission Construction to start; Financing fully secured; Rolling stock contract awarded in September 2011 Feasibility report finalised 80% completed (Sep 2011); Operational by end-2012 At planning stage Preliminary survey completed; Construction to start in Q12011 US$250mn loan from ADB, US$814mn from BMRCL, US$139mn from HUDCO (Oct 2011)
Chennai Metro project
3500
8.6km
2009-2015
Delhi-Gurgaon Metro Indore-Dahod broad-gauge railway line
209
6.1km
2009-2013
230.62
na
na
na
Hyderabad Metro rail PPP Leh to Bilaspur rail project, Himachal Pradesh
2630 520
71.16 km 498 km
Larsen and Toubro; L&T Hyderabad Metro Rail na Anil Ambani Group, Veolia Transport, Reliance Infrastructure na
June 20112011-
Mumbai Metro Line-1 (first phase), Versova (west Andheri) - Ghatkopar Six railway lines and gauge conversion across India
510 681.03
11.1km na
2008- end-2012 2013
Mumbai Metro Line-2 (first phase), Charkop-BandraMankhurd Namma Metro, first phase (involves a 4.9km underground section and a 6.5km viaduct section), Bangalore, Karnataka province
2300
31.8km
Reliance Infrastructure, SNC Lavalin
2011-2016
2190
35.6km
Bangalore Metro Rail Corp. (BMRCL)
2006- March 2013
Page 60
Project Name
Value (US$mn)
Capacity/Length
Companies Japan International Cooperation Agency (JICA), Dedicated Freight Corridor Corporation of India (DFCCIL), Indian Railways
Timeframe
Status
High-speed freight railway line, Western Dedicated Freight Corridor from Mumbai to Delhi Freight rail linking Pakistan and Bangladesh via New Delhi
9390 (6700)
1490km
March 2012December 2016
First phase (1000km) undergoing tendering process; JICA to loan US$6.64bn; 90% of land acquired Plans being discussed Preliminary works underway
na
14km
na Delhi Metro Rail Corporation
2010-
Kochi Metro rail extension Rail bridge linking International Container Terminal at Vallarpadam Island with mainland Kochi Kadapa- Bangalore railway
654
na
na
na na
4.62 km 174km
na na
-Nov 2009 2008-
Construction underway Project announced Construction to begin on Villapuram and Dindigal stretch Operational with four stations; Due to be inaugurated in September 2011 Preliminary work underway; Type of railway line (underground or elevated) undecided 343km KhurjaKanpur first phase to start tendering process; US$975mn loan approved from World Bank ( Contract awarded Small section of track still not open; 2.57km Anand ViharVaishali line operational July 2011 At planning stage
Chennai Egmore- Madurai line electrification Delhi Metro Airport Express Line (Six stations), linking Indira Gandhi International Airport
na
222 km
na
2008-2011
580
22.7 km
Reliance Infrastructure, CAS
- 2011
Bangalore (Namma) Metro, 2nd Phase, Karnataka province
3960
70km
Bangalore Metro Rail Corp., Delhi Metro Rail Corp.
January 2011-
Eastern Dedicated Freight Corridor from Ludhiana in Punjab to Dankuni in West Bengal
8000
1800km
Dedicated Freight Corridor Corporation of India (DFCCIL), Indian Railways Hindustan Construction, Coastal Projects
October 20112016
North Front Railway tunnel
67.3
na
na
Delhi Metro Phase II Expansion Metro rail connection
4200 666.7
100 km na
na Cidco, Mumbai
Completion date was extended to September 2010 2010-
Page 61
Project Name between Mumbai and Navi Mumbai
Value (US$mn)
Capacity/Length
Companies Metropolitan Region Development Authority
Timeframe
Status
Delhi Metro link, part of its 65km Phase III extension plans Construction of rail track and upgrading of existing rail facilities from power plants located in Maithon, Rajpura, Korba and Jharsugud
178.5
3.2km
Delhi Metro
2011-2014
Awaiting final clearance
246.8
34km
Larsen & Toubro Larsen & Toubro (L&T), Alstom Transport, Alstom Projects India
2011-
Contract awarded Under construction; First phase involves 21km of elevated track due by end-2013 Revised plan approved by India government; Allocated US$158mn from India's 2011/12 budget Contracted awarded Feasibility study to start in H1 2011 Waiting for central government approval At tendering stage; Eight companies shortlisted Funding provided by India and Bangladesh; Plans approved (Sep 2011) First phase to start work (May 2011); Phase 2 and 3 to start in 2015-16 and end 2030
Chennai Metro Rail project (track work on corridors I and II), Tamil Nadu
98
105km
2011-2015
Delhi Metro Phase III Extension Part of the Chennai metro system (include two stations) Rail and road project for Sagar Island port, Kolkata
6750 (include taxes and duties)
108km
na Afcons, Transtonnelstroy Indian Railways, Kolkata Port Trust
2011-2016 February 2011April 2015
567
5.5km
438
40 km
2011-
Pune metro expansion
507
70 km
na
na
Kanchrapara rail project, West Bengal
331.7
na
na
2011-
Railway link between Tripura state capital Agartala with Gangasagar in Bangladesh
54
15km (10km in Bangladesh)
na
October 2012 2014
Navi Mumbai Metro (first phase from Belapur to Pendhar)
996
11.5km
na
May 2011 to 2016
Page 62
Project Name Electrification system for east-west metro railway line (First phase, 5.77km with 6 stations; Second phase, 8.9km underground section with 6 stations), Kolkata state Electrification of ShoranurKannur line, Malabar 2 sections (Janpath to Mandi House; Janpath to Central Secretariat) of underground twin tunnels for Metro Phase III project
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
na
14.67km
Siemens
2011- end 2013 (first phase), end 2014 (second phase) May 2011 - May 2013
Contract awarded by Kolkata Metro Rail Corporation (KMRC) Contract awarded
6.6
na
KEC International Pratibha CRFG JV, Pratibha Industries, China Rail First Group
103
na
June 2011 -
Contract awarded (June 2011) Under construction; Construction include 11km Qazigund to Banihal tunnel First line completed under the Railways Infrastructure for Industry Initiative & funded by private J
Jammu-Udhampur-KatraQazigund-Baramulla railway line project, Kashmir valley
4120
345km
Indian Railways
2011 - December 2017
Railway line from Dhamra Port to Jamshedpur steel plant
na
62km
na Delhi State Industrial and Infrastructure Development Corporation (DSIIDC), Rail India Technical & Economic Services (RITES)
- June 2011
Monorail between the Dwarka metro station and Baprola, New Delhi
na
4.5km
June 2011 -
Awaiting approval from state government (June 2011); RITES to conduct feasibility study Deal agreed (July 2011); 74% financed by IERSL, 26% by Scomi-Geodesic Feasibility study concluded (July 2011); Awaiting government approval (July 2011) Preliminary work underway (July 2011) Feasibility study completed (July 2011) Preparation of a
60km-Bangalore monorail project (first phase)
500
16km
ITNL Enso Rail System (IERSL), Scomi-Geodesic Rapid MetroRail Gurgaon (RMG), ITNL Enso Rail Systems (IERS), DLF Metro
June 2011 -
Light railway line extension project (Sikanderpur Metro station to Golf Course Road), Gurgaon Railway line linking the Hazaribagh railway station with Shivpur in Chatra, Madhya Prades Ahmedabad-Mumbai-Pune railway PPP project Monorail system running
488.5
7km
July 2011 January 2013
na
49km
Indian Railway Ministry
July 2011 -
12720 na
634km 28 Km
na na
2011 - 2021 na
Page 63
Project Name from Balaramapuram to Kazhakootam in Thiruvananthapuram
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status feasibility study by National Transportation Planning and Research Centre (NATPAC)
Railway line (part of Dedicated Freight Corridor), between Mughalsarai, Uttar Pradesh and Sonnagar, Bihar Railway line (part of Dedicated Freight Corridor), between Surat, Gujarat and Vasai Road, Maharashtra
na
120km
Dedicated Freight Corridor Corporation (DFCCIL) Dedicated Freight Corridor Corporation (DFCCIL)
August 2011 end-2014
Under construction At tendering stage (August 2011) US$500mn loan from ADB, US$644mn from Indian government (Sep 2011) At planning stage (September 2011) At planning stage (September 2011) At planning stage (September 2011) At planning stage (September 2011) At planning stage (September 2011) At planning stage (September 2011) At planning stage, details being finalised (September 2011) Line 1 under construction; others at various stages of implementation (Sep 2011)
na
140km
March 2012 end-2014
Railway Sector Investment/Improvement programme Mumbei Metro Line-3 (first phase), Colaba-Bandra Mumbai Metro Line-3 (second phase), CharkopDahisar Mumbai Metro Line-4 (second phase), GhatkoparMulund Mumbai Metro Line-5 (second phase), BKCKanjurmarg via Mumbai Airport sections Mumbai Metro Line-7 (third phase), east Andheri - east Dahisar Mumbai Metro Line-8 (third phase), Ghatkopar - Flora Fountain
1144
na
Asian Development Bank
September 2011 - December 2018 September 2011 September 2011 September 2011 -
na
20km
na
na
7.5km
na
na
12.5km
na
na
19.5km
na
September 2011 September 2011 September 2011 -
na
18km
na
na
21.80km
na
Mumbai Metro Line-9 (third phase, undeground), SewriPrabhadevi
na
4.8km
na
September 2011 -
Mumbai Metro Master Plan (three phases) Railway tunnel, (north-south through the Pir Panjal mountains), below Jawahar road tunnel
4300
146.5km (32.50km underground)
na Hindustan Construction Company, India Rail
September 2011 -
201.8
11km
October 2011 -
Completed (Oct 2011)
Page 64
Project Name Namma Metro first phase (Reach-1), part of the 18.1km east-west metro line, Bangalore, Karnataka province
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
na
6.7km
Bangalore Metro Rail Corporation
2006 September 2011
Completed Under construction, Financed by MOR and Industrial Development Corporation of Maharashtra (Nov 2011)
Nerul-Belapur-SeawoodUran railway line, Mumbai, Maharashtra state Roads & Bridges Upgrading Maharashtra-Goa and Goa-Karnataka road Road project, Mumbai Roads of the Thane district Elevated road in Kolkata city Four lane highway Maharashtra Expanding road linking Hyderabad and Yadgiri road project in Rajasthan 54 Bridges in Maharashtra and Gujarat Ranchi-Hazaribagh stretch of NH-33 highway Four lane highway from Haridwar to Dehradun Road construction in Assam, Madhya Pradesh and Chattisgarh
285
27km
na
November 2011 2015
4.31 10.2 60 67.86 94.29 106.06 128 130
122.87km na na 8.14km 336 km 54km 53km 200 Km
na PBA Infrastructure na Hindustan Construction IJM Corporation Berhad Sadbhav Engineering Reliance Infrastructure Soma Enterprise IL&FS Transportation, Punj Lloyd Era Infra Engineering Limited Indian Telecommunicati on Consultant India Mytas Infra and IL&FS Transportation Network Rajahmundry Godavari Bridge Gammon Infrastructure Era Infra Engineering
na na na 2009-2012 2009-2012 na 2009-2011 na
Project approved Contract awarded At planning stage Contract awarded Contract Awarded Contract awarded Contract awarded na Contract awarded Contract awarded
135
71km
2009-2012
142.56
414.8km
na
146.21
na
na
Contracts secured
Highway NH9 linking Pune and Sholapur Godavari River Bridge National Highway 47 in Bihar Muzaffarnagar to Haridwar road
160 180 182.6 220.17
104.6km 2.7 km 63.17km 80 Km
2009-2011 na 2009-2012 na
Contract awarded At planning stage Contract awarded Contract awarded
Page 65
Project Name
Value (US$mn)
Capacity/Length
Companies Limited
Timeframe
Status
Chennai Outer Ring Road Road development project (construction of around 1,000km of new roads, and the strengthening of 5,000km of existing road structures), Jharkhand Road linking Indore and Ahmedabad
227.3
29.65km
GMR Infrastructure
2010- 2013
Under Construction US$240mn loan from ADB; Construction to start (August 2011)
1100
1000km
na IVRCL Infrastructure & Projects Sadbhav Engineering, Hindustan Construction, Laing
August 2011 2014
339.31
155km
na
na
Highway project Maharashtra
340
265km
-2011
Contract awarded Star Universal Resource Company interested in the project Contract awarded Contract awarded BOT contract awarded in June 2009 Reliance Infrastructure, Landmark Worldwide shortlisted Projects approved Contract awarded in May 2009 Contract awarded in May 2009 Tenders launching in December 2008 Tenders invited in October 2008 Project announced
West Bengal to Gangtok in Sikkim Highway Renovation and automation of border check posts in Maharashtra Construction of a six lane highway linking Pune and Satara Hyderabad - Vijayawada road, Andhra Pradesh
361
na
na Sadbhav-SreiSrei Sahaj Reliance Infrastructure GMR Infrastructure
2008-2011
370
na
na
373
140 km
2009-2012
497.05
181 km
2009 -
Road linking India and Nepal (Kathmandu to Birgunj, Terai plains) Three road projects in Rajasthan, Maharashtra and Gujurat Gujarat/Maharashtra BorderSurat-Hazira Port highway expansion NH-9 highway, PuneSolapur section expansion
900
na
na
2009-2012
937.9
na
na Isolux-Soma Consortium Navinya Buildcon and Atlantia
na
na
133 km
na
na
110km
na
Bangalore Ring Road Mumbai-Ramji Nagar Road Chennai inner ring road
na na na
62 km na 5km
na na na
200820082008-
Page 66
Project Name Surat-Dahisar Road Chilkaluripet-Vijaywada Road Chennai-Tada Road
Value (US$mn) na na na
Capacity/Length 239 km 82.50 km 43.4 km
Companies IRB Developers, Deutsche Bank IJM Corporation Berhad, IDFC Ltd Larsen & Toubro Emirates Trading Agency LCC, KMC GVK Developmental Projects
Timeframe 200820082008-
Status Project awarded Project awarded Project awarded
Gurgaon Kotputli-Jaipur highway Deoli-Kota section of the National Highway No. 12, Rajasthan
na
225.6 km
2008
Work to start by 2009 Contract awarded on BOT basis
182.5
83.04Km
na 2010-2036 (including construction period)
Delhi-Agra highway concession
626
180 km
Reliance Infrastructure
Concession awarded Contract awarded in June 2010 Contract Awarded Final BOT tender phase ADB loan for US$300mn awarded
Orissa BOT highway NH-4 BOT expansion Bakhtiarpur - Tajpur bridge Bihar State Highways II Project NH-1A road upgrade between Chenani and Nashri in Jammu and Kashmir province Improvements on the Mizoram State Roads Projects
194 102 322
88km 79.36 km 5.575 km
Ashoka Buildcon Ashoka Buildcon na
na na 2010-2015
424
356 km
ADB IL&FS Transportation Networks
na
548.9
41km
2011-2015
Contract awarded Financing approved
13
480km
World Bank Ramky Infrastructure, Jiangsu Provincial Transportation Engineering KMC Constructions, SNC-Lavalin National Highways Authority of India na Asian Development
2010-
Expansion of the SrinagarBanihal highway, Jammu and Kashmir highway project, Andhra Pradesh Highway Project in Tamil Nadu 27 roads along the Chinese border Karnataka Highway Improvement Project
225
67.76km
2010-
Contract awarded
362
188km
na
At planning stage Open for international tender At planning stage US$315mn loan provided by ADB;
249.7 na 463
29.65 km 804km 615km
201020102010-2014
Page 67
Project Name
Value (US$mn)
Capacity/Length
Companies Bank Gujarat State Road Development Corporation, GVK Power & Infrastructure (GVKPIL)
Timeframe
Status
Bagodara-WatamanTarapur-Vasad road extension
223.03
101.9km
Construction period 2.5 years
GVKPIL named preferred bidder 332.6 loan provided by ADB; US$166.3mn provided by the state government
Road development project, Chhattisgarh Three road widening projects (122.8km Barwa Adda-Panagarh section on National Highway (NH)-2, Jharkhand; BarasatKrishnagar Section of the NH-34, West Bengal; Ambala-Kaithal section of the NH-65, Haryana)
498.9
1500km
Asian Development Bank (ADB)
December 2011-
800
na
na
2010- (30 months)
Received government approval MoU signed with Malaysian government Construction tender to start in 2012; In discussion with World Bank about financing (Nov 2011)
highway construction projects
5000
1000km
na
2010-
Mumbai Trans Harbour Link (MTHL) project (eight-lane bridge), between Sevri and Nhava Sheva, Maharashtra road linking Agartala, India, to Ashuganj river port, Bangladesh expressway between Sanauta Bridge to Purkazi, Upper Ganga Canal, Road Projects
1670
22km
Mumbai Metropolitan Region Development Authority Oil and Natural Gas Corporation (ONGC)
2012-2017
5.52
50km
2010-
At planning stage Awaiting concession proposals from six companies Under construction US$34.9mn aid from Indian Union Ministry of Rural Development as part of Phase VII road construction Undergo preliminary construction; Funded by Jaipur Development Authority & North Western Railway
1800 769
212km na
na C&C Constructions
2011-2014 na
Development of rural roads, West Bengal
34.9
na
na
2011-
Eight railway overbridges, Jaipur
na
na
Irfan
2011-
Page 68
Project Name Jetpur-Somnath section of the NH-8D, Gujarat Improvement of roads, Gujarat state highway construction project in Mizoram NH31 highway expansion project
Value (US$mn)
Capacity/Length
Companies Jetpur Somnath Tollways, PLUS Expressways na Gayatri Projects
Timeframe
Status 30-year concession signed Bidding process to start Contract Awarded Contract awarded US$300mn loan provided by ADB; US$75mn provided by state government US$125mn loan, second tranche of the Second India Infrastructure Project Financing Facility Report to be submitted to the Uttar Pradesh government US$350mn loan provided by World Bank
na 6600 120
127.6km 800-900 km 120km
201120112011-2014 Operating timeframe is 17 years
162
140km
Punj Lloyd
Madhya Pradesh State Roads Project III
375
1000km
2011-2013
road expansion across three states and Gujarat power project Widening of the National Highway 58 (between Delhi and Dehradun) Second Karnataka Highway Improvement Project (KSHIP-II) four-lane Khalghat highway project, between Madhya Pradesh and Maharashtra Expressway connecting Jaipur-Delhi Expressway connecting Chandigarh-Delhi Road development project, Gujarat
125
906km
na Central Road Research Institute
2011-
na
114km
2011-
350
1231km
World Bank
2011-
177 3000
83km 250km
SEW Infrastructure na
na 2011-
Completed At planning stage
3000
250km
na IRB Infrastructure Developers
2011-
At planning stage Contract awarded
813
na
2011-
Yamuna Expressway project, between New Delhi and Agra
na
165km
Jaypee Associates
-March 2012
Under construction; Expected to be complete earlier Seeking financing from PE firms; Borrowed maximum from banks
2,500 miles of roads across India
2200
na
KMC Constructions
2011-
Page 69
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Contract awarded (June 2011)
Road construction project, Rajasthan
128
53km
2011 -
Six lane AhmedabadUdaipur-Kishangarh expressway-widening project (include new bypass in Udaipar), from Gujarat to Rajasthan
1260
555.5km
GMR Infrastructure
September 2011 -
26-year concession awarded (July 2011) Concessionary agreement signed in Sep 2011 Gannon Dunkerley & Co (GDCL) made lowest bid for contract (July 2011)
4-lane highway widening project between Jabalpur and Lakhanadone, Madhya Pradesh
237
81km
na Tata Steel , Adityapur Area Authority
June 2011 -
Adityapur to Jamshedpur PPP toll bridge, Kharkai river Two road widening projects (four-laning of national highways in Orissa and Madhya Pradesh)
na
2.22km
July 2011
Completed Received government approval (July 2011) Contract signed with National Highways Authority of India (Sep 2011) Deal signed with Indian National Highways Authority (July 2011)
790
na
na
July 2011 -
Road widening project (fourlaning of Lucknow Sultanpur section in Uttar Pradesh)
219
na
Essar-Atlanta IRB AhmedabadVadodara Super Express, IRB Infrastructure Investors
September 2011 -
93km Ahmedabad-Vadodara section of the 120km NH-8 North Eastern State Roads Investment Programme upgrade 433.7km of roads in Assam (137.6km), Manipur (93.2km), Meghalaya (93.4km), Mizoram (55km), Sikkim (34.2km), Tripura (20.3km) Shivpuri-Dewas national highway project, Madhya Pradesh 2 state highway PPP projects (DelhiSaharanapur-Yamunotri road and the BareillyAlmora-Bagheshwar road), Uttar Pradesh Two-laning the road
816.6
93km
July 2011 -2014
285
433.7km
Asian Development Bank GVK Power and Infrastructure (GVKPIL)
July 2011 - 2016
US$192mn loan from ADB; US$94mn from Indian government (July 2011) 30-year BOT concession awarded (August 2011)
633
330km
August 2011 -
466.8 na
na na
SEW-Prasad Consortium, PNC-Infratech na
August 2011 August 2011 -
PPP contract awarded (August 2011) Received
Page 70
Project Name widening project, Bikaner to Suratgarh
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status approval from PPP Appraisal Committee (August 2011) BOT contract received approval from PPP Appraisal Committee (August 2011) Approved by Indian Cabinet Committee on Infrastructure (CCI) Under construction (September 2011) Project announced by NHAI (Sep 2011) Project announced by NHAI (Sep 2011) Projects approved by Indian PPP approval committee (Sep 2011) BOT contract awarded to NHAI (September 2011) 28-year contract awarded (Oct 2011)
Four-laning road widening project, between Vijayawada and Machlipatnam
na
na
na
August 2011 -
NH-7 motorway four-laning project Two-lane road tunnel project between Chennai and Nashri, Udhampur district, Jammu and Kashmir province Eight-lane highway project, between Mumbai and Jawaharlal Nehru port Maharashtra-AmravatiGujarat highway project 5 PPP road projects (include Agra-Etawah, Uttar Pradesh; Rampur-Kathgodam, Uttarakhand; RaipurBilaspur, Chhattisgarh) Four-lane National Highway No. 3 (Mumbai-Agra) expansion Jaipur ring road, Rajasthan state
434.11
na
Indian Cabinet Committee on Infrastructure
na
809.5
9km
Leighton Welspun Contractors
September 2011 - 2016 September 2011 September 2011 -
478
na
na
1000
na
na
1400
na
na
September 2011 -
na
332km
GVK Power & Infrastructure Sanjose, Supreme GMR Infrastructure (GMR), Oriental Structural Engineers (OSE)
October 2011 -
210
47km
Oct 2011 -
Hungund - Hospet road project, Karnataka Road project between NH-8 at Kotputli (Rajasthan) to NH-1 at Ambala (Haryana)
365.36
99km
February 2010 -
BOT contract awarded (Feb 2010) DBFOT agreement awarded (Nov 2011)
275
151km
IVRCL Assets & Holding
November 2011 -
Source: BMI. na=not available.
Page 71
Energy and Utilities Infrastructure

Table: India Energy and Utilities Infrastructure Industry Data
2008/09 Energy and Utilities Infrastructure Industry Value As % Of Total Infrastructure Energy And Utilities Infrastructure Industry Value, INRbn
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
59.3
60.0
60.0
60.3
60.1
59.6
59.2
59.1
59.0
1,223.5
1,399.5
1,668.8
1,930.8
2,235.6
2,629.6
3,080.4
3,581.9
4,142.8
Energy and Utilities Infrastructure Industry Value, US$bn Energy and Utilities Infrastructure Industry Value Real Growth, % chg y-o-y Energy and Utilities Infrastructure Industry Value As Percent Of Total Construction (%)
28.1
28.9
36.5
42.0
47.6
57.5
70.8
86.8
103.6
11.4
12.4
8.7
6.6
7.3
9.4
8.6
8.3
7.7
27.1
27.9
28.2
28.8
29.2
29.6
29.9
30.2
30.5
Power Plants and Transmission Grids Infrastructure Industry Value As % Of Total Energy and Utilities Power Plants and Transmission Grids Infrastructure Industry Value, INRbn Power Plants and Transmission Grids Infrastructure Industry Value, US$bn
58.0
60.1
60.1
61.0
62.3
63.7
65.3
66.2
67.0
709.6
841.4
1,003.3
1,177.9
1,393.7
1,674.9
2,010.8
2,370.5
2,773.8
16.3
17.4
21.9
25.6
29.7
36.6
46.2
57.5
69.3
Page 72
2008/09 Power Plants and Transmission Grids Infrastructure Industry Value Real Growth, % chg y-o-y Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Infrastructure Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Construction
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
28.3
16.6
8.7
8.3
9.8
11.9
11.6
9.9
9.0
34.4
36.1
36.1
36.8
37.4
38.0
38.6
39.1
39.5
15.7
16.8
17.0
17.6
18.2
18.9
19.5
20.0
20.4
Oil and Gas Pipelines Infrastructure Industry Value As % Of Total Energy and Utilities Oil and Gas Pipelines Infrastructure Industry Value, INRbn Oil and Gas Pipelines Infrastructure Industry Value, US$bn Oil and Gas Pipelines Infrastructure Industry Value Real Growth, % chg y-o-y
36.0
34.9
34.9
34.4
33.4
32.3
30.8
30.1
29.4
440.5
487.7
581.6
664.9
746.6
848.2
949.8
1,077.4
1,219.1
10.1
10.1
12.7
14.5
15.9
18.5
21.8
26.1
30.5
-6.3
8.7
8.7
5.2
3.8
5.4
3.5
5.4
5.1
Oil and Gas Pipelines Infrastructure Industry As % of Total Infrastructure Oil and Gas Pipelines Infrastructure Industry As % of Total Construction
21.3
20.9
20.9
20.8
20.1
19.2
18.3
17.8
17.4
9.8
9.7
9.8
9.9
9.7
9.6
9.2
9.1
9.0
Page 73
2008/09 Water Infrastructure Industry Value As % Of Total Energy and Utilities Water Infrastructure Industry Value, INRbn Water Infrastructure Industry Value, US$bn Water Infrastructure Industry Value Real Growth, % chg y-o-y Water Infrastructure Industry As % of Total Infrastructure Water Infrastructure Industry As % of Total Construction
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
6.0
5.0
5.0
4.6
4.3
4.0
3.9
3.7
3.6
73.4
70.4
83.9
88.0
95.4
106.5
119.8
134.0
149.9
1.7
1.5
1.8
1.9
2.0
2.3
2.8
3.2
3.7
-6.3
-6.1
8.7
-4.3
-0.2
3.4
4.0
3.9
3.9
3.6
3.0
3.0
2.8
2.6
2.4
2.3
2.2
2.1
1.6
1.4
1.4
1.3
1.2
1.2
1.2
1.1
1.1
2013/14f Energy and Utilities Infrastructure Industry Value As % Of Total Infrastructure Energy And Utilities Infrastructure Industry Value, INRbn Energy and Utilities Infrastructure Industry Value, US$bn
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
59.6
59.2
59.1
59.0
59.0
58.9
58.8
58.8
58.7
2,629.6
3,080.4
3,581.9
4,142.8
4,750.6
5,425.2
6,181.2
7,009.2
7,944.9
57.5
70.8
86.8
103.6
121.8
142.8
162.7
184.5
209.1
Page 74
2013/14f Energy and Utilities Infrastructure Industry Value Real Growth, % chg y-o-y Energy and Utilities Infrastructure Industry Value As Percent Of Total Construction (%)
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
9.4
8.6
8.3
7.7
6.7
6.2
5.9
5.4
5.3
29.6
29.9
30.2
30.5
30.7
30.9
31.0
31.2
31.2
Power Plants and Transmission Grids Infrastructure Industry Value As % Of Total Energy and Utilities Power Plants and Transmission Grids Infrastructure Industry Value, INRbn Power Plants and Transmission Grids Infrastructure Industry Value, US$bn
63.7
65.3
66.2
67.0
67.6
68.2
68.7
69.2
69.6
1,674.9
2,010.8
2,370.5
2,773.8
3,212.3
3,700.1
4,248.2
4,850.0
5,531.7
36.6
46.2
57.5
69.3
82.4
97.4
111.8
127.6
145.6
Power Plants and Transmission Grids Infrastructure Industry Value Real Growth, % chg y-o-y
11.9
11.6
9.9
9.0
7.8
7.2
6.8
6.2
6.1
Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Infrastructure
38.0
38.6
39.1
39.5
39.9
40.2
40.4
40.7
40.9
Power Plants and Transmission Grids Infrastructure Industry Value As % of Total Construction
18.9
19.5
20.0
20.4
20.8
21.1
21.3
21.6
21.8
Page 75
2013/14f Oil and Gas Pipelines Infrastructure Industry Value As % Of Total Energy and Utilities Oil and Gas Pipelines Infrastructure Industry Value, INRbn Oil and Gas Pipelines Infrastructure Industry Value, US$bn Oil and Gas Pipelines Infrastructure Industry Value Real Growth, % chg y-o-y Oil and Gas Pipelines Infrastructure Industry As % of Total Infrastructure Oil and Gas Pipelines Infrastructure Industry As % of Total Construction
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
32.3
30.8
30.1
29.4
28.9
28.4
27.9
27.5
27.1
848.2
949.8
1,077.4
1,219.1
1,371.1
1,538.5
1,724.9
1,927.2
2,154.3
18.5
21.8
26.1
30.5
35.2
40.5
45.4
50.7
56.7
5.4
3.5
5.4
5.1
4.5
4.2
4.1
3.7
3.8
19.2
18.3
17.8
17.4
17.0
16.7
16.4
16.2
15.9
9.6
9.2
9.1
9.0
8.9
8.8
8.7
8.6
8.5
Water Infrastructure Industry Value As % Of Total Energy and Utilities
4.0
3.9
3.7
3.6
3.5
3.4
3.4
3.3
3.3
Water Infrastructure Industry Value, INRbn Water Infrastructure Industry Value, US$bn Water Infrastructure Industry Value Real Growth, % chg y-o-y
106.5
119.8
134.0
149.9
167.2
186.5
208.2
232.0
258.9
2.3
2.8
3.2
3.7
4.3
4.9
5.5
6.1
6.8
3.4
4.0
3.9
3.9
3.6
3.5
3.6
3.4
3.6
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2013/14f Water Infrastructure Industry As % of Total Infrastructure Water Infrastructure Industry As % of Total Construction
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
2.4
2.3
2.2
2.1
2.1
2.0
2.0
1.9
1.9
1.2
1.2
1.1
1.1
1.1
1.1
1.0
1.0
1.0
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Energy and Utilities Infrastructure Forecast Scenario

In 2009/10 energy and utilities infrastructure accounted for 60% of total infrastructure industry value, equal to INR1.4trn (US$29bn). Over the forecast period, the sectors share is expected to remain stable as substantial industry value is created from investments in power plants, transmission grids, fuel pipelines and water infrastructure. By 2015/16, the industry is expected to be worth INR3.6trn (US$87bn) following a substantial build up in the provision of utilities and energy infrastructure. Expanding electricity generating capacity will be the main driver of growth in the wider energy and utilities infrastructure sector. In order to realise economic growth potential and meet demand from an ever-expanding demand base, a reliable electricity supply is crucial. This has led to ambitious targets for electricity generation, including 470GW of nuclear power by 2050, 20GW of solar power by 2022 and 20GW of wind capacity by 2020. While we do not expect all of these targets to be met, achieving even 50% would present massive opportunities for companies associated with the industry. There is also a substantial build-up of coal and gas-fired power plants. According to BMI's Key Projects Database there is in excess of US$212bn worth of projects either under construction or in the pipeline in the Indian power plants and transmission grids sector. This is guiding our optimistic forecasts for the sub-sector's industry value, which we believe will grow by an average of 10.3% per annum between FY11/12 and FY15/16 , from INR1.2trn (US$26bn) in FY11/12 to INR2.4trn (US$57.5bn) in 2015/16. A total of INR6.7trn (US$150bn) was slated to be invested in the sector in the 11th Five-Year Plan (2007/08-2011/12), and the government is largely on target to meet this goal, having fallen just 1% short at the time of the mid-term appraisal. During the 11th Five-Year plan it is hoped that 78GW of additional capacity will come online, with a further 100GW of capacity planned in the 12th Five-Year Plan period.
BMI f=forecast, Source: BMI, Local news sources, industry sources, BMI Research (Key Projects Database)
Powering Forward Infrastructure Industry Value And Energy & Utilities Share
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Energy and Utilities Infrastructure Overview

Indias electricity is insufficient to cope demand, which has growing at a significant pace, fuelled by rapid population growth continued high levels economic growth. is set to continue coming years and presents a major obstacle to the country's business environment and economic development. It also cements existing
e/f= BMI estimate/forecast, Source: UN Data, BMI
sector
India Electricity Generation Capacity Mix, 2011e
with been
and of This over
regional variances in development. In order to realise the country's economic growth potential and meet demand from an ever-expanding demand base, a reliable electricity supply is crucial. Massive energy investment is required to achieve targeted economic expansion and the Indian government has set very ambitious targets for electricity generation, including 470GW of nuclear power by 2050, 20GW of solar power by 2022 and 20GW of wind capacity by 2020. In May 2011, the Indian Ministry of Power estimated that about INR11.2trn (US$252bn) would be required to sustain the power sector during the 12th Five-Year Plan (2012-17). Nearly half of this funding, INR5.1trn, would be required for the development of 100GW worth of electricity generation capacity, while another INR2.1trn and INR4.0bn would be required for the transmission and distribution of electricity. The expansion of coal, hydro and nuclear power forms the basis of the short-term capacity growth, and the medium-term focus will shift towards gas.
Funding needs, existing regional variances in development as well as bureaucratic red-tape are among the principal downside risks to this plan. Latest data from the Ministry of Statistics and Programme Implementation show that 34 power projects in India were on schedule in December 2010, but 43 were delayed, while a further 12 faced additional delays. Furthermore, India will miss its target of adding 78.6GW of power generation capacity in the five years to March 2012 by almost a quarter, due to a
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shortage of fuels such as coal and gas needed to fire electricity plants, according to Power Secretary H.S. Brahma. Nevertheless, it appears that the country is making strides to address this deficit in electricity, with a recent announcement from the Indian Power Minister, Sushil Kumar Shinde, stating that the country suffered from a 6.6% deficit in power supply during the first quarter of FY2011/12 (April June), an improvement from a 11.1% power deficit in Q1 FY2008/09. Private capital forms a significant part of the financing jigsaw for the power generation sector. A consortium of global investors has acquired a 44% stake in Asian Genco Pte Ltd (AGPL), an infrastructure company with a focus on the Indian power sector. The deal is the largest equity transaction to date in the Indian power sector and is an endorsement of the sectors potential. APGL is domiciled in Singapore, but its entire power generation portfolio is located in India. The consortium of global investors is led by Morgan Stanley Infrastructure Partners and also includes General Atlantic, Goldman Sachs Investment Management, Norwest Venture Partners, Everstone Capital and PTC India Financial Services. Together the investors have committed US$425mn to AGPL in order to boost its presence and market share in the Indian power sector. The company has targets to put 1,350MW of capacity into operation, as well as plans to develop a project pipeline exceeding 10,000MW, by 2012. Thermal Sources to Fire According to BMI estimates, thermal sources accounted for around 71% of total electricity generation capacity in India in 2011, with coal alone contributing the bulk. We expect thermal to remain dominant in the country over the forecast period, with coal seeing its market share declining as more gas power plants are introduced. However, although many forecasters suggest that gas will see the greatest percentage rise in installed electricity generation capacity over the next decade, coal is expected to show a substantial increase in absolute terms. India has significant coal reserves, and coal projects tend to be much cheaper than gas or other sources. Oil will remain a relatively insignificant part of the Indian power generation mix, and its market share is expected to decline during the forecast period, with few new facilities being built. This focus on coal is exemplified by the governments focus on developing ultra-mega power plants (UMPP), which have a coal-based generation capacity of 4000MW each. In August 2011, the Indian government had chosen two sites on which to build two new ultra-mega power projects, according to Yahoo! News India. The locations identified were in the states of Tamil Nadu and Andhra Pradesh. Following consultations with local regional authorities, a further seven power generation projects are due to be given the go ahead. Currently, four coal-based ultra-mega power projects are in various stages of development across the country. These UMPPs are primarily developed by Indian power producers, but foreign companies remain interested. In August 2011, South Korean energy company Korea East-West Power had formed a
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partnership with India's Sahara India Power, according to The Times of India. Under the deal, the two firms will establish plants with a total capacity of 6,000MW, and will jointly engage in tariff-based bidding for UMPPs. India has significant coal resources. According to the Ministry of Coal, India has total coal resources of 256bnt (billion tonnes), of which 33bnt are coking coal assets. Despite its sizeable coal reserves, India is facing supply shortages in coal and is still heavy reliant on coal imports to meet its electricity demand, with Indonesia and Australia accounting for around 55% of Indias coal imports, according to the Economic Times. This dependence is expected to grow exponentially over the coming years, particularly from Indonesia. According to the Indonesian Coal Mining Association in May 2011, India will surpass Japan as the leading buyer of Indonesian coal in 2011, importing up to 60mn tonnes, increasing to 90mn tonnes by 2013. This dependence is because mining projects in India continue to face delays in project approvals. The country's bureaucracy remains inefficient in issuing statutory land and environmental clearances for coal mining, as well as in resolving regulatory disagreements between various ministries, particularly between the country's Ministry of Environment and Forests and the Department of Mines. Between 2008 and July 2011, the Indian government received a total of 1,258 applications to mine coal, but only around 158 applications received approval. However, this overseas reliance has left Indias power generation sector heavily exposed to regulatory and political risks from Indonesia and Australia. In mid-2011, Indonesia reaffirmed its commitment to ban all raw mineral exports (including coal) from the country by 2014 while launching a major plan to increase its domestic coal power generation capacity. These moves could reduce the supply of coal available for exports in Indonesia, putting more upside pressure on global coal prices. In addition, new Indonesian mining laws require the annual alignment of coal prices with international rates, where previously, Indonesian coal mines had the freedom to bilaterally agree on coal prices with buyers. This new Indonesian law would see coal costs soar to almost double, from $26 a tonne to $60 at current international prices. Meanwhile, Australia's coal mining industry, still reeling from the effects of the Queensland floods, is facing further taxation the carbon tax and the Mineral Resource Rent Tax from the government; this introduces additional political risks to the industry, potentially raising the cost of coal production in the country. According to the Ashok Khurana, Director General of the Indian Association of Power Producers (a group of 13 private companies), these new taxes are expected to push coal prices up by US$20-25 a tonne. These regulatory changes in Indonesia and Australia could have serious ramifications with regard to the financial viability of coal power plants in India, as current contractual framework does not protect power companies from coal price changes triggered by any change in law in the exporting country.
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As a result, some companies are putting their plans for coal plants on hold until there is some clarity on the issue of imported coal. In August 2011, JSW Energy said it had put its Ratnagiri expansion plans on hold due to costly imported coal, while Reliance Powers 4,000MW Krishnapatnam coal-fired power plant , which relies on coal imported from three Indonesian mines owned by Reliance, is expected to face viability issues as the Andhra Pradesh government is likely to refuse the companys suggestion for a tariff rise, according to the Business Standard. Saying that, many Indian independent power producers still hold fast to goals of tripling their existing capacity within the next five years. In October 2011, Essar Power, part of energy developer Essar Group, has announced plans to invest US$8bn in the construction of new thermal power plants throughout India over the next three years. Similarly, in September 2011, GVK Power And Infrastructure announced plans to reach a 7,500MW thermal power generation capacity by 2016/17 (the company currently has a gas-based capacity of 901MW), while Reliance Power announced that it expects to reach a capacity of 5000MW by end-2012, with nearly 30,000MW under various stages of development. Indian state-owned coal mining and power producer Neyveli Lignite Corporation (NLC) has announced plans to invest INR402bn in boosting the company's power generation capacity by 7,500MW - the company's existing capacity is currently 2,740MW. A key trend among Indian independent power producers is the vertical integration of their operations, where large coal-reliant utilities look to purchasing coal assets in India and in overseas markets, such as Indonesia and Australia. While it is a necessity for the private sector to diversify into Indias coal mining sector (coal mined from captive mines in India must be used for an attached power, steel or cement plant), the purchase of overseas coal assets is to hedge against price volatility and ensure the security of supply. However, it remains to be seen if this strategy would work given the political and regulatory risks highlighted earlier in these countries. In August 2011, Lanco Infratech was successfully selected as the Mine Developer and Operator for the Gare Pelma II coal block in Raigarh, Chhattishgarh. The company is planning to invest INR130bn (US$2.9bn) in the project, with the bulk of the funds - INR120bn (US$2.7bn) - allocated for the power project. This project, along with Lanco's recent acquisition of the Griffin coal mine in Australia, could be crucial in reducing the company's exposure to price volatilities in coal (the Gare Pelma II coal block boosts the company's coal reserves to over 2bn tonnes). In August 2011, GMR Energy announced plans to acquire a 30% stake in PT Golden Energy Mines, a subsidiary of Indonesian conglomerate Sinar Mas Group. The agreement, which is expected to cost between US$450-550mn, includes a 25-year off-take agreement to supply GMR's coal-fired power plants (80% still in construction phase) in India, with GMR eventually receiving 10mn tonnes per annum (tpa) from the Golden Energy Mines. According to Reuters, Golden Energy mines have recoverable coal reserves (i.e. recoverable coal at current prices) of 860mn tonnes and resources (i.e. total estimated coal
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available at the mine) of 1.9bn tonnes. The agreement is expected to be finalised by the end of 2011, provided conditions laid out in the definitive agreement are met. In September 2011, GVK Coal Developers (Singapore), a member of the GVK Group which includes power plant operator GVK Power & Infrastructure (GVKPIL), had reached an agreement with Australia-based mining company Hancock Prospecting to pay US$1.26bn for a majority stake in the company's coal assets in Queensland, Australia. The conclusion of the deal means that GVK will acquire: A 79% stake in the Alpha and Alpha West coal mining project in the Galilee Basin; A 100% stake in the Kevin's Corner coal mining project in the Galilee Basin; And a 100% stake in the 400km rail and port project connecting the above coal mining projects to the port of Abbot Point and its planned T3 terminal. GVK will pay an initial sum of US$500mn for the acquisition, followed by another US$200mn a year from now. The remaining US$560mn will be paid on financial close of the project, which is expected to be in 2012. The first phase of production for the entire coal development project is scheduled to start in 2014, at a rate of 30mn tonnes of thermal coal per annum.
As part of GVK's plan to pay for the purchase and project developments costs, it would raise US$1bn by selling minority stakes in GVK Coal Developers, while taking on US$1bn in bank loans through the assistance of its bankers ICICI Bank and Standard Chartered. GVK was also holding discussions with Indonesia-based miner Kideco Jaya Agung, as well as with several parties to
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 15,000 10,000 5,000 0
Nuclear Capacity Build-Up 2007-2018

25,000 With International Cooperation, MWh Without International Cooperation, MWh 20,000
sell a part of its majority stake in Hancocks coal assets. Although coalbased power projects dominate the thermal generation sector, there are
Source: Nuclear Power Corporation of India Ltd.
opportunities for natural gas. In September 2011, Indian energy company Haryana Power Generation Corporation Ltd was reported by the New Kerala to be close to securing environmental clearance for its proposed 1,500MW energy generation project. The project will be the company's first gas-fired plant, and a possible site has been identified in the villages of Arwa and Mothuka in Haryana region. The Union Ministry of Environment and Forests is in the process of approving the project's Environment Management Plan and preparing an Environmental Impact Assessment report.
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Nuclear Waiting to Take Off Indias nuclear power sector continues to attract the attention of major international players, as it promises to unlock investments worth hundreds of billions of dollars. In December 2010, a landmark agreement on nuclear cooperation was signed between France's Areva and Nuclear Power Corporation of India Limited (NPCIL). The agreement was for the construction of two 1,650MW EPR reactors at Jaitapur in Maharashtra state, estimated to be worth around US$10bn. The reactors are part of a series of six and the agreement also includes fuel supply for 25 years. Studies on the project were due to start in early 2011, with the first reactor expected to come online in eight years. The Indian government is keen to pursue nuclear as an answer to rapidly growing demand for electricity. Currently, nuclear power is estimated to account for less than 3% of India electricity capacity but the country hopes to increase the supply of nuclear sources to 25% by 2050. In late September 2009, India's Prime Minister Manmohan Singh, announced plans for the largest expansion of nuclear power capacity in the world, stating that by 2050 India could generate up to 470 gigawatts (GW) of nuclear power if the country executes its strategy effectively. India currently has 4,423MW of nuclear power generating capacity from six nuclear power complexes containing 20 reactors; a further 5,300MW are under construction. This strategy would see a more than 11,000% increase in capacity by 2050. According to Singh, who made the announcement in a speech at an atomic energy conference in Delhi, the plans to significantly expand nuclear capacity in the country will increase electricity access, reduce dependence on fossil fuels and contribute to global efforts to combat climate change. Singh also noted that the plan would provide numerous opportunities for the global nuclear industry. No details were mentioned relating to the cost of the plan or how it would be funded. India's nuclear power sector is not open to foreign direct investment (FDI), with the country's then Atomic Energy Chief, Anil Kakodkar, ruling that option out in August 2009, according to India's Economic Times. However, Kakodkar did note that there were still opportunities for private companies to get involved, although protecting the technological competence of Indian companies was crucial, he said. Since the lifting of the nuclear trade ban on India in 2008, the sector has seen a rush of activity. All the major international nuclear companies are keen to get involved in the sector, with France, Russia and the US all having signed contracts with the country. Companies from these countries have since been partnering up with Indian firms in order to gain access to the industry, as, according to India's Atomic Energy Act, technology suppliers can only participate in India's nuclear sector through a JV with a government-owned company.
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The freeing up of Indias nuclear power sector is thought to potentially open up US$150bn of investment, according to Indias Economic Times. A letter of intent has been written for the construction of 10,000MW of new nuclear power technology, and 60,000MW of planned additional capacity by 2032. The country was banned from trading in nuclear technology because of its refusal to sign the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) in 1968, and because of its subsequent testing of an atomic weapon in 1974. Following the signing of the nuclear power co-operation agreement between the US and India in October 2008, the country also signed agreements with the other two nuclear power majors, Russia and France. As a result of this, Indias nuclear power sector is set for a rapid expansion, and the international competition is lining up to get a slice of Indias nuclear pie. It should be noted that, despite a huge pipeline of nuclear projects approved in recent years, funding represents a significant downside risk to this extremely ambitious plan. Furthermore, the Fukushima nuclear crisis in Japan has led to an adverse public reaction towards nuclear power. We have already seen local civilian protests against the development of the country's largest nuclear power complex at Jaitapur escalate violently. In April 2011, clashes between protestors and local police left one protestor dead and at least 50 people injured. France-based Areva has also concluded in an internal report that the recent Fukushima nuclear crisis in Japan could lead to a delay in the development of Jaitapur nuclear power complex, due to a re-assessment of the safety standards at the site. In March 2011, India's Prime Minister Manmohan Singh said that India's nuclear power programme was on track, with more stringent safety controls to be implemented following the Fukushima crisis. India's nuclear power sector also presents a political conundrum for the current incumbent party, the Indian National Congress. A recent WikiLeaks cable published in March 2011 alleged that the party bribed lawmakers, offering them US$2.2mn each, to secure their support for a crucial 2008 vote over a nuclear deal with the United States, which was passed, according to the Economic Times. The nuclear deal, known as the 123 Agreement, is vital to the growth of India's civil nuclear sector because it allows the country to take part in international nuclear commerce, while authorising Indian scientists to participate in international nuclear research activities. While Prime Minister Singh has said that no government members were involved in vote-buying, it is possible that the drive for nuclear power in India could take a backseat, as the government seeks to sooth anti-nuclear sentiment, in the short-term at least. This means a potential delay to existing nuclear power projects in India, where, according to the latest data from the World Nuclear Association and NPCIL, there are seven nuclear reactors under construction and 24 nuclear reactors planned or firmly proposed. However, BMI believes that if policy makers decide to take a cautious stance towards new nuclear new builds (essentially an indefinite wait and see approach) following the Fukushima accident, it would mean ignoring crucial factors that differentiate Japan's nuclear power industry and specifically the Fukushima reactor from new generation plants. It should be noted that nuclear industry experts have been pointing
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out since the first reactor collapsed that the design for new builds, mainly in Europe, has much more advanced safety features than the older generation plants commissioned in the 1970s and 1980s. Consequently, the proposed Jaitapur nuclear power plant should be similarly advanced. It had, prior to the Fukushima crisis, received clearance from the Indian environmental ministry, imposing 35 conditions for the clearance. Growing Increasingly Confident On Renewables India is increasingly looking towards renewable as an alternative source of electricity. In January 2011, India's Ministry of New & Renewable Energy announced that it raised the country's renewable energy targets fourfold to 72,400MW by 2022. We believe this increase in renewable energy targets stems from high interest in India's solar projects, and the country's growing energy security concerns. We further note that this ambitious target has a long and uncertain path to realisation. The revised renewable energy target includes the existing solar power initiative the Jawaharlal Nehru National Solar Mission, a three-stage plan to generate 22,000MW of solar power, 2000MW of which will come from off-grid distributed solar capacity in addition to the construction of 20mn square metres (m2) of solar thermal projects by 2022. Besides raising renewable energy targets, India has also stated that it hopes to reduce emissions intensity (carbon emissions per unit of GDP) by 20%-25% of 2005 levels by 2020. Renewable energy sources recognised by India's renewable ministry include solar, wind and small hydropower plants, but not large hydropower projects, according to the Wall Street Journal. We believe that the immediate reason for this latest increase in renewable energy targets is due to the overwhelming private-sector interest in India's first major solar auction, launched at the end of 2010. India's plans for the installation of more than 100MW of solar capacity in 2011 was more than 10 times over-subscribed. This has boosted India's confidence in meeting its renewable energy targets and it is now fast-tracking its solar plans to capitalise on this strong interest. Contracts for a further 620MW of installed solar capacity have since been awarded by India and tenders for an additional 300MW were expected to be launched in January 2011. Another contributing factor to this increase in renewable energy targets is energy security concerns, particularly with regard to coal supplies. India currently generates about 65% of its electricity supply from coal sources. With growing electricity demand due to robust economic growth, we believe that India's coal consumption and imports are likely to rise rapidly over the medium term. According to BMI's forecasts, India's coal consumption will grow from 360mn tonnes in 2010 to 411mn tonnes in 2015 (up 14%), while Wood Mackenzie forecasts show that India might overtake China by 2019 as the largest thermal coal buyer, with purchases of 182m tonnes. This means that India will be increasingly exposed to coal price hikes and a greater reliance on renewable energy sources for electricity supply could therefore offset some of this exposure to price fluctuations.
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While we are encouraged by the country's commitment to the implementation of renewable energy sources, there are significant risks that are derailing such an ambitious plan. The fierce competition at India's first solar auction has resulted in many companies offering deep discounts to secure these contracts, significantly increasing the risk of project failure and delays. Many of India's renewable energy policies are also incoherent, with state governments free to determine their own renewable energy policies. While India's renewable ministry has introduced renewable energy certificates to encourage state distribution utilities to purchase a specified minimum percentage of renewable power, this trading scheme has yet to gain favour with utility companies. These factors, combined with India's nebulous bureaucratic system, means that there are still significant hurdles to overcome before meeting its ambitious target. Hydropower Hydropower accounts for a significant proportion of Indias electricity generating capacity. In 2011, it accounted for around 20% of India's total installed generating capacity, and India aims to develop its hydro potential even further. There is a large amount of hydroelectric capacity, both large- and smallscale projects, in the construction and planning stages, according to the Indian government. The Brahmaputra river basin in eastern India is expected to result in several large power plants, which could add nearly 30GW to capacity. A major policy initiative in the sector was announced in January 2008, with hydropower initiated into the ultra-mega power project (UMPP). The average size of hydro projects is expected to be 500MW. One of the largest hydropower plants being developed in India is the 9500MW Siang Upper hydropower project. In August 2011, the India state-owned power producer National Thermal Power Corporation (NTPC) announced that it would invest about INR1.0trn (US$22bn) to develop the hydropower project in the state of Arunachal Pradesh. The Siang Upper project would be India's largest hydropower plant if completed, and one of the largest in the world - the largest operational hydropower plant in India is currently the 1,500MW Nathpa Jhakri project. NTPC is currently in discussions with the state government about the project, while conducting field studies in preparation for a detailed report. NTPC also plans to commission its 800MW Koldam project in Himachal Pradesh in 2012. While this project, if completed, will have a major impact in meeting electricity demand in the surrounding region, we note that hydropower plants, particularly large-scale ones, typically face significant opposition from the local populace, due to perceived lack of compensation for displacement, as well as environmental concerns due to the large swathes of land which are flooded and the disruption to the natural ecosystems. A recent example is the stiff public opposition for the INR26bn Sinodol hydropower project in the state of Orissa. The Sinodol hydropower plant is located at three sites across the Mahanadi river in the western part of the Orissa state, and is likely to affect farming in the region. This is the major gripe among the local populace and as a result of this public pressure against the project, the Orissa government has decided to conduct public hearings before launching the 320MW Sinodol hydropower project, delaying its implementation. Given that the Siang Upper hydropower project is much larger, we believe that the project could face similar problems.
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Meanwhile, a total of 636 hydro projects, with capacity of less than 25 MW each, are expected to be commissioned by India during the 12th Five-Year Plan (2012-2017). These projects were allotted by the state governments and are due to receive environment and forest clearances by Ministry of Environment and Forests regional offices within a short period of time. Come Wind...... Wind has being targeted as an important element of the countrys future power mix. By 2022, the government is planning to have more than 20,000MW of wind generating capacity, according to the Minister for New and Renewable Energy, Farooq Abdullah, as reported by the Economic Times. Current wind capacity in India is 13,065MW. It is presently one of the largest sources of renewable electricity in the country, accounting for 70% of current installed capacity from renewable sources. However, the country has the potential for 49.1GW of installed capacity. In order to increase the speed of wind power development, India is in the process of changing the structure of its incentives for wind power. Previously, subsidies supported investment in turbines, allowing companies to claim 80% depreciation on equipment costs in the first year, according to Bloomberg. This incentive served to turn India into a hub for wind turbine manufacture, and helped India's Suzlon Energy to become one of the top five turbine manufacturers in the world. In December 2009, India's Ministry of New and Renewable Energy announced that it would move to generation-based incentives, in order to reduce the cost of purchasing electricity generated by wind, making it a more affordable (and therefore realistic) source of electricity. The proposal includes an incentive of INR0.50 (US$0.0107) for electricity generators per unit of wind energy produced, though it remains unclear at this point what form this incentive will take. The old incentives will be phased out by the end of the 11th Five-Year Plan, 2012, with the new plans taking over. Under the new system, the government will spend around INR3.8bn (US$81mn) on subsidies, according to the Wall Street Journal. This follows on from the decision by the Central Electricity Regulatory Commission to guarantee a 19% pre-tax return on investment in renewable energy for the first 10 years of operation. These incentives are targeted at wind-power, solar, biomass and small hydro projects. Critics claim that government support for renewable energy is so extensive in India that the sector is essentially unviable as a standalone industry. However, with the government looking to commit to long-term renewable energy incentives by the time state support is removed, the technological capability of the sector may have improved to the extent that it can compete with thermal sources of power in terms of price. The Indian market is also emerging as one of the major manufacturing hubs for wind turbines in Asia, and according to the Global Wind Energy Council, there are currently seventeen manufacturers with an annual production capacity of 7,500MW. This potential for growth has captured the interest of international investors. In September 2011, ReNew Wind Power announced that the private equity (PE) division of Goldman Sachs Group will invest up to INR10bn (US$204mn) in the Indian wind power producer. The investment means that Goldman Sachs
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will likely acquire a majority stake in the company, which was founded by Sumant Sinha, a former Chief Operating Officer of India's largest wind turbine manufacturer Suzlon Energy. ReNew is expected to use the funds to meet its generation capacity targets, where the company plans to develop up to 200 to 300 megawatts (MW) of wind power capacity per annum, reaching a total wind power capacity of 1000MW by 2015. Besides Goldman Sachs, ReNew had signed agreements with Suzlon, Germany-based Kenersys GmbH and India-based Regen Powertech to implement wind farms throughout India. At present, ReNew is currently developing a 25MW and 60MW wind farm in the Indian states of Gujarat and Maharashtra respectively. In August 2011, Indian power producer Reliance Power (R Power) announced plans to make a INR15bn (US$333.2mn) investment in a 200MW wind power plant project in Vashpet, Maharashtra. The plant, which is scheduled to start operations in September 2012, will have 80 wind electric generators supplied by German wind turbine supplier Fuhrlnder. A long-term power purchase agreement (PPA), already sanctioned by the Maharashtra State Electricity Regulatory Commission, has been signed with Indian construction company Reliance Infrastructure (RInfra) at a rate of INR5.37 (US$0.12) per unit. The plant's generation capacity will eventually increase to 400MW. The project will be entitled to receive 3.7mn certified emission reductions (CERs) during the first 10 years, which is likely to generate additional revenue of INR3bn (US$66.6mn) for the project. ...........Or Shine India also has vast potential for solar power. The country receives 5,000trn kilowatt-hours (KWh) a year of solar energy equivalent, compared to its projected total energy consumption in 2010 of only 848bn KWh, according to India's Ministry of New and Renewable Energy. In light of existing challenges in meeting India's growing energy needs, the government is looking to harness this solar potential, launching the Jawaharlal Nehru National Solar Mission in November 2009 and announcing favourable incentives to attract investors. The plan has been scaled down from the draft proposal, but is still ambitious, considering the country's current near-zero capacity. The solar plan will be executed in three phases, with a final target of 20,000MW by 2022. The initial phase, from 2010 to 2013, plans to add 1,100MW of solar capacity. Initial investment will be US$935mn, and it is estimated that the full proposal will cost around US$19bn. The Mission aims to create a conducive environment for solar technology penetration, both at a centralised and decentralised level. The first phase will focus on: Capturing the low-hanging options in solar thermal; Promoting off-grid systems to serve populations without access to commercial energy; and Favouring modest capacity addition in grid-based systems.
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Banking on newly acquired experience, the second phase will focus on an aggressive increase in capacity, with a view to creating the conditions for up-scaled and competitive solar energy penetration in the country. The project is one of 40 schemes that are planned to transform the area of desert land which makes up the India/Pakistan border, into a solar power hub, with Gujarat at the centre. This combination of vast growth potential and favourable government policies has attracted a large number of companies to these projects. In November 2010, the Indian government received bids to generate 1,740MW of solar photovoltaic (PV) power; however, it only plans to allocate 150MW of solar PV projects. This fierce competition for the projects has also lead to aggressive cost undercutting. For example, international solar manufacturer Moser Baer has won a solar project in Maharashtra state at INR120mn (US$2.63mn) per MW, while government projections for the project were estimated at INR170mn per MW, according to reports by Forbes India. India's Ministry of New and Renewable Energy approved 802MW of grid-connected solar projects in 2010 alone. BMI is concerned about such aggressive undercutting measures, as they heighten the level of risk of project delays, cost overruns and future profitability. Many of the estimated costs for these projects are based on projections of future earnings that have no precedent. Furthermore, it is unclear if these earnings projections have taken into account the difficulties associated with the construction of these specific solar projects. For instance, many of the projects are located in areas with limited access to water a necessary resource in the solar power generation process and in keeping the panels clean and it is unclear if the government is able to provide the necessary quantities of water. Another problem is access to financing. In March 2011, the government stated that it plans to provide additional funds of up to INR15bn (US$333mn) to banks and finance solar energy projects. These funds will be provided interest free to the lenders by the Indian Renewable Energy Development Agency (IREDA), a non-banking financial institution that belongs to the Indian renewable energy ministry and provides term loans to renewable energy projects. The funds will then be loaned to companies that are establishing small solar projects amounting to a total capacity of 200MW at an interest rate of 5%, significantly lower than the State Bank of India's prime lending rate of 11.75%. These projects are part of Phase 1 of the Jawaharlal Nehru National Solar Mission. The Indian government's ambitious plans and strong support for renewables is creating significant opportunities for solar power companies, many of whom competed fiercely for projects during India's first major solar auction in 2010 As of July 2011, the country had so far issued licences for seven solarthermal plants - totalling 770MW (according to data from Bloomberg) - to companies such as Reliance Power , Lanco and Godawari Power & Ispat. This keen interest from the private sector has encouraged the Indian government to increase its renewable energy targets fourfold to 72,400MW by 2022 and boost funding for renewable energy projects. India's New and Renewable Energy Ministry has seen its allocated
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budget rise by 20% to INR12.1bn (US$269.5mn) for 2011, from INR1.0bn (US$224mn) in 2010. The government has also allocated INR6.6bn (US$148mn) for grid-interactive and distributed renewable energy, while INR1.8bn (US$39mn) has been assigned to develop renewable power for rural applications in 2011. However, we believe that providing greater access to financing is insufficient if the significant regulatory and operational risks inherent in India's solar power sector are not tackled. Many of India's renewable energy policies are still incoherent, with state governments free to determine their own renewable energy schemes. While India's renewable ministry has introduced renewable energy certificates to encourage state distribution utilities to purchase a specified minimum percentage of renewable power, this trading scheme has yet to gain favour with utility companies, the main purchasers of electricity. Investment in India's grid infrastructure is also lagging the development of power plants, thus a bulk of the electricity generated from these solar power plants could be wasted. In October 2011, in an attempt to prevent further delays to project implementation in its power sector, India had granted developers of large solar-thermal power plants exemptions from having to obtain environmental clearances. This move was initiated by the government as an attempt to shield Indian power companies from the obstacles faced by other energy and mining companies, which face the risk of missing output targets in 2011 and 2012 because of delays in obtaining environmental clearances. Although developers must still demonstrate that they are not using protected land and have applied for water permits, broader exemptions should ease construction delays for companies. We believe that this move is short-sighted, even though the decision might speed-up the commissioning process in the early stages of project development. India needs to streamline its regulatory procedures; yet the removal of a priori environmental-permit requirements is hardly a solution. Such a move will simply introduce new risks to projects during the construction phase and might easily lead to their suspension and/or cancellation in the later stages of the project life-cycle. Transmitting Power The overall length of Indias power grid is almost 6.5mn km. The annual loss of power through the system is estimated at more than 30%. As of 2006, about three-quarters of Indias villages received an electricity supply, but only 43% of rural households had been provided with a permanent supply. According to the Planning Commission of India, 600mn people are not connected to the power grid. State-owned Power Grid Corporation of India (PGCIL), which transmits 51% of the generated power across India and has approximately 22.4-gigawatt of interregional capacity, is developing an integrated national grid, in a phased manner, for strengthening the five regional grids. Inter-regional power transfer capacity of 9.5GW at the end of 2005 is expected to be enhanced to 30GW by 2012. About US$16bn is required for the central transmission sector. The Asian Development Bank is also keen to aid the PGCIL in developing Indias transmission network, announcing in October 2011 that it will be providing PGCIL with a US$750mn loan for a national grid upgrading project. The project involves the construction of a 1,300km interregional transmission line,
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using 800 kV high-voltage direct-current (HVDC) technology. According to the ADB, the upgrade would allow the grid system to transfer three gigawatts (GW) of electricity from independent power producers in the western state of Chhattisgarh to regions of high demand in the north, including the national capital territory of Delhi. The ADB loan will consist of a US$500mn sovereign-guaranteed loan and a US$250mn non-sovereign corporate loan. The project could make a material impact in addressing the electricity demand in India's northern states. The Chhattisgarh state is one of the three states that hold almost all of India's coal deposits, and it is attempting to use these resources for electricity generation on a large scale. According to BMI 's Key Projects Database, there are currently around nine coal-based power plants, with a capacity of more than 1GW under various stages of development in the Chhattisgarh state. Indias transmission grids sector is showing significant growth potential for private investors in 2011. The sector is undergoing a process of liberalisation, requiring state-run companies such as PGCIL to compete with private sector companies for electricity transmission projects. This is opening up significant opportunities for private sector companies throughout India, with a US$1.1bn high-voltage transmission contract recently awarded to Isolux Corsan in August 2011 and another two transmission contracts a INR13bn (US$293mn) project in the state of Andhra Pradesh and a INR10.3bn (US$231mn) project connecting the two states of Tamil Nadu and Karnataka at the tendering stage. An additional three high-voltage transmission projects have been identified by the Indian government to be awarded to private companies, with state-owned institutions Power Financing Corporation and Rural Electrification Corporation conducting the tendering process for these projects. Several states have also recognised the importance of an efficient transmission grid. In August 2011, the Haryana state government launched a new investment programme to construct 174 new sub-stations with varying levels of power output. A total of 98 existing stations will also be refurbished, expanded and augmented so as to further contribute towards the state's ambitious energy targets. Meanwhile, the government in Andhra Pradesh is considering investing US$3.09bn between 2012 and 2016 to boost the nation's power infrastructure, which includes work to strengthen the transmission and distribution network. In October 2011, it was reported by the Economic Times that the central government approved INR17bn (US$350mn) for the state of Jammu and Kashmir to carry out power reforms aimed at cutting transmission and distribution losses in 30 cities and towns across the state. The reforms, known collectively as the Restructured-Accelerated Power Development and Reforms Program (R-APDRP), would look to carry out system improvements in power distribution in the state, which currently are at 65%.
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Water Utilities Investment into water treatment facilities remains on the backburner in Indias infrastructure sector. In April 2011, Salman Khurshid, Minister of Water Resources, said the central government will discuss measures to improve the country's water management and develop a new national water policy in 2012 to address the issues of water scarcity, management and conservation. The state governments will also form an individual policy at state level. The current national water policy was adopted in 2002. In August 2011, the Indian state of Karnataka announced that it would invest US$4.1bn in a series of irrigation projects, according to Water-Technology. The projects will be focused around the Upper Krishna basin, and a firm programme of action is to be confirmed by December 2011. The funding will also be directed towards a project to address irregularities in the supply of fresh drinking water in the drought-hit Bijapur region.
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Major Projects Table Energy And Utilities

Table: Major Projects Energy And Utilities
Project Name Oil & Gas Pipelines India-Iran gas pipeline project Dabhol - Bangalore natural gas pipeline Mangala Development Pipeline, Second phase, Gujarat region Power Plants & transmission grids Transmission line through Jharkhand, Bihar and West Bengal Teesta River hydropower plant Steam generators for the Kakrapara atomic power project Power Transmission lines Kandra Power Plant Jharkhand power plant,270KW Biomass power plants India -Bangladesh transmission line Coal-based power plant IPP project, Chhattisgarh Grid projects Thermal power plant in Chattisgarh Power plant, Andhra Pradesh Mundra Ultra Mega Power Project (UMPP), Kutch district, Gujarat province
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
7000 1100
1100 km 1570km
na GAIL India
2006-2011 2010-2012
Still at early planning stage Early construction phases
na
80km
Cairn India
2010-
Project approved
27.75 54
1200kV 96 MW
Power Grid Corp of India, KEC International Ltd Alstom Projects India Bharat Heavy Electricals Limited Larsen Toubro Adhunik Thermal and Power Limited Bharat Heavy Electricals Limited Oriental Green Power Power Grid Corp of India RKM Powergen, Mudajaya Group Power Grid Corp of India Bharat Heavy Electricals Limited L&T, GMR Infrastructure
20082009-2013
Contract awarded on turnkey basis Contract awarded in July 2009
80 84 106 130 148.76 193.91
700MW na 1000MW 0.27MW na na 1440MW (350MW first phase) na 600 MW 768MW
na 2008na na 2009-Dec 2010 na January 2009 - May 2012 (first phase) 2010-2012 na 2009-2012
Contract awarded Project awarded Project announced na plans announced Details finalised Delays due to local protests resolved (May 2011) Plans announced Contract awarded Contract awarded Loan granted from ADB; 77% of work completed; First unit commission by Sep 2011 Under construction; 1st 362MW unit operational by December 2011; Turbines from GE
1060 344.12 352.4 415
na
4000MW
Tata Power Oil and Natural Gas Corporation (ONGC), ONGC Tripura Power
2008-2013
Tripura combined cycle gas turbine power plant
2000
726MW
2008- March 2012
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Project Name
Value (US$mn)
Capacity/Length
Companies Company
Timeframe
Status and Bharat Heavy
super critical thermal power plant in Yamuna Nagar Undersea transmission line to Sri Lanka thermal power project at Warora in Chandrapur
552.86 573
660MW 500MW
Haryana Power Generation Corporation na KSK Energy Ventures, Wardha Power Company
20092008-2011
Plans announced Project announced
586.4
540MW
2009
Project launched Under construction; Stay order by Pakistan not obtained from International Court of Arbitration (Se Contract Awarded Contract for supply of technology awarded
Kishanganga hydropower project, Ganga River, Kashmir Thermal Power Plant, Andhra Pradesh
650 660
330 MW 1600MW
Hindustan Construction, Halcrow Group Tata Projects L&T, Mitsubishi (supply contract)
2009-2016 na
Nigrie power plant thermal power project at Kamalanga in Orissa Coal power plant at Amreli, Gujarat
828
1320MW
na
952 963.74
1050MW 2000 MW
GMR Infrastructure Torrent Power
na 2009-2012
Funds secured Agreement signed Face legal proceedings due to construction without prior environment clearance (Jul 2010)
Thermal coal-based power plant, Chhattisgarh Two wind farms in Karnataka and Maharashtra power plant in Central India Power plant in Mundra in the western Indian state of Gujarat
1070
2400MW
BHEL, Jindal Power National Thermal Power Corporation National Thermal Power Corporation Doosan Heavy Industries and Construction Company
2007 -
1200 1200
500MW 1000MW
na na
At planning stage na
1220
4000MW
-April 2012
Contract awarded First unit due December 2009, second unit March 2010 Construction due to begin March 2010
Rosa power plant Thermal power plant, Chhattisgarh
1290 1320
1200MW 1200MW
Reliance Power GMR Bharat Heavy Electricals, Maharashtra State Power Company Pertonet
2010-2012 2010-2014
thermal power plant Two power plants in Gujarat and Kerala
1400 1500
1320MW 1200MW
na 2009-2013
JV formed Plans announced
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Project Name Hydropower project, Manipur Talwandi Sabo power plant, Punjab power plant in Gujarat power project in Tamil Nadu thermal power plant at Gidderbaha Dadri Power project, UP Hydropower projects India (and Nepal) coal-fired power project, Sasan, Madhya Pradesh Oil refinery and thermal power station on Hare Island solar installations Two nuclear reactors Kakrapar
Value (US$mn) 1890 2160 2300 2310
Capacity/Length 1500MW 660MW 2000MW 2000MW
Companies Satluj Jal Vidyut Nigam, NHPC Sterlite Energy Jindal Group Macnamara International
Timeframe 2009-2021 -2012 -2012 na
Status Project Announced Financial closure achieved Awaiting approval At planning stage Expression of interest (EoI) completed EPC tender released Plans announced Under construction; First unit completion set for May 2013 Initial outline announced (Oct 08) Plans announced Plans announced
2600 3150 3200
2640MW 3500 MW 236 MW
na Reliance Power Tata Power, SN Power
na na 2009-2015
4300
3960MW
Reliance Power
2011-June 2014
120-580 na na
250MW 1000MW 1400MW
Tuticorin Port Trust Enfinity, Titan Energy Systems NPCIL CLP Holdings, Vestas Wind Technology India
na 2010-2015 2009-2017
wind power in Theni, Tamil Nadu
na
99MW
2009-Q410
Agreement signed
Thermal power project, Marwa, Chhattisgarh
na
1000MW
BGR Energy
na
Contract awarded EPC tender released Plans announced Second Phase under construction; US$1.33bn capital expenditure announced Construction due to begin in 2010
Shahpur power plant Nuclear power plants, Gujarat, Rajasthan
na na
4000MW na
Reliance Power na
na na
Expansion of Rosa Thermal Plant , Uttar Pradesh Dondaiche power plant
2660 na
1200MW 1320MW
Reliance Power Mahagenco Moserbaer, DCM Shriram Infrastructure and Jindal Steel and Power
2011-2012 2010-2014
13 Hydropower projects in Himachal Pradesh
na
1583 MW
na
Approval granted
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Project Name Solar PV power plant, Mithapur, Gujarat
Value (US$mn) na
Capacity/Length 25MW
Companies Tata Power
Timeframe 2010- end 2011
Status PPA signed; Under construction Second phase, bidding due to start end 2009 Project's location under discussion: Kadapa and Srikakulam mooted. Land still to be acquired (Dec 08) Project awarded Project awarded Seeking government approval
Kirthai power plant
na
240 MW
na
2009-
nuclear power plants power project at Cheyyur, south of Chennai thermal power plant units in Rajasthan. power plant in Bihar Coal-fired power plant, Orissa province
na
2000MW
AP Genco
na
na na na
4000MW 500MW 1980MW
na Bharat Heavy Electricals NTPC Neyveli Lignite Corp Ltd Kerala State Electricity Board, National Thermal Power Corporation Bharat Heavy Electricals, APGenco Coastal Energen Private Ltd Lanco Infratech
2008-2017 20082008-
2200
1000MW
2010-
Coal fired power plant in Baithrani IGCC Power Plant in Vijayawada Power Plant at Tuticorin Power project, Utter Pradesh Coal-based Thermal Plant in Nagapatinuam district Two 600MW Power Plants at Meja Power Plant in Gujarat Rajpura Thermal Power Project, Punjab thermal power project in Punjab Ultra Mega Power plant (UMPP), Sarguja, Chhattisgarh
na
240 MW
2008-
Project announced
na na na
125 MW 2000MW 732MW
200820082008-
Project announced Project announced Received financing of US$587.2mn Construction approved (February 2011) Project announced Project awarded Bidding completed (Dec 08) Project announced
1,570 na na na na
1200MW 600MW 350MW 1320MW 1980MW
Chettinad Power National Thermal Power Corp Bharat Heavy Electricals Lanco Infrastructure Limited Sterlite Energy
200820082008-2010 na 2008-
na
4000MW
na GVK Power and Infrastructure, EPC: Hyundai Engineering, Larsen & Toubro Reliance Power
June 2010 -
Tender underway First unit to come online Q213; Second expansion on hold due to gas supply issues from Reliance Under construction;
Gautami Power plant, Andhra Pradesh Krishnapatnam coal-
688.44 3755
800MW 4000MW
-2013 - 2013
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Project Name fired power plant (UMPP), Andhra Pradesh
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Delays due to land disputes and unsuitable soil condition for boiler foundation;
Chhattisgarh power plant Power plant, Uttar Pradesh Bajaj Energy, thermal power project, Uttar Pradesh Krishnapatnam coal fired power plant
567 1400
1200MW 1980MW
Dainik Bhaskar Power/Bharat Heavy Electricals Ltd (EPC) Jaiprakash Group, L&T
na 2010-2015
EPC contract awarded (July 2010) Supply contract awarded Financial closure (September 2010) Reached financial closure (September 2010)
490
450MW
Bajaj Energy Sembcorp Utilities, Gayatri Energy Ventures Sembcorp Industries, Gayatri Energy Ventures Private Lim Visa Power, Construction contract: Bharat Heavy Electricals (BHEL) GVK Power & Infrastructure (GVKPIL), GVK Developmental Projects National Thermal Power Corporation, Punjab State Power Corporation GMR Infrastructure Nuclear Power Corporation of India (NPCI), Haryana Power Generation Corporation (HPGCL) Bharat Heavy Electricals Limited
2010-
1500 (first phase)
1320MW
2010-2014
Andhra Pradesh power plant first phase
1500
1320MW
na
Financial closure reached
Coal fired power plant, Raigarh district, Chhattisgarh state
584.1
1200MW
August 2011 -
Construction contract awarded
Rattle hydropower project in Jammu and Kashmir
1100
690MW
2010-2017
Project awarded under BOOT basis
thermal power plant in Punjab Gujarat solar power plant
na na
2640MW 25MW
na na
MOU signed Approval granted (October 2010) HPGCL proposed two new sites for plant; NPCIL purchasing land for project in Fatehabad district Contract awarded (October 2010) Delayed due to land acquisition problems (October 2010)
Haryana nuclear power plant Lakshadweep solar power plant Orissa UMPP (Darlipalli and Gajmara)
na 7.8
1600MW 1MW
20102010-2011
12400
8000MW
NTPC National Hydro Power Corporation, Independent Power Producer
2010-2017
Jammu and Kashmir UMPP
na
5000MW
na
Contract awarded (October 2010)
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Project Name Thermal/coal-based power plant, Baradarha, JanjgirChampa district, Chhattisgarh
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
325.6
1200MW
Larsen and Toubro, DB Power Limited Haryana Power Generation Corporation (HPGCL) Om Metals Infraprojects, SEW National Thermal Power Corporation, MP Power Trading Company Bergamo Harbinsons Energy, Andri Urja Essar Energy Areva National Thermal Power Corporation (NTPC), Indian Railways Creative Thermo Light, Uttar Pradesh Power Corporation (UPPCL)
October 2010 - May 2013
Contract awarded (October 2010)
Three solar power plants, Haryana Chhindwara dam project, Madya Pradesh Coal-based thermal power plant, Madhya Pradesh Solar power plant in Rajasthan Vadinar gas-fired power plant, Gujarat Four solar power plants
na
na
2010-
Shortlisting consultants
31.5
1320MW
na
Contract awarded
4500
3960MW
2010-
MOU agreement signed Contract to sign in November 2010 First of two phases commissioned At planning stage
na na 3000
5MW 380MW 1000MW
201020102010-
power plant in Adra, West Bengal thermal power plant, Chitrakoot district, Bundelkhand Tuppadahalli Wind turbine farm in Karnataka state Tidal farm, Gujarat state
na
1320MW
na
MOU to be signed
na
600MW
2010-2014 2010 - October 2011 2012-
MOU signed
80.75 na
56.1MW 50MW
Acciona Energy Atlantis Resources
Completed Contract awarded Seeking environmental clearance; Acquired 1.97km square out 4.22km square acres of land required for
Katwa super thermal power plant, Burdwan district, West Bangal power plant project, Rajasthan and Madhya Pradesh state Two 2MW solar PV power projects, Chandrapur Super Thermal Power Station Coal power plant expansion
1800
1600MW
West Bengal Power Development, Bharat Heavy Electricals, NTPC
2010-
1770
16500MW
Adani Power Megha Engineering and Infrastructure, Instant Energy, Mahagenco Orissa Power Generation
2010-2014
At planning stage
10.8 2000
2MW 660MW
2010- August 2011 2011 -
Contract awarded Bidding deadline was February 2011
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Project Name Expansion of coal-fired power plant, Banharpali in Jharsuguda Wind power plants
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Global tender floated /Financial closure loan planned for June 2011 At planning stage Agreement signed; Studies to start in 2011; Face potential delays US$658bn loan from Japan rejected due to concerns of ability to repay loan
2000 1100
1320MW na
Orissa Power Generation Tata Power Areva, Nuclear Power Corporation of India
20102010-2017
Jaitapur nuclear power project, Maharashtra Thermal power project, Bakreswar, West Bengal
10000
3300MW
2011-2018 (first reactor)
na
600MW
na Asian Development Bank (ADB), NTPC, Kyushu Electric Power
2010-
renewable energy projects
40
500MW
2010-2013
At development stage
100km Power transmission line project to link Jharli to the Bawana project
na
400KV
Jhajjar KT Transco Suryachakra Energy & Infrastructure Private Bharat Heavy Electricals (BHEL), Karnataka Power Corporation (KPCL)
2010-2012 (14 Months)
Financial closure reached
lignite-based power plant, Bhavnagar
na
150MW
2010-
At planning stage
coal fire unit, Bellary thermal power station Hindalco thermal power plant, Orissa (structural steel works) Sepco-I thermal power plant, Punjab
817.6
700MW
2010-
Contract awarded
56.4 36.1
300MW 1420MW
Larsen & Toubro Larsen & Toubro Ganga Power and Natural Resources, Bihar State Electricity Board
20102010-
Contract awarded Contract awarded MOU signed; In the process of obtaining clearance Construction resume for two 600MW units; Awaiting approval for another 2400MW capacity extension Commencement delayed for first reactor due ongoing negotiations with local residents, Plans scrapped
Pirpainty Power Plant, Bhagalpur
na
1320MW
2010-December 2014
Tamnar power plant extension project, Ghardhoda
2900
3600MW
Jindal Power
2010-
Kudankulam nuclear power plant, Tamil Nadu
2600
2000MW
Nuclear Power Corporation of India (NPCIL), Atomstroyexport
2006 - December 2011 (first reactor); August 2012 (Second reactor)
Page 100
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Project announced (December 2010)/Financial closure expected end-2012 Official approval received
Arunachal Pradesh hydropower plant solar thermal power plant, Parewar, Rajasthan
140
90MW
CESC Godawari Power & Ispat (GPIL) Uttar Pradesh Power Corporation (UPPCL), Unitech Machines (UMT)
2012-2016
155.92
50MW
2010-
coal-fired power plant, Auraiya district 800MW, Mundra; 120MW, Jojobera; 1,050MW, Maithon; 100MW of wind and 25MW of solar, Gujarat solar power plant
280
250MW
2010-2014
MOU signed
na na
2095MW 5MW
Tata Power Rithwik Projects
2011 2010-2011 (1 year) 2010- December 2011 (first unit), May 2012 (second unit)
At planning stage Contract awarded US$288mn financing agreement and US$813mn signed
coal-fired power project at Jhajjar, Haryana Power plant investment
na
1320MW
CLP India
2000
630MW
Dongfang Electric
2010-
At planning stage
Expansion of Patratu Thermal Power Station, Jharkhand
1470
1320MW
National Thermal Power Corporation (NTPC) National Thermal Power Corporation (NTPC) KU Projects Private Limited (KPPL)
2011-
MOU signed with Jharkhand State Electricity Board PPA signed; Construction to start
Visakhapatnam power plant, Andhra Pradesh Pitamahul coal-fired power project, Sonepur district, Orissa Mahakalapara coalfired power project, Kendrapara district, Orissa Tentulipathar coal-fired power project, Angul district, Orissa coal-fired plant at Luni, Orissa Singaji thermal power project, Khandwa district Kudgi coal-based
5120
4000MW
2011-
1600
1300MW
2011-
MOU signed
1600
1300MW
SPI Ports Private Limited(SPIPL) NSNL Nagapatnam Power Company Private Limited (NNPCPL)
2011-
MOU signed
1460
1300MW
2011-
MOU signed Signed PPA with Grid Corporation of Orissa
1620
1320 MW
JSL Stainless Madhya Pradesh Power Generating Company Limited (MPPGCL) NTPC
2010-
1428 na
1320 MW 4000MW
2010-2012 (First phase) 2011-
Second phase to start Planning to float
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Project Name thermal power plant
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status tenders for procurement of equipment
Wind power plants in Karnataka, Maharashtra, Rajasthan and Tamil Nadu 5 power generation projects, Orissa, Raigarh, Raipur, Chattisgarh
191
150MW
Suzlon Energy, Hindustan Zinc Limited (HZL)
2011-September 2011
First phase (50MW) to be completed by March 2011
1180
na
Power Grid Corp of India
2011-
At planning stage
Combined cycle gasbased power plant, Western Tripura district
65
100MW
North Eastern Electric Power Corporation (NEEPCO) Macquarie Group, MB Power Madhya Pradesh (MBPMPL), Moser Baer Projects (MBPPL) Reliance Power, Rajasthan Sun Technique Energy Konark Group Vandanaa Power Infratech
July 2011 - 2013
First phase (60MW) awaiting construction (July 2011)
Anuppur coal-based plant, Madhya Pradesh solar power project, Rajasthan solar and wind project, Rajasthan coal-fired power plant, Navalakhi port, Kutch district, Gujarat Renewable energy park, Dholera Special Investment Region, Ahmedabad, Gujarat state
1400
2520MW
2011-2014
Under construction; Macquarie to invest US$129mn PPA signed with NTPC Land lease agreements signed
na 221.5
100MW 100MW
2011-2012 2011-
2000
2400MW
2011-2014
MOU signed Received government investment of US$2.55bn
2640
na
Hindustan Construction (HCC)
2011-
coal-fired power plant (ultra-supercritical), Chandigarh Development of renewable energy sources
2200
800MW
BHEL, NTPC
2011-2017
At planning stage
7400
na
Asian Development Bank
2011-2013
At planning stage
Sagardighi thermal power plant, Murshidabad district, West Bengal
na
1000MW
na
April 2011 - 2015
Construction to start
Page 102
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
Kholongchhu hydropower plant Second stage of Muzaffarpur thermal power plant project (two 195MW units), Bihar gas-based power plant, Gujarat power plant, Karnakata solar power plant, Meghalaya
na
670MW
na
2011-
Feasibility study to be completed in December 2011
51 242 54
195MW 375MW 50MW
Hindustan Construction Company (HCC) Larsen & Toubro Orient Paper and Industries (OPIL)
2011-2014 2011-2013 2011-
Contract awarded EPC contract awarded At planning stage Awaiting state government approval
33
10MW
Azure Power Gammon Infrastructure Projects, Barmaco Energy Systems EMTA Power
2011-
Haryana biomass power plant HEPL thermal power plant, West Bengal 1200MW expansion to 655MW gas-fired power plant, Gujarat
150 892
154MW 660MW
2011-2013 2011-2015
Agreement signed (February 2011) At planning stage Approval granted from Central Electricity Authority (CEA) In talks with state government; Plant designed for Indira Gandhi International Airport Received environmental clearance from Ministry of Environment & Forests 500MW thermal unit completed; Remaining two units under construction Seeking investment; In talks with government Turbine orders placed; Seeking US$625mn loan from US Exim Bank (July 2011) Awaiting environmental
1300
1200MW
China Light and Power (CLP)
2011-
gas-fired power plant in the district of Jhajja, Haryana
na
420MW
GMR
2011-2013
Mandva coal-based thermal power project, Maharashtra
na
1320MW
Lanco Infratech, Lanco Vidarbha Thermal Power
2011-
Indira Gandhi Super Thermal Power Project, Haryana solar plant (Phase 3), Kutch, Gujarat
na
1500MW
National Thermal Power Corporation Solairedirect Energy India Reliance Infrastructure, Reliance Power, Black & Veatch Adani Power
2011-
66.6
20MW
na
Samalkot natural gasfired power plant, Andhra Pradesh Sarguja power plant, Chhattisgarh
2000 na
2400MW 1200MW
20112011-
Page 103
Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status clearance
Wind power plant, Maharashtra
22
na
Mahanagar Telephone Nigam (MTNL)
2011-
At planning stage; Feasibility study to start At planning stage; stage government agreed to provide 1,300 acres of land
Kovvada nuclear power plant, Andhra Pradesh Nizampatnam nuclear power plant, Andhra Pradesh Raigarh gas-based power plant, Maharashtra Guna gas-based power plant, Madhya Pradesh Rajasthan coal-based power plant, Maharashtra thermal power plant, Jharkhand biomass power plant, Chhattishgarh Amravati coal-based power plant, Maharashtra coal based captive power plant, Tamil Nadu gas-based captive power plant, Gujarat
22000
1300 MW
na
na
22000
6000 MW
na DMIC Development Corporation DMIC Development Corporation
2011-
At planning stage Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Received clearance from environment ministry Bidding deadlines delayed fifth time to May 31 2011; project 8 months behind schedule
na
1300MW
na
na
1300MW
2011-
na
1320MW
Adani Power
2011-
na
270MW
Adani Power
2011-
na
12MW
Adani Power
2011-
na
1350MW
Indiabulls
2011-
na
120MW
ARS Metals
2011-
na
7.2MW
Raymond National Thermal Power Corporation (NTPC); Orissa Power Generation Corporation
2011-
Bedabahal ultra mega power project (UMPP), Orissa Balagarh thermal power plant expansion (660MW to 1320MW), West Bengal Transmission lines between Northeast India and Agra Koteshwar Hydro Power Project
3810
4000MW
2011-
1500
660MW
CESC BHEL, ABB, Power Grid Corporation of India Tehri Hydro Development
2011-2016
At planning stage to double capacity
353
1728km
2011-
Order received First unit (100MW) commissioned in April 2011
na
400MW
2011-
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Project Name 21 new wind, biomass and mini hydro power projects, Karnataka state 5 thermal power plants, Bihar
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Awaiting central government approval Proposal from private investors approved 1st phase (37.5MW) by midJuly 2011; US$85mn loans from IFC, Standard Chartered Bank, DBS Bank At planning stage; To be developed in four stages MOU signed with Jharkhand government; US$1bn of financing to be raised by company At planning stage
na
114MW
na
2011-
na
na
na
2011-
Wind power project, Tamil Nadu Patan solar power plant, Gujarat
85
100MW
Techno Electric and Engineering Company, Simran Wind Project
2011April 2011- end2012
na
40MW
PLG Power
coal-fired power plant, Ranchi, Jharkhand power plant, Madhya Pradesh
1350 293.08 (first phase)
1320MW 1360MW
Madhucon Projects JK Organisation KEC International, Maharashtra State Electricity Transmission Company
2012-2015 2011-2013 (first phase)
transmission lines, Maharashtra An integrated power distribution network for countries part of the South Asian Association for Regional Cooperation (SAARC)
82.1
400 kV
2011-2012
Contract awarded
na
100000MW
na Reliance Infrastructure, Reliance Power Transmission (RPTL)
2011-
At planning stage First Solapur-Karad transmission line commissioned; Second 103km Limdi-Ranchodpura transmission line First 300MW stage completed by June 2011; Construction has four phases Phase III on hold due to gas supply uncertainties from Reliance Final loan instalment of US$69mn received from ADB
Western Region System Strengthening (WRSS) project, Gujarat
314.33
1500km
2011-
Krishnapatnam power plant, Andhra Pradesh Jegurupadu III gasbased power plant, Andhra Pradesh Madhya Pradesh Power Sector Investment Programme
na
1,920MW
Simhapura Energy, Madhucon GVK, Hyundai Engineering, Larsen & Toubro, Alstom
2011-
na
800MW
-H2 2014
620
10000MW
na
2011-
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Project Name (transmission capacity) Three (3x360MW) gasbased power plants, Nagapattinam
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
770.9
1080MW
Larsen & Toubro, PPN Power Generating Company
na
Contract awarded by PPN to L&T Project in limbo; Proposals originally to be invited in early 2011
Thermal power plant project, Patutu Eight wind power projects(25MW each), Karnataka or Tamil Nadu
na
1980MW
Jharkhand State Electricity Board
na
273
200MW
GAIL
2011
At planning stage
Three photovoltaic power plants, between Dhule and Chandrapur districts, Maharashtra
438
155MW
Mahagenco Lanco Solar, Lanco Infratech, Juwi Holdings, Maharashtra State Power Generation Company
2011
To be constructed by Mahagenco
Solar photovoltaic (PV) plant, Dhule district, Maharashtra province
195
75MW
2011 - February 2012
Contract awarded Proposal submitted to state government; Coal supplies from Jharkhand Urma Pahari Coal Mines Deal signed with Enercon PPA signed Schneider Electric as EPC contractor; Debt financing provided by Indian banks PPA to be signed; Received approval from GAIL's board
Coal-based power plant, Jharkhand Wind power project, Gujarat Solar power project, Gujarat
na na na
1320MW 50MW 50MW
Adani Power (APL) Enercon, Torrent Power Torrent Power Astonfield Renewable Resources, Grupo T-Solar Global, Schneider Electric
2011 2011 - December 2011 2011 - December 2011
Solar PV project, Rajasthan Natural gas-based power plant, Maharashtra state
na
5MW
2011 -
na
250MW
GAIL India Ramky Infrastructure, Ramky Enviro Engineers
2011-
Hydropower plant EPC project Laying of two 250km high-capacity transmission lines between Vemagiri and Hyderabad, Andhra
67.07
na
2011-2013
Under construction
290
250km
na
July 2011 -
At tendering stage (July 2011)
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Project Name Pradesh Solar photovoltaic (PV) power plant, Belakavadi village, Karnataka
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
13.89
5MW
Bharat Heavy Electricals (BHEL) WinWinD Power Energy, Suryachakra Green Power National Hydroelectric Power Corporation (NHPC)
2011 -
Contract awarded by Karnataka Power Corporation (KPCL)
Dharapuram wind farm, Tamil Nadu
350
250MW
June 2011 - Q3 2013
Constructed under 3 phases Proposal rejected by MoEF (June 2011) Proposal rejected by MoEF (June 2011) Under construction Investment unconfirmed; Construction period to take 32-month Under construction; 1st, 2nd turbine completed; 3rd, 4th turbine completed by July and August 2011 r EPC contract awarded (June 2011)
Kotlibhel II hydropower plant, Uttarakhand Alaknanda Badrinath hydropower plant, Nanda Devi Biosphere Reserve, Uttarakhand Solar power plant, Gujarat Coal-based thermal power plant, Langrin Coalfield, West Khasi Hills District, Meghalaya state Karcham Wangtoo RoR hydro power project, Kinnaur district, Himachal Pradesh Pumped-storage hydropower plant, Tehri
na
530MW
June 2011 -
na na
650MW 30MW
GMR Energy Moser Baer
June 2011 - July 2011
286.7
240MW
NEEPCO
June 2011 -
1569
1000MW
Jaypee Karcham Hydro Corporation, Jaypee Group Hindustan Construction Company, Alstom
- August 2011
156
1000MW
June 2011 - 2015
Coal-based thermal power plant, Kanpur, Bilhaur, Uttar Pradesh
na
1320MW
NTPC National Thermal Power Corporation (NTPC)
January 2012 -
Awaiting environmental clearance Construction to start in January 2012
Coal-based power project, Kanpur Vishnugad Pipalkoti hydropower plant, Alaknanda river, Uttarakhand
1480
1320MW
January 2012 -
648
444MW
THDC India
July 2011 - 2016
US$648mn loan from World Bank (July 2011) Seeking approval from the Indian Energy Exchange and the Rural Electrification Corporation (July 201
Solar power plant, Pokhran, Rajasthan
304.6
100MW
PLG Power
July 2011 -
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Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status Contracts secured; Projects part of Gujarat Phase-I solar power policy; 25-yr PPA signed Seeking financing from IDFC (July 2011); Construction to take 2 years
3 solar power projects (Patan, Kutch and Mithapur regions), Gujarat Two 400KV transmission (25-year concession) projects, Rajasthan state Pressurised heavywater nuclear reactor, seventh unit of the Rajasthan Atomic Power Station, Rajasthan 3 Hydropower projects (Subarnapur, 100MW, Sambalpur, 100 MW, Boudh, 120 MW), Mahanadi River, Orissa High-voltage transmission lines (include five transformer substations),Uttar Pradesh
na
30MW
Tata BP Solar India, Tata Power, BP Solar
July 2011 - end2011
83.5
400km
GMR Energy
July 2011 - July 2013
na
700MW
Nuclear Power Corporation of India (NPCIL)
July 2011 - June 2016
Under construction Pact signed with state government (July 2011); To potentially face protest (July 2011)
586
320MW
NHPC, Orissa Hydro Power Corporation
July 2011 - 2016
1166
1600km
Isolux Infrastructure, Isolux Corsan
Aug 2011 - 2048
37.5-year, BOOT concession awarded (August 2011)
Laying of two 250km high-capacity transmission lines between Tamil Nadu and Karnataka Coal fired power plant, Orissa state
233
250km
na
July 2011 -
At tendering stage (July 2011)
na
1320MW
Visa Power
August 2011 -
Contract awarded
Lodhva coal-based Ultra Mega Power Plant (UMPP), Junagadh district, Gujarat
5400
4000MW
na
August 2011 -
Site Selected (August 2011)
Gare Pelma II coalfired power plant, Raigarh, Chhattishgarh
2700
2000MW
Lanco Infratech
August 2011 - 2015
Concession awarded (August 2011) In discussion with state government (August 2011); Undergoing field studies (August 2011) Under construction
Siang Upper hydropower project, Arunachal Pradesh state Koldam coal-based
22000 na
9500MW 800MW
National Thermal Power Corporation (NTPC) NTPC
2011 - 2012
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Project Name power project, Himachal Pradesh 2 Hydropower plant, Uttarakhand Ultra-mega power plants in the states of Tamil Nadu and Andhra Pradesh
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status (August 2011) At planning stage (August 2011)
na
400MW
NHPC
August 2011 -
na
na
na
na
2 sites chosen PPA agreement signed with Reliance Infra, US$84mn loan approved from US Exim Bank (August 2011) PPA agreement signed with NTPC (Aug 2011); Solar modules supplied by First Solar (Sep 2011) Environment Management Plan awaiting approval, EIA report being prepared (September 2011) Garnering all statutory clearances (August 2011) MOU signed with UPRVUNL, Feasibility & Environmental studies underway (Sep 2011) Received government approval, At tendering stage (Jun 2011)
Solar power plant, Rajasthan state
na
40MW
Reliance Power
August 2011 - 2012
Solar power plant, Jaisalmer, Rajasthan
na
100MW
Reliance Power
August 2011 - 2013
Gas-fired power plant, between villages of Arwa and Mothuka, Haryana region
na
1500MW
Haryana Power Generation Corporation
September 2011 -
Teesta stage-IV hydropower project
773
520MW
NHPC Neyveli Lignite Corporation, Uttar Pradesh Rajya Vidyut Utpadan Nigam (UPRVUNL)
August 2011 -
Ghatampur coal-based power plant, Kanpur Nagar district, Uttar Pradesh state Neyveli coal-based power plant (replacement of existing 600MW TPSI), Cuddalore district, Tamil Nadu Bithnok coal-based power plant (includes linked mine of 2.25mtpa capacity), Bikaner district, Rajasthan
2100
2000MW
September 2011 -
1200
1000MW
Neyveli Lignite Corporation
September 2011 December 2015
481
250MW
Neyveli Lignite Corporation Lauren Jyoti, Jyoti Structures, Lauren, Godawari Green Energy Power Grid Corporation of India Ltd ( PGCIL)
September 2011 -
At planning stage Contract awarded by Godawari Green Energy (Sep 2011) At planning stage, received management
Solar thermal power plant, Rajasthan Transmission systems, Madhya Pradesh and Chhattisgarh
115.1mn
50MW
September 2011 May 2013 August 2011 - end2012
288.7
na
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Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status approval (August 2011)
Pooling stations at Champa and Raigarh (near Tamnar), Chhattisgarh Monarchak gas-based power plant, West Tripura district Wind farm, Gujarat Wind farm, Maharashtra Gujarat Solar Power Transmission Project, Charanka solar park, Patan district Solar power plant, Gujarat
414
na
Power Grid Corporation of India (PGCIL) North East Electrical Power Corporation (NEEPCO) ReNew Wind Power ReNew Wind Power
June 2011 - June 2014
Plans announced (June 2011) First phase (60MW) completed by 2013 (Jul 2011) Under development (Sep 2011) Under development (Sep 2011) US$100mn loan from ADB, US$37mn from state government (Sep 2011) EPC contract awarded (Sep 2011) Clearances obtained, land acquisition in progress (Feb 2010)
na na na
100MW 25MW 60MW
July 2011 - January 2013 (first phase) September 2011 September 2011 -
137
na
Asian Development Bank Zamil Industrial, PLG Photovoltaic Limited Karnataka Power Corporation Ltd (KPCL), Larsen & Toubro
September 2011 -
68.5
20MW
September 2011 -
Coal-based thermal power project, Godhna, Chhattisgarh
na
1600MW
February 2010 -
Interregional transmission line (800 kV high-voltage directcurrent technology) upgrade project, Chhattisgarh state to northern states
750
1,300km
Power Grid Corporation of India (PGCIL), Asian Development Bank
October 2011 -
US$750mn loan from ADB (Oct 2011)
Salaya coal-based plant (Part of US$8bn, 3-year investment), Gujarat state
na
3120MW
Essar Power
2011 - 2014
Under construction (Oct 2011)
Hazira multi fuel plant (part of US$8bn, 3year investment), Gujarat state 510MW expansion to the 500MW Vadinar thermal plant (part of US$8bn, 3-year investment), Gujarat state Mahan coal-based
na
270MW
Essar Power
2011 - 2014
na na
na 1200MW
Essar Power Essar Power
2011 - 2014 2011 - 2014
Under construction (Oct 2011) Under construction
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Project Name plant (part of US$8bn, 3-year investment), Madhya Tori coal-based plant (part of US$8bn, 3year investment), Jharkhand state Paradip coal-based plant (part of US$8bn, 3-year investment), Orissa state Navabharat coal-based plant (part of US$8bn, 3-year investment), Orissa state Tilaiya ultra mega power (coal-based) project (UMPP), Jharkhand Solar power plants (including manufacturing plant in Bangalore)
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status (Oct 2011)
na
1800MW
Essar Power
2011 - 2014
na
120MW
Essar Power
2011 - 2014
na
1050MW
Essar Power
2011 - 2014
Under construction (Oct 2011) Under construction, received approval to start carbon credits trading (Oct 2011) Projects cancelled due delays in funding and subsequent cost rises (Oct 2011) Committee established to resolve location dispute between power and coal ministries (Oct 2011)
na
3,960MW
Reliance Power, Jharkhand Integrated Power
October 2011 2015
na
40MW
Electrotherm India, AEG Power
October 2010 October 2011
North Karanpura power plant, Jharkhand Lucknow-Sultanpur highway four-lane widening project, part of Phase IVA of the National Highways Development Programme Nuclear power plant, Haripur, West Bengal Water Water pipeline system in Delhi Sewer rehabilitation in Delhi Andhra Pradesh irrigation work Water management contract for Mysore city Mundra UMPP
1600
1980MW
National Thermal Power Corporation (NTPC)
October 2011 -
206
na
Essar Projects, Atlanta
October 2011 -
Contract awarded Indian National Highways Authority (NHAI) (Oct 2011) Plans scrapped by state government (Aug 2011)
na
6000MW
Atomexportstroy
August 2011 -
0.3 21
na na
na Insituform Technologies Inc IVRCL Infrastructures & Projects Tata Aquatech International
20082008-
Tender announced Project awarded
102 na na
na na 9.198mn m3/year
2008-2012 na na
Project awarded na DBO contract awarded in May
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Project Name desalination plant Water supply scheme to Kurugodu, Bellary Water treatment plant in Tamilnadu Chennai Pumping Station expansion Street drinking water taps for slums of Kadapa
Value (US$mn)
Capacity/Length
Companies Corporation
Timeframe
Status 2009
na na na
na na na
na na na
200820082008-
Tender launched Tender announced Tender launched
na
na
na
2008-
Project announced
Sewage system for 9 towns in Rajasthan Two desalination Plants, Mumbai
na
na
na
2008-
Project announced First phase to be completed 2014
260
36.5 mn m3/year
na
na
Underground drains in Jabalpur city, Madhya Pradesh (210km)
118
na
2010-2013
Contract awarded
Haryana project (stormwater drainage, wastewater collection, water supplies and associated works in industrial units situated in Panipat and Rai) Water supply and mitigation project, Tamil Nadu
36
na
2010-2012
Contract awarded
86
na
Nagarjuna Construction
2010-
contract awarded Received government approval
Chhattisgarh Canal Project, 60km
56
na
na
2010-2014
Power, water and sewerage development projects Water treatment plant, Bihar state Expansion of water treatment plants, Ganges river
1200
na
Mitsubishi Heavy Industries, Tata Motors
2010-
At planning stage
na
2.271mn m3/year
Punj Lloyd
2011-
Contract awarded At planning stage; funded by state and federal governments
109
na
na
2011-
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Project Name Rajasthan Urban Sector Development Investment Program (New treatment plants, renovating distribution networks and installing new connections in slums and low-income areas) Water supply projects (treatment plant, pipes and pumping stations, Guwahati;flood relief culverts, bridges and sluice gates, Dibrugarh), Assam
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
63
na
2011-
US$63mn loan agreement signed between ADB and Rajasthan state government
200
na
October 2011 December 2017
US$200mn loan from ADB (Oct 2011)
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Residential/Non-Residential Construction and Social Infrastructure

Table: India Residential and Non-residential Building Industry Data
2008/09 Residential and Non-Residential Building Industry Value As % of Total Construction Residential and Non-Residential Building Industry Value, INRbn Residential and Non-Residential Building Industry Value, US$bn Residential and Non-Residential Building Industry Value Real Growth, % chg yo-y Residential and Non-Residential Building Industry Value as % of GDP
2009/10
2010/11
2011/12f
2012/13f
2013/14f
2014/15f
2015/16f
2016/17f
54.3
53.5
53.0
52.2
51.5
50.3
49.6
48.9
48.4
2,450.9
2,684.1
3,136.9
3,499.1
3,945.2
4,461.4
5,112.0
5,800.4
6,573.6
56.3
55.4
68.6
76.1
83.9
97.5
117.5
140.6
164.3
-2.5
7.5
6.3
2.4
4.2
4.8
6.1
5.5
5.3
4.4
4.1
4.0
3.8
3.8
3.8
3.8
3.8
3.8
2013/14f
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
Residential and Non-Residential Building Industry Value As % of Total Construction
50.3
49.6
48.9
48.4
47.9
47.6
47.3
47.0
46.8
Residential and Non-Residential Building Industry Value, INRbn
4,461.4
5,112.0
5,800.4
6,573.6
7,416.2
8,355.5
9,412.5
10,575.6
11,894.7
Residential and Non-Residential Building Industry Value, US$bn
97.5
117.5
140.6
164.3
190.2
219.9
247.7
278.3
313.0
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2013/14f Residential and Non-Residential Building Industry Value Real Growth, % chg yo-y Residential and Non-Residential Building Industry Value as % of GDP
2014/15f
2015/16f
2016/17f
2017/18f
2018/19f
2019/20f
2020/21f
2021/22f
4.8
6.1
5.5
5.3
4.8
4.7
4.7
4.4
4.5
3.8
3.8
3.8
3.8
3.7
3.7
3.7
3.7
3.6
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Residential/Non-Residential Construction Forecast Scenario

Over the next few years we expect India's residential and non-residential building sector to continue to underperform the wider construction sector and overall economic growth. While favourable macro economic and demographic fundamentals should continue to drive growth - we forecast the sub-sector will grow at an average of 4.7% year-on-year (y-o-y) in real terms between 2011 and 2016 this is significantly below the rate required to meet the demands of India's rapidly urbanising population.
f=forecast. Source: Reserve Bank of India, BMI
Residential and Non-residential Building Residential And Non-residential Building Industry Data
Over the short-term, an 18-month-long aggressive rate hiking cycle will see demand for housing and commercial projects continue to soften as credit growth falls; while over the medium-term at least, major barriers to affordable housing provision and a weak business environment, among other factors, will continue to limit growth. Short-term headwinds add to long-term obstacles We expect India's residential and non-residential building industry to grow by a very modest 2.4%% in real terms in 2011/12, compared to our forecast of 5.9% for the infrastructure sector and 7.4% for real GDP. Indeed, BMI notes that with residential and non-residential building already an underperforming sector, we expect the effects of an 18-month-long aggressive rate hiking cycle to add to the headwinds facing the sector. With inflation still on the rise and elevated interest rates to remain in place until late FY2011/12 (April 1 2011 to March 31 2012), a softening in the domestic demand is likely to have a greater impact on residential and non-residential construction activity than on infrastructure. The multiple headwinds facing developers in Indias residential construction sector point to a deflationary outlook over the coming 6-12 months. Indeed, evidence suggests that demand for property has started to flag. Real estate sales deed registrations in Mumbai slumped by 31% y-o-y in July 2010, the 12th consecutive month of year-on-year contraction. Sales have fared even worse in industrial development areas such as Noida, where registrations are down by as much as 50% y-o-y. Furthermore, inventory
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levels are ticking up. Unsold inventory in Mumbai increased to 12 months in July (from a low of nine in March 2011), and similar trends have been witnessed across other major cities such as Bangalore (18 months) and Chennai (10). These figures illustrate that elevated property prices and the rising cost of mortgage financing have started to hurt consumer appetite for new homes. Mortgage rates at the Housing Development Finance Corporation (HDFC), India's largest mortgage lender, have risen to a 2-year high of 10.75% in line, with the Reserve Bank of India's 350bps tightening cycle since March 2010, and the low spread suggests previous rate increases may yet have to be passed on. Given BMIs Country Risks analysts subdued outlook on the Indian consumer, we would not expect to see households embark on a major buying spree anytime soon.
A More Expensive Proposition

India - RBI Repo Rate & HDFC Mortgage Rate, %
Source: BMI, RBI, HDFC
A build-up of unsold inventory, higher financing costs and huge debt levels have also severely dented the liquidity position of real estate developers. Indeed, the sector's total debt burden was estimated to be worth US$24.6bn in July 2011, up from just US$3.8bn in September 2005, and rolling over this debt has become extremely expensive in a high-rate environment. Builders such as Real Estate Holdings and Akarsh Residence were forced to sell debt at yields between 16-24% in Q111. Indeed, the tough operating environment, weakening earnings prospects and the fall-out from a number of housing loan scandals last year has seen the BSE Realty Index majorly underperform the broader index in
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the last few years (see chart). Indeed, since its October 2010 cyclical peak, the index is down by 55%, making it the worst performing sub-sector on the BSE. Underdeveloped Mortgage Market While elevated interest rates will dampen demand for mortgages and by extension new homes over the short-term; of greater concern to the long-term development of India's housing sector is the fact that mortgages remain accessible to very few. The mortgage market in India accounts for less than 5% of GDP and although it holds vast growth potential, we believe the inaccessibility of home loans remains one of the key barriers to the long-term development of India's residential construction sector. BMI notes this issue is one of the keys to unlocking the private investment needed to meet the vast underlying demand for housing in the country. That said, we believe that residential construction projects will continue to provide a key source of value for the sector, although growth will not come at the rate needed to keep pace with the huge demand for affordable homes generated by a rapidly urbanising population. Social housing provision will remain a pressing issue as the government struggles to address the countrys urban housing deficit of 25mn. BMI notes that confusion over the roles of central, state and local government actors, coupled with bureaucracy and widespread corruption, has hampered the country's efforts to implement a coherent and effective urban development strategy. BMI notes that manifold obstacles continue to undermine Indias business environment particularly those facing construction companies and we believe that over the short- to medium-term, growth will continue to be curbed by these weaknesses. However, there are increasing signs that the government is taking a more pro-active approach to tackling the country's long-term development needs. In particular, the appointments of Kamal Nath and Jairam Ramesh as ministers for urban development and the environment respectively appear to be positive and could offer some upside potential to our forecasts.
Residential/Non-Residential Construction and Social Infrastructure Overview

India's urban population will grow by 215mn by 2025 and by 2030 the country is projected to have 68 cities with a population of over one million compared to 42 today. This poses a stern test for India, which is already home to Asias largest slum population. The pressure on affordable housing in particular will become increasingly acute over the next decade as housing and land supply constraints drive up property prices. This will expand the growing proportion of the urban population unable to buy a home at market rate, and further perpetuate India's chronic urban slum problem that threatens to derail its urban transformation. While significant obstacles will need to be overcome if India is to come close to addressing these challenges, we believe the sheer level of demand for physical and social infrastructure will ensure large
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levels of private investment continue to pour into the country. We expect this to continue over the next few years, with both upside and downside risks present. While elevated interest rates will dampen demand for mortgages and by extension new homes over the short-term; of greater concern to the long-term development of India's housing sector is the fact that mortgages remain accessible to very few. The mortgage market in India accounts for less than 5% of GDP and although it holds vast growth potential, we believe the inaccessibility of home loans remains one of the key barriers to the long-term development of India's residential construction sector. BMI notes this issue is one of the keys to unlocking the private investment needed to meet the vast underlying demand for housing in the country. Central to this problem is finding a sustainable housing financing solution for those within India's low- to middle-income bracket, as banks, unsurprisingly, prefer to lend to those within the mid- to higher-income levels. The government will need a housing model that is both attractive to private developers and flexible enough to be accessible to those within India's vast low income bracket. Such a solution has so far been beyond the capabilities of the Indian government and its realisation over the short- to medium-term remains unlikely. Steps In The Right Direction However, over the last 12 months there have been encouraging signs that the government is seeking to tackle the issue of mass affordable housing provision. In June 2011, the government launched the ambitious Rajiv Awas Yojana (RAY) scheme, targeting 32mn people across 250 cities. The scheme includes welcome elements such as the establishment of a low-income mortgage fund and the assigning of property rights to slum dwellers. However, BMI notes that while the government's establishment of a US$137mn mortgage guarantee fund to facilitate greater lending to low income groups is a positive step, it falls way short of what is required. Indeed, we have long stressed that the level of investment required to meet India's slum housing demands is at a far higher level than the government alone will be able to sustain in the long-term. While moderate success has been achieved in harnessing the private sector for economic infrastructure projects, social infrastructure remains a largely untapped area.
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Tourism Ticking Up A planned US$2.1bn theme park project in Gujarat, announced in July 2011, is the latest illustration of a growing trend
800,000
A Growing Attraction India Foreign Tourist Arrivals (Monthly)

700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11
Source: Bloomberg.
across Asia as countries seek to capitalise on rising consumer-spending and a burgeoning mass tourism market. BMI notes that while visitors from developed markets such as the UK and US are still the biggest contributors by number to India's tourism market, the balance is shifting, with arrivals from Asia and within India itself likely to be the major growth driver over the coming years.
With a population of over one billion and an expanding middle-class, we believe India's domestic tourism industry will increasingly become a key driver of demand within the commercial construction sector in particular, as hotels and resort development create growing value for the industry. Indeed, in April 2011, International hotel chain Starwood hotels announced plans to ramp up its presence in India. With 31 hotels in the country, the firm plans to add a further seven by the end of 2011 and also plans to open its first W brand hotel in Mumbai in 2015. Cabinet Reshuffle A Positive Move The appointment of Kamal Nath as India's new Minister for Urban Development following a cabinet reshuffle in January 2011 can be interpreted as an attempt by the government to inject some much-needed momentum into the sector. Moreover, having had success in harnessing private sector support for public projects in his previous role at the road transport ministry, Mr Nath's appointment is an encouraging sign that India's central government is seeking a more active role in tackling its long-term development needs. While the role of urban development minister is not traditionally regarded as a high profile one, this could well change with Nath's appointment. BMI notes that his appointment is part of a wider drive by the Congress-led government to alert investors to the opportunities within the sector. However, his appointment is the easy part, as the government must now attempt to find a solution which will allow it to meet the housing and educational needs (among other requirements) of the millions who will move to the cities over the next 20 years. In the case of affordable housing, BMI notes that the government will need a model that is attractive to private developers and flexible enough to be accessible to the vast range of people within India's expanding urban low-income bracket.
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The level of investment required to meet these demands is at a far higher level than the Indian government alone will be able to sustain in the long-term. Furthermore, while moderate success has been achieved in harnessing the private sector for economic infrastructure projects, social infrastructure remains largely untapped. This trend is likely to continue over the foreseeable future, reflected in our forecasts for India's residential and non-residential building sector. Between 2011 and 2020, we expect real growth in the sector to average 4.2% y-o-y. In contrast we expect to see 7% average growth for the overall construction sector and over 7.5% for the booming Indian economy as a whole. Fostering greater investment into its urban building sector must therefore be a priority for the government.
Roads Ahead India PPP Projects By Sector
BMI believes that PPPs represent a major potential source of funding for a social infrastructure sector that as yet remains largely untapped. Of the 450 PPP projects at various stages of progress, over 60% are road projects, with the remainder mostly economic infrastructure projects, notably ports, power projects and airports. Having worked in the only sector where PPPs have really flourished, there is growing evidence that Kamal Nath plans to implement a more investor-friendly approach, with a greater focus on private procurement. Between 700 to 900mn square metres (m2) of commercial and residential space needs to be built in the country every year, according to a Mckinsey Global Institute (MGI) report. In order to meet such demand, significant private sector participation will be needed, both in terms of financing and expertise, over the long term. However, while India has had some success increasing private sector participation through the creation of a more conducive project financing environment, the limited long-term borrowing capability of domestic banks and a lack of transparency still present challenges and pose risks. In the affordable housing sector in particular, such risks have deterred investment, despite the huge growth potential. Inadequate business models and developers' preferences for building more profitable mid to high-end residential housing have traditionally inhibited growth within the sector and limited mortgage lending options for lower-income groups. Companies such as Bangalore-based developer Provident Housing, the affordable housing arm of Puravankara Group, have sought to overcome such obstacles by using funding from new bookings to finance operational costs, thereby reducing the financing risks associated with such projects. Indeed, its successful business model means the firm is now targeting new projects across 33 cities over the next five Source: Ministry of Finance
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years. Provident Housing is one of a growing number of developers seeking to capitalise on the insatiable demand for affordable housing in India. Providents latest proposal, announced in November 2010, involves the development of four housing projects in Karnataka and Tamil Nadu, with the first of the projects, on Mysore road in Bangalore, due to be completed by end-2010. Construction on the latter three projects will start in 2011 and will add to the firm's growing portfolio of affordable housing projects. One ongoing project is the 'Provident Welworth City' in North Bangalore, which is specifically providing for those within the INR1.5mn (US$33,000) to INR2mn (US$44,000) per apartment income bracket. Clearer Stance On Environmental Planning Should See Benefits We believe a firmer stance on environmental planning and regulations despite some high profile disputes and project delays is what is needed if a coherent and trusted framework is to emerge over the medium-to-long term.
Table: World Bank Doing Business Report: Global Rankings 2010
Ease of doing business (rank) Zimbabwe Kosovo Malawi Burundi Serbia India 157 119 133 181 89 134
Dealing with construction permits (rank) 172 173 174 175 176 177
Source: BMI, World Bank
In light of this, the Indian environment ministrys approval in May 2010 of South Korean steel maker POSCO's long-delayed US$12bn plant in Orissa is a welcome decision for the industry and a relief to investors. Given the size of the investment, the deal first announced in 2005 had come to typify the inherent obstacles facing project execution in the country. Although not the only steel project facing delays in the country, the approval of such a high-profile venture will be received with cautious optimism by the industry. Moreover we maintain our view that the country's insatiable long-term demand for key materials, such as steel, should convince global investors to absorb such cost and time overruns. One of the major obstacles facing the project had been the issue of land clearance, which continues to be one of the major obstacles facing the construction industry in India. Indeed, it was announced on October 18 2010, by India's Environment Minister, that the project's environmental clearances would be withdrawn, with no fixed timeframe for a decision on the future of the project. BMI notes that the
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opposition of local farmers and families who would lose their land under the proposed project was cited as a key reason; the decision also reflected Delhi and its new environment minister Jairam Ramesh's firmer stance on environmental impact and social protection. However, claims by local people that they are being forced off their land have now been dismissed despite ongoing protests by Ramesh, and approval has been granted, raising hopes that future projects may be dealt with more swiftly as greater clarity in the implementation of planning procedures is gradually achieved. The project was billed as the single largest investment in the country when announced and has therefore been regarded by foreign investors as a test case for the country's environmental vetting procedures.
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Major Projects Table Residential/Non-Residential Construction and Social Infrastructure

Table: Major Projects Construction And Social infrastructure
Project Name Commercial Construction
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status
Five theme parks, Gujarat dwelling units at three new resorts in Gir, Ranthambore and Sariska Four hotels in Juhu, Mumbai One hotel in Kakinada, Andhra Pradesh housing units, a fivestar hotel and a shopping mall Hyatt Regency, Ahmedabad Three commercial construction projects in Pune and Orissa 20 to 30 hotels 117 storeys 'World One' tower, Mumbai Tourist development project, Konkan, Maharashtra province Orissa steel plant Office complex for Insurance Regulatory and Development Authority, Nanakramguda, Hyderabad New government buildings for the Ministry of Earth Sciences
2100
13mn sq m
Atlanta, Disney World, Wonderland, Sentosa, Genting
July 2011 -
Received approval from Gujarat Tourism Department; In talks with five foreign operators (July 2011)
60 na na
500 units na na
Mahindra Holidays & Resorts HDIL HDIL
201120132013-
At planning stage At planning stage At planning stage At development stage Project announced (December 2010)
437 88.5
3000 units 27870 sq m
ATS Group Juniper Hotels, Hyatt
2010-2015 2011-2013
44 na
na na
Unity Infraprojects Choice Hotels ACC, Simplex Infrastructures, Lodha Developers
2010-2012 2011-
Contracts awarded At planning stage
99
na
2011-2015
Contract awarded Received state approval At planning stage
51 1120
na 1.8mn tonne
na Bhushan Steel
20112011-
12.9
na
Unity Infraprojects
April 2011 October 2012
Construction orders awarded
7.26
na
Unity Infraprojects Horizon Infrastructure Limited, Paramount Licensing, Paramount Pictures
April 2011- July 2012
Construction orders awarded
Theme Park (Kerala)
na
na
na
Agreement reached between different parties
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Project Name
Value (US$mn)
Capacity/Length
Companies Corporation
Timeframe
Status
Delhi-Mumbai Industrial Corridor (DMIC) project (include construction of a 4,000MW power plant, a high-speed freight line, a six-lane intersection-free expressway, three ports, six airports, seven cities, nine large industrial zones) Mix-used developments ( Raheja Revanta, Raheja Phoenix, and Raheja Shristi), New Delhi and Guargaon Healthcare MedCity (500-bed hospital, six centres of excellence, a resort hotel, a convention centre) Housing residential and office units in two developments, Haryana
90000
1483km
Delhi Mumbai Industrial Corridor Development Corporation (DMICDC)
September 2011 2018
US$3.7bn revolving fund set up for trunk infrastructure, tendering process to start in 2011
204
na
Arabtec Holding, Raheja
October 2011 2014
Contract awarded (Oct 2011)
223
500 beds
DM Healthcare
2011-2013
Funding to come from bank financing, internal accruals and a proposed IPO
44
550 units
Vigneshwara Developers
2010-2014
At planning stage
Industrial Construction Contract work includes building, repairing or altering steel buildings for the Aditya Aluminium project at Sambalpur, Orissa
11.6
na
Hindustan Construction Company (HCC)
Contract awarded
2010-2012 Received final approval (May 2011) by Ministry of Environment. Project delayed since 2005
Orissa steel plant Two polyester plants(1.5mn tonnes each) Piping work for its Paradip refinery
12000
na
POSCO
na
1200 37.5
3mn tonnes na
Indorama Ventures Indian Oil, Punj Lloyd
2010-2014 2010-
At planning stage Contract awarded Government approval withdrawn on environmental grounds; Land acquisition
Cement plant near Bandi wildlife sanctuary
na
na
Harish Cement India
na
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Project Name
Value (US$mn)
Capacity/Length
Companies
Timeframe
Status proceedings suspended
Cement plant, Karnakata Concentrated solar power (CSP) plants Three wind equipment manufacturing plants in Gujarat and Tamil Nadu Durgapur steel plant expansion, West Bangal Kalinganagar steel plant, Jaipur Kutra cement plant expansion, Orissa Power equipment manufacturing plant, Tamil Nadu Residential Construction Gurgaon luxury residential development Four residential projects (Mumbai, Chennai, Hyderabad, Nagpur) Housing projects, Bengaluru Township in Alibaug near Mumbai Four housing projects in Karnataka and Tamil Nadu Luxury apartment project, Pune city (two towers approx. 90 apartments) Mohali housing project, Punjab Chennai residential development Chintels Serenity project (555 apartments), National Capital Region
322
3 mn tonnes
Orient Paper and Industries (OPIL) Bharat Heavy Electricals (BHEL), Abengo
2011-
At planning stage
na
na
2011-
Agreement signed At planning stage; Location of plants at Gujarat and Tamil Nadu
111
na
Gamesa Steel Authority of India Neelachal Ispat Nigam (NINL) Shiva Cement
2012-
646 na 1800
na 1.1mn tonnes 1mn tonnes
2011-October 2011 2011-
At planning stage Under construction (second phase) MoU signed At planning stage (July 2011)
na
3000MW
Doosan
July 2011 -
107
na
Sobha Developers
2010-2011
At planning stage
na
na
Mahindra Lifespace Developers Pruksa Global, Pruksa India Housing Samira Habitats, Peninsula Land Provident Housing, Puravankara Group
2010-2014
Projects announced First project launched At planning stage
na 45
na na
20102010-
750
na
2010-
At planning stage
144.4 99.8 99.7
na na na
Vascon Engineers Godrej Properties (GPL) Phoenix Hodu Developers
2010-2013 20102010-2013
At development stage At planning stage Under construction
68.7
na
Chintels India
2010-
45.43 investment planned
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Project Name An exclusive villa project, Goa 35 storey residential project, Mangalore
Value (US$mn) 66 33
Capacity/Length na na
Companies Nitesh Estates SKS Netgate
Timeframe 2010-2013 2010-2012
Status Project launched Project launched Agreement signed with World Bank and Indian government Suspended, Environmental clearance refused by MOEF, Undergoing legal proceedings (Oct 2011) Contract awarded (March 2011) Contract won from central government At planning stage
Bihar Kosi Flood Recovery Project
220
na
na
2011-
Lavasa township project first phase, Pune One Avighna Park, Mumbai 58 buildings for urban poor Housing units, Delhi 2,688-unit luxury residential project, Pallikaranai, Chennai 25 luxury and affordable housing projects and five townships, Maharashtra Indiramma (affordable housing programme)
611 (first phase) 400 46.7 na
300000 persons na na 20850 units
Hindustan Construction Company, Lavasa Elemec Electrical Contracting Neev Infra Delhi Development Authority
October 2011 20112011-2012 2011-
380.5
na
Puravankara
2011-2015
At planning stage
226 586
na 4.7mn units
Soham Group na
2011-2014 2011-2012
At planning stage At planning stage At planning stage; Able to house 1.4mn people once completed Construction works started (June 2011)
1,250 acre township, Panvel Karvenagar apartment complex (2800 residential units), Pune
na
na
Wadhwa Group, Gulf Finance House
June 2011 -
177.6
2800 units
Acron Infra Projects
June 2011 -2012
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Business Environment
India Business Environment
India comes fourth in BMIs Asia Pacific Business Environment Ratings in Q411 with a score of 63.4 out of 100. BMI's Infrastructure Business Environment Ratings quantify the gap between scope for growth and the structural weaknesses holding back the market. For its Industry Rewards, India scores 77.5 out of 100, one of the highest scores globally, due to the combination of expected high growth and large industry value in the construction sector. However, in all three of the other categories (Country Rewards, Industry Risks and Country Risks), which make up the total infrastructure BE score, India performs poorly receiving scores of 45.4, 55 and 57.8 respectively. Labour market, access to electricity, institutions and corruption are the worst performing indicators for India.
Rewards
Industry Rewards Indias infrastructure industry is set to expand impressively over the long term, given the governments efforts to attract capital for multibillion-dollar investments in transport, energy, utilities and urban infrastructure. According to our forecasts, India will witness robust growth in terms of construction industry value, giving the country high scores for growth levels and value of the industry over the next five years. While all of this has given India the highest infrastructure market score in the region, the score has fallen from scores of 80 and above to 77.5. Concerns regarding the level of investment filtering through to projects on the ground are steadily becoming a major risk to India realising its unmatched growth potential in the construction sector and our current score reflects this concern. Country Rewards The countrys labour market posts a modest performance. With more than half the population younger than 25, labour supply does not seem to be a hurdle. However, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) has reported a large shortage of skilled labour in the construction industry, with a shortage of skilled civil engineers posing a real concern. Also, in spite of a wellestablished financial system, institutions have been wary of lending to contractors, because of the high risk of default. Many firms have been forced to borrow at high rates of interest to meet working-capital requirements. Access to an uninterrupted supply of power is another hurdle for the industry.
Risks
Industry Risks The Indian construction industry is relatively large in comparison to its peers; however, the sector is dominated by a handful of large players who alone posses the expertise to execute several mega-projects that are required. The sector is seeing an increasing number of international players enter; however, most have chosen to do so via a tie-in with a local company in order to help navigate the complex regulatory
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and operating environment. Construction companies have tended to seek joint ventures (JVs) with local construction players, whereas private equity and other funds have chosen to take stakes in existing companies active in the infrastructure, especially power, sectors. Local expertise is crucial to executing infrastructure projects in India and therefore local players of which there are a number of substantial size are best placed to win contracts. Country Risks Indias convoluted political and economic profile means that there are numerous country-wide risks that affect potential returns in the infrastructure sector. Among them, two key risks are Indias over-burdened legal system and rampant corruption. India's legal framework is complex and archaic, with a variety of often conflicting regulations still in place. The court system is prone to lengthy delays, where even the liquidation of a bankrupt company can take up to 20 years. Meanwhile, foreign businesses have to manoeuvre through a panoply of rules and certifications to obtain the estimated 70 separate approvals needed to set up shop in India (unless they are operating within a special economic zone). Corruption is another major issue of concern for investors in India, and the country has fallen from 84th in 2009 to 87th in 2010 (out of 178 countries) in Transparency International's Corruption Perceptions Index. Wide-ranging administrative discretion provided by India's legendary bureaucracy provides numerous opportunities for officials to extort bribes. The lack of transparency in governance rules and excessive bureaucratic procedures provide the context for graft to prosper. In particular, the governments procurement system has been identified as being riddled with corruption and malpractice. However, some progress has been made in combating corruption in recent years, with several public officials indicted or convicted under anti-corruption laws. According to the World Bank's 2010 Doing Business survey, India ranks a relatively lowly 133 in the overall ease of doing business category, out of 183 countries. With corruption in the headlines, however, the authorities are being forced into action. The government is looking to pass the Jan Lokpal bill which would essentially put in place an independent anti-corruption body in the 2011 monsoon session of parliament.
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Regional Overview Asia Pacific Infrastructure Business Environment Ratings

BMI View: The rising cost of construction inputs and capital continues to be a problem in 2011, but the mounting headwinds throughout the global economy suggest that external risks, not adverse monetary conditions, are the key issues plaguing the Asian infrastructure sector going into 2012. Over the longterm, we continue to see upside potential for rewards throughout the Asia Pacific region, with many countries still launching massive infrastructure programmes. This reaffirms the region's status as the world's largest concentration of infrastructure and construction markets. There is still substantial disparity in the demand for infrastructure throughout Asia, and this translates into a significant divergence in rewards and risks among the Asia Pacific infrastructure markets. A 40-point differential exists between the top and bottom countries in BMI 's Risk/Reward Infrastructure regional ratings table. Such a wide dispersion presents investors with a range of rewards at different levels of risk.
Asia The Melting Pot

Asian Countries (LHS) And Regional (RHS) - Infrastructure BE Risk/Reward Ratings, Scores out of 100
* Higher Score = Lower Risks, CEE = Central/Eastern Europe. Source: BMI
The key findings from this quarter's update on the Asia Pacific Infrastructure Business Environment (BE) Ratings can be summarised as follows: Although the elevated levels in inflation and the aggressive rate hikes to curb these pressures for much of 2011 have created a tough business climate for construction companies, we expected these monetary difficulties to lessen in 2012 due to growing headwinds throughout the global economy.
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The most populous countries in the region present sufficient scope in rewards to overcome risks, but it must be reiterated that risks at grass-roots level are considerable, with current monetary conditions not conducive to construction activity.
Emerging South East Asian (SEA) countries such as the Philippines continue to offer greater rewards for their level of risk, but there are growing country risks for these export-oriented economies due to weakening external demand.
The more developed countries in the region present the most attractive business environment but have limited greenfield opportunities. This deficit is highlighted in the revision of Singapore's Rewards scores, where most of the country's greenfield railway contracts have been awarded.
China, India and Indonesia Offer Significant Rewards And Risks China, India and Indonesia head the group in terms of industry rewards. The combination of large industry values, positive long-term macro fundamentals, large fiscal expenditure on infrastructure and expectations of high growth in construction and infrastructure industry value underpin their scores in this category, while reflecting their attractiveness.
Larger Size, Large Rewards, Large Risks

China, India And Indonesia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100
* Higher Score = Lower Risks. Source: BMI
The high Reward scores in their business environments are accompanied with high levels of risks, both on an industry and country level. In China, India and, to a lesser extent, Indonesia, stubborn inflationary pressures and tight monetary policies continued to make headlines during the third quarter of 2011, squeezing profit margins for construction companies while inflating the cost of debt for investment in this
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capital-intensive industry. As a result, we have seen a decline in construction activity in these countries throughout the better part of 2011, as companies become cautious in taking on large-scale projects. However, going into 2012, we expect these tough monetary conditions to lessen and create a more conducive environment for infrastructure development, prompting us to maintain our Country Risks scores (which are already elevated) for these three countries. Besides monetary conditions, there are other idiosyncratic risks that continue to plague the respective business environments in China, India and Indonesia. China continues to channel vast amounts of public funds into its already-sizeable construction industry, dwarfing allocations in all other emerging markets. Nevertheless, concerns such as the transparency of the tendering process and biases towards foreign companies continue to have an adverse impact on China's business environment. Meanwhile, issues related to inefficiencies and wastages are growing following the infrastructure boom during the last Five-Year plan. Recent examples include the boom and bust of highspeed rail, where the approvals for new high-speed railway projects are suspended and safety checks conducted on existing lines, and the liquidity problems facing local governments due to large-scale lending to economically unviable infrastructure projects. Although these factors are expected to dampen the overall growth in rewards for China's construction sector, there are potential bright spots in certain sub-sectors. China has plans to launch a raft of measures to bolster funding the country's mass social housing programme. China has also completed its mandatory safety inspections on nuclear plants without incident, suggesting that it is likely to continue its massive nuclear-building programme. India also has plans to spend significant amounts on plugging its infrastructure deficit, with the country's 12th Five-Year Plan (2012/13- 2016/17) to push out US$1trn worth of infrastructure investment. However, project execution continues to suffer due to weighty bureaucratic problems and an incoherent legal framework. This fosters corruption and inefficiencies, which culminate in delays and project cost inflation for sponsors. Sectors ranging from energy infrastructure to road and rail continue to face serious challenges over the time needed to secure property rights, navigate planning regulation and deal with localised protests. One area of particular concern is that of land acquisition. A land acquisition bill and legislation on resettlement are expected to be completed in December 2011, with the proposals likely to include farmer-friendly provisions in terms of compensation and government-centric handling of virtually all land acquisition deals (even on behalf of private players). Although the new laws are expected to bring much-needed clarity to the land acquisition process, the issue has become increasingly politicised, with proposed reforms likely to see investors pay well above market rates for property. Therefore, even though the government has been making serious attempts to address the problem regarding access to financing (the country has launched measures to boost the size and sophistication of
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the domestic debt market), concerns over the level of investment filtering through to projects on the ground remain pertinent. Indonesia continues to present significant opportunities, with the government's latest plan in June 2011 expected to launch a slew of industrial construction projects worth a combined US$22.3bn (IDR190trn). Combined with the launch of core infrastructure projects under a private-public partnership framework, Indonesia's infrastructure sector is sending the right signals to investors about its vast growth potential. However, we have yet to see a decisive change in Indonesia's regulatory environment, as the industry continues to be fraught with intrinsic risks. A new land acquisition bill was supposed to be implemented in 2011 but is still stuck in parliamentary discussions. High levels of corruption and an unsophisticated regulatory environment (particularly in legal rights that facilitate lending) mean there are substantial country risks. Industry risks are also on the downside, with significant concerns regarding the transparency of the tendering process. The government is looking to provide incentives and guarantees to limit the downside risks to investors, but it remains to be seen if the Indonesian government is able to effectively implement them. Lastly, the infrastructure sector remains dominated by quasi- state-owned entities, and there is no precedent to gauge how the long-term returns from infrastructure could play out. South East Asia Offering Greater Rewards, But Face Greater External Risks For emerging SEA countries, inflationary pressures remain stubborn and are starting to have a growing impact on construction activity in 2011. Nevertheless, we continue to expect these emerging SEA countries to offer greater rewards relative to their level of risk, with the Philippines achieving an appreciation in their Industry Rewards scores this quarter. These countries continue to exhibit varying levels of infrastructure deficits and have launched multi-billion dollar infrastructure programmes to address such shortfalls. Therefore, we expect them to continue to present numerous opportunities in their respective infrastructure sectors over the long-term.
Vietnam Leads In Rewards, Trails In Risks

Emerging South East Asia (ex-Indonesia) - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100
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Risks in these SEA countries are also relatively stable, but evidence of a stalling economic recovery in the US suggests that there could be a worse-than-expected slowdown in external demand. This could increase risks on a country level for the infrastructure sectors in these emerging SEA countries as their economies (or tax revenues) are dependent on a vibrant export sector to finance infrastructure expenditure. This potential risk has yet to be reflected in our ratings. Malaysia, in fact, saw an improvement in its country ratings due to a resilient domestic market, but we expect them to make an impact in the following quarters. Thailand, for example, has shown signs of these growing external risks, but the downward revision in its Country Risk score is also due to the prospect of further political instability within the country. Although the July parliamentary elections saw the Pheu Thai Party win an overwhelming majority, the party's adamant stance on amending the constitution is increasing the risks of renewed political protests by supporters of the opposition party, the People's Alliance for Democracy. This is clouding the political situation in Thailand, which is not positive for investor confidence. Nearly Developed Markets Offer Best Risks/Rewards Mix Inflationary pressures have also remained elevated in Asian countries that are nearing developed market status in terms of their infrastructure market maturity. However, with the exception of Hong Kong, they have not reached levels that are detrimental to construction growth and, instead, we expect the weakening external demand to be the main concern affecting demand for infrastructure.
Singapore Moderates On Rewards

Nearly Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100
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Nevertheless, these countries continue to offer the best business environments for realising investment returns. Countries such as Singapore, Hong Kong, Taiwan and South Korea are highly developed in terms of their legislative and regulatory environments and present very little in the way of risk to sponsors and financiers. The average score for Risks in these developed markets is 79.4 out of 100, significantly higher than the remaining nine Asian markets at 50.3. Furthermore, these countries offer significant opportunities for brownfield projects and remain committed to improving their infrastructure to support economic development. This quarter, Singapore's Rewards scores have seen a major downward revision, pushing its ranking in the overall BE ratings table from second to third place. This decline is because most of the country's greenfield contracts for the next decade, centred on the US$48.6bn urban railway expansion project, have been awarded. South Korea continues to hold top spot in our Asia BE Ratings table as it offers the best combination of risks and rewards. The recent successful bid by South Korea to host the 2018 Winter Olympics and the ongoing plans by the government to expand and diversify the country's transport networks and electricity generation capacity are expected to provide a steady stream of greenfield projects. However, the sector has been saturated since the construction boom in the 1990s, and places high entry barriers for foreign companies.
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Table: Regional Infrastructure Business Environment Ratings
Reward s Industry Reward s South Korea China Singapore India Hong Kong Taiwan Indonesia Malaysia Vietnam Thailand Philippines Cambodia Pakistan Regional Average 52.5 75.0 37.5 77.5 35.0 42.5 67.5 42.5 55.0 37.5 45.0 47.5 15.0 48.5
Risks Country Reward s 88.9 60.9 86.2 45.4 90.1 74.0 48.2 72.2 60.4 72.3 55.1 25.9 43.6 63.3 Reward s 65.2 70.1 54.6 66.3 54.3 53.5 60.8 52.9 56.9 49.7 48.5 39.9 25.0 53.7 Industry Risks 75.0 40.0 90.0 55.0 85.0 75.0 25.0 55.0 35.0 50.0 35.0 20.0 35.0 51.9 Country Risk 77.1 66.5 86.2 57.8 77.8 71.6 62.2 69.8 53.9 60.5 57.1 37.6 41.7 63.1 Infrastru cture BE Rating 68.5 65.8 64.5 63.4 62.2 59.4 56.7 56.2 53.7 51.7 48.5 37.1 29.2 55.2 Regiona l Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13
Risks 76.3 55.9 87.7 56.7 80.7 73.0 47.3 63.9 46.3 56.3 48.3 30.6 39.0 58.6
Source: BMI. Scores out of 100, with 100 highest. The Infrastructure BE Rating is the principal rating. It is comprised of two sub-ratings 'Rewards' and 'Risks', which have a 70% and 30% weighting respectively. In turn, the 'Rewards' Rating is comprised of Industry Rewards and Country Rewards, which have a 65% and 35% weighting respectively and are based upon growth/size of the Infrastructure industry (Industry) and the broader economic/socio-demographic environment (Country). The 'Risks' rating is comprised of Industry Risks and Country Risks which have a 40% and 60% weighting respectively and are based on a subjective evaluation of industry regulatory and competitive issues (Industry) and the industry's broader Country Risk exposure (Country), which is based on BMI's proprietary Country Risk Ratings. The ratings structure is aligned across the 14 Industries for which BMI provides Business Environment Ratings methodology, and is designed to enable clients to consider each rating individually or as a composite, which the choice depending on their exposure to the industry in each particular state. For a list of the data/indicators used, please consult the appendix at the back of the report.
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Company Monitor
Gammon India Ltd.
Strengths Gammon is well placed within the Indian infrastructure sector, meaning it can take advantage of opportunities as they arise. Weaknesses Opportunities Gammon has a presence in the infrastructure sectors in Asia, the Middle East and Africa. It was hit by higher finance costs and currency fluctuations, dampening Q109/10 results. Indias strong population growth and a growing economy is fuelling demand for infrastructure. Indias government is looking to improve the regulatory regime to make the business environment more attractive for private sector companies looking to invest in infrastructure. It is also opening up the sector to private companies through PPPs. Threats Lack of widely available domestic expertise to take on large infrastructure and civil engineering projects.
Company Overview
Gammon India Limited is an India-based civil engineering company. Over the past 70 years, the company has expanded its operations both in India and abroad. Gammon has taken on the design and construction of bridges, ports, harbours, thermal and nuclear power stations, dams, high-rise structures, chemical and fertiliser complexes, environmental structures, cross country water, and oil and gas pipelines.
Recent Activity
Gammon is currently involved in a number of projects: the improvement, operation and maintenance of the Vadape-Gonde Road; the Parbati Hydroelectric Project; the Rampur Hydroelectric Project; the West Bengal Corridor Project; the construction of the Bramhaputra Bridge; the part design and construction of viaduct and structural work on three elevated stations for phase two of the Delhi MRTS Project; the Gorakhpur By-Pass; the Kosi Bridge; the Dahej Uran Pipeline Project; the Gandikota Package two, Andhra Pradesh Irrigation Works; and the Kalwakurthy Lift Irrigation Scheme. In August 2011, Gammon Infrastructure Projects announced that the Company has sold its 50% stake in the 12MW operational biomass power plant of Punjab Biomass Power Ltd. at Ghanour to its joint venture partner for a cash consideration. Further, the Company has sold its 50% stake in seven other biomass power projects in Punjab to its joint venture partner and has in turn bought an additional 50% stake in six biomass power projects in Haryana and one in Punjab from the joint venture partner. The Company, as a result of the transaction, will have 100% stake in biomass projects to generate 66 MW power. The transaction, however, is subject to the approval of the concerned authorities and lenders. Terms were not disclosed. In February 2011, Gammon Indias Gammon-OJSC Mosmetrostroy announced that it had been awarded two contracts to design and construct underground stations and associated tunnels for the Chennai Metro Rail Limited amounting to INR19.47bn. The project involves the construction of
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seven underground stations along with twin-bored tunnels covering a total length of 6.4km. In September 2010, Gammon India announced it had bagged an order to supply a 150MW steam turbine and boiler for Nagai power plant valued at approgammonximately INR3.1bn (US$67mn). In February 2010, Gammon India announced it had been awarded a contract by ISKCON (International Society for Krishna Consciousness), aggregating to INR1.37bn (US$29.8mn) for Construction of the Sri Chaitanya Chandrodaya Mandir and Indian Educational & Cultural Centre at Sri Mayapur, West Bengal. In January 2010, Gammon India announced that it had been awarded a project by Jindal Power, aggregating to INR3.08bn (US$67mn) for civil works.
Strategy And Evaluation
Gammon India is currently engaged in the business of investing in, developing, operating and maintaining infrastructure projects under the public-private partnership (PPP) model. The company has a strong presence in diverse sectors such as roads, bridges, ports, hydroelectric power, biomass power and SEZs. Going forward, the company intends to extend its operations in more major segments such as mass rapid transit systems, power transmission lines, airports and SEZs. Gammon regularly enters into strategic alliances and partnerships with leading domestic and international players to jointly apply and bid for projects, aiming to further expand its presence and remit. The company has been hit by the global downturn, with results for the three months to June 30 2009 (or Q1 2009/10) showing a 52% drop in net profits. The company did post a strong increase in net sales, growing by 45% to reach INR8.5bn from INR5.8bn in Q108/09. Despite this, the company was hit by higher finance costs and currency fluctuations which led to a 37% drop in profit before tax to INR398mn.
Company Data
Net sales/income from operations: INR8.50bn (US$182mn) three months to June 30 2009.
Profit after tax: INR250mn (US$5.36mn) three months to June 30 2009.
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Strengths The companys portfolio includes some of Indias flagship infrastructure projects, such as the Mumbai and New Delhi metros, and more recently the Tilaiya UMPP. Weaknesses Fitch Ratings India has awarded an Ind AAA debt rating for the company. Reliances heavy involvement with the PPP market potentially exposes the company to demand risks associated with external economic shocks. Opportunities Strong population growth and a growing economy is fuelling demand for infrastructure. Indias government is looking to improve the regulatory regime to make the business environment more attractive for private sector companies looking to invest in infrastructure. It is also opening up the sector to private companies through PPPs. Threats Lack of widely available domestic expertise to take on large infrastructure and civil engineering projects.
Company Overview
Reliance Infrastructure Ltd (formerly Reliance Energy Limited) is Indias largest private sector power utility, as well as a key player in many other infrastructure sectors. In the power sector, Reliance is involved in the generation, transmission, distribution and trading of electricity; and constructing power plants as energy performance certificates partners. In the infrastructure space, the company is focused on roads and urban infrastructure, including mass rapid transit systems, sea-link and airports, as well as in specialty real estate and special economic zones (SEZ).
Recent Activity
In October 2011, Reliance Power has received permission to start trading carbon credits for its 3,960MW Tilaiya ultra mega power project (UMPP) in Jharkhand. The coal-fired plant secured approval from the Clean Development Mechanism Executive Board (CDM-EB) of the United Nations Framework Convention on Climate Change (UNFCCC). The approval will enable the plant to earn INR20bn (US$407.36mn) by trading 21.3mn carbon credits during the first 10 years of operations. The plant, scheduled to start generation in 2015, is being developed by Reliance's wholly owned subsidiary Jharkhand Integrated Power. In September 2011, the first phase of construction of the Mumbai Metro rail line was set to be completed by the end of 2012, reports News Resources International. The Mumbai Metropolitan Region Development Authority has said that the US$510mn project is 80% complete. Construction is being led by Indian utilities company Reliance Infrastructure. The entire line will total 146.5km, and is projected to cost US$4.3bn. In September 2011, Arizona-based solar technology company First Solar is to supply Indian energy generator Reliance Power with 100MW of solar modules, according to Reuters. Around 40MW-worth of First Solar's thin film modules are to be supplied by the end of 2011, with the remaining 60MW to follow in 2012. The deal was supported by the Export-Import Bank of the United States (Ex-Im Bank), which approved a US$84.3mn direct loan to Reliance, as part of its efforts to support the US solar-energy exports.The thin film modules will be used at Reliance's
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plant in Jaisalmer, Rajasthan. In August 2011, Reliance Power (R Power) announced plans to make a INR15bn (US$333.2mn) investment in a 200MW wind power plant project in Vashpet, Maharashtra. The plant, which is scheduled to start operations in September 2012, will have 80 wind electric generators supplied by German wind turbine supplier Fuhrlnder. A long-term power purchase agreement (PPA), already sanctioned by the Maharashtra State Electricity Regulatory Commission, has been signed with Reliance Infrastructure at a rate of INR5.37 (US$0.12) per unit. The plant's generation capacity will eventually increase to 400MW. The project will be entitled to receive 3.7mn certified emission reductions (CERs) during the first 10 years, which is likely to generate additional revenue of INR3bn (US$66.6mn) for the project. In August 2011, Reliance Power was set to receive a US$625mn (INR28bn) loan from US Exim Bank for the construction of its 2,400MW gas-based power project in Samalkot, Andhra Pradesh. The approval process for the loan was expected to be completed by September 2011, according to chairman of US Exim Bank, Fred Hoghberg. The loan is part of a memorandum of understanding (MoU) signed between US Exim bank and Reliance Group, with the former agreeing to provide up to US$5bn for the purchase of US goods and services used in Reliance's projects. The US$625mn loan was disbursed because Reliance Power had, in November 2010, awarded GE Energy a US$750mn contract to supply three steam turbines and six gas turbines for the Samalkot power project. Besides GE, US electrical engineering company Black & Veatch was also selected to design the Samalkot power plant in March 2011. In June 2011, Reliance Infrastructure (RLIN) announced that it was holding talks with investors and funds to sell a stake in its roads, metro lines, and transmission businesses. Reliance currently has a portfolio of three urban railway lines in Mumbai and Delhi, five transmission line projects and 11 road projects. According to its CEO, Lalit Jalan, Reliance's business units are receiving a lot of interest from several foreign parties such as construction companies and private equity firms. He believes that this strong interest is due to the significant growth potential of these businesses. However, he declined to identify the interested parties. In June 2011, Reliance Infrastructure won a 53km road construction project in India, according to Reuters. The firm will build and operate the road, which is to be located in Rajasthan, over a period of 18 years. The project is worth INR5.9bn (US$128mn). In March 2011, Reliance Infra had announced that it will build a 2,400MW power plant in Samalkot, in Andhra Pradesh, India, according to Infra News. The gas-based plant will cost an expected INR72bn (US$1.6bn) and was contracted by Indian energy firm Reliance Power.
In February 2011, Reliance Infrastructure announced that the company would purchase up to INR10bn (US$221mn) of its outstanding equity shares at INR725 per share. The buyback will be made from the open market through the stock exchange.
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Strategy And Evaluation
Reliances core market is the generation, transmission and distribution of electricity. However, Reliance has also established a strong presence in other infrastructure segments such as road and metro projects. According to Morgan Stanley, Reliance was estimated to have invested a total of INR16,500mn in infrastructure projects by the end of the 2010 financial year. The Morgan Stanley report said that stronger than expected growth in the engineering, procurement, construction (EPC) portfolio will insulate the companys operations from potential political interference in the PPP market. We note that reducing the reliance on long-term concessions in both transport and power projects will consequently reduce the companys exposure to demand risks and possibly price risks. However, the government has shown significant willingness to finance the countrys massive infrastructure needs through private sector participation and to buttress that involvement through schemes such as the viability funding gap, making political interference a relatively small risk. The company had already signed a US$5bn credit agreement with US Exim bank for the purchase of US goods and services used in Reliance's projects, while it is currently holding talks with investors and funds to sell a stake in its roads, metro lines, and transmission businesses, potentially unlocking additional value in them. Reliance is thus in a favourable position to extend its portfolio in both the transport and power sectors in India. The chairman of Reliance Power, Anil Ambani, announced that the company planned to finance power projects with debt in 2009/10, according to Reuters. The company was planning to raise nearly INR200bn (US$4.1bn) to finance its three mega-power projects. The three projects are expected to generate 4,000MW of electricity each. Reliance posted improved results in its 2008/09 annual report (covering April 1 2008 to March 31 2009). Gross revenue for the company increased by an impressive 46% in a challenging business environment to reach INR109bn (US$2.16bn) up from INR750bn (US$1.87bn) in 2007/08. Both gross and net profit also increased, by 3.5% and 4% respectively. Net profit for the year was INR11.39bn up from INR10.85bn in 2007/08. Conversely, the companys net profit in US dollar terms, as quoted by Reliance in their annual report, fell to US$224.55mn in 2008/09 from US$270.34mn, illustrating the currency fluctuations between the US dollar and the Indian rupee. However, as Reliance carries out the majority of its work in India, this had a limited impact on profit margins.
Company Data
Gross revenue (April 2008 to March 2009): INR109bn (US$2,160.69mn) Net profit (April 2008 to March 2009): INR11.39bn (US$224.57mn)
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Larsen & Toubro

Strengths Weaknesses Opportunities Threats Strong focus on technology and innovation, with engineering research centres in numerous parts of India; Mumbai, Vadodara, New Delhi, Chennai and Kolkatta. Revenue streams diversified over different parts of India. Large construction order book - around INR1,364bn (US$3.0bn) at the end of June 2011. Limited geographical diversification 91% of order book from India at the end of June 2011. Opportunities for greenfield projects span across all sub-sectors of Indias infrastructure sector. Strong population growth and a growing economy is fuelling demand for infrastructure in India. Indias government is keen to encourage and facilitate the participation of private sector in infrastructure. India has a complex and over bureaucratic business environment, with a lack of transparency in some tendering processes. Project delays, caused by issues with land clearance and a nebulous bureaucratic system, continue to be a significant problem in Indias infrastructure industry. Concerns with access to finance due to maturity mismatch between loans required by infrastructure companies and loans offered by Indian banks.
Company Overview
Larsen & Toubro (L&T) is a technology, engineering, construction and manufacturing conglomerate based in India. The firm was established in 1938 and is one of the largest companies in Indias private sector, with global operations in 20 countries. The Engineering and Construction Division of L&T is the largest construction organisation in India. The division covers every discipline of construction: civil, mechanical, electrical and instrumentation engineering. L&T also manufactures and markets critical construction and mining machinery, plus a wide range of electrical and electronic products and systems
Financial Highlights
(L&T) continues to ride the infrastructure boom in its domestic market, with revenues in the first quarter of FY2011/12 (April-March) growing by 21% y-o-y to reach INR94.8bn (US$2.1bn). This places it in a good starting position to hit its revenue growth target of 25% for FY11/12. The surprise performance was its net profit performance, which beat consensus and saw a higherthan-expected increase of 12% y-o-y in Q1 FY2011/12. This was a reversal from Q1 FY2010/11's net profit figures, which fell by 58% y-o-y. According to L&T, its Q1 FY2011/12 net profit performance was aided by an acceleration in project execution, but we note that income from its non-operating operations, particularly in financial services, was also a key component in boosting headline profitability, growing by 38% y-o-y in Q1 FY2011/12.
Strategy and Evaluation
Headwinds On The Horizon We believe that the company is facing several headwinds over the short term due to its exposure to the Indian infrastructure market. India accounted for 91% of its order book at the end of Q1 FY2011/12, while its engineering and construction division, which covers the infrastructure, power and hydrocarbons sectors, accounted for 85% of its total order book. Elevated levels of inflation and rising interest rates (to curb inflation) are increasing the operational costs and financing costs for L&T. Both factors have already affected L&T's financials in Q1 FY2011/12 and are expected to continue to do so through the rest of the
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financial year. Operating margins fell to 11.9% in Q1 FY2011/12 from 12.8% in Q1 FY10/11, while interest expenses grew by 25% y-o-y compared with the previous quarter. In July, the company launched a stake sale at its financial holding company, L&T Finance Holdings, to raise US$252mn in funds for its infrastructure financing vehicles, but this is unlikely to be sufficient to meet its financing needs. Another major concern due to tighter monetary conditions is the impact on the broader economy. Economic activity is slowing down in India and the government is releasing fewer infrastructure projects so as to further cool the economy. This slowdown in project releases means that L&T will continue to face growing competition for infrastructure projects in India. For example, the recent release of the 555.5km Ahmedabad-Udaipur-Kishangarh expresswaywidening project, India's largest ever road project, saw 11 parties compete for the project, while the US$290mn Vemagiri-Hyderabad transmission cable laying concession saw 28 companies taking part in its bidding process. These issues are reducing the number of projects being awarded to L&T and have impacted the company's project order inflows, which grew by just 4% y-o-y in Q1 11/12. Overseas Markets Not Offering As Much Long-Term Growth Potential A move overseas would seem prudent to offset this current weakness in the Indian infrastructure sector. L&T has done just that, winning three overseas hydrocarbon projects (two from UAE and one from Thailand) worth US$889mn in August. However, these markets offer limited growth opportunities going forward, with real construction growth in the UAE and Thailand expected to come in at a relatively modest 3.3% and 3.9% per annum over the next five years respectively, compared to 8.5% (9.9% for the infrastructure sector) in India. Thailand continues to hold significant political risks which could hamper project implementation in the country, while there are suggestions within the UAE that there could be a review of all government-sponsored projects in Abu Dhabi an indication that there could be a cut in construction spending. Stock Price To Trend Sideways And Still Outperform We therefore conclude that L&T should instead focus on streamlining its operations (ie increasing efficiency in project execution and maintaining a tight control on costs) in the Indian market and weather the market's near-term weakness. L&T still retained a huge construction orderbook at around INR1,364bn (US$3.0bn) at the end of Q1 11/12 more than three times full-year revenue figures and this will sustain revenues over the next couple of years. Its strong focus on technology should also hold it in good stead. The company has numerous engineering research centres in different parts of India carrying out in-depth research on construction design, engineering systems and material stress analysis. This focus on technology and construction has allowed the firm to take on a diverse range of infrastructure projects, from oil rigs to metro railway networks. Following recent selling pressure, we do not have a firm conviction on the company's stock price over the near-term, and suspect that it will continue to trend sideways in FY2011/12. Even if this scenario were to take place, we would expect L&T to remain an outperformer against the broader Bombay Stock Exchange, given that other sectors (most notably consumer discretionaries and technology) are much more expensive and, by extension, exposed to
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downside growth risks. From a global perspective, L&T remains one of the stronger infrastructure players in terms of stock performance. When rebased from the start of 2009, L&T's stock price is an outperformer against the SENSEX and a huge outperformer against our proprietary Infrastructure Index, which is an indication of market sentiment for the global construction sector.
Recent Activity/Projects
In September 2011, Larsen & Toubro announced that it had received a project order valued around US$150mn from the Petroleum Development Oman. The order is for the development of a gas treatment plant, which includes gas desulfurisation and gas dehydration units with required utilities and supporting facilities as well as associated pipelines.
In September 2011, Larsen & Toubro announced that it was set to work on a new railway construction project in Mumbai, according to Railway-Technology. The project is expected to cost between US$260mn to US$326mn, and will include a railway station along with space reserved for commercial and retail operations. Work will begin once railway operator Indian Rail gains access to the land, and will take four years to complete.
In August 2011, Larsen & Toubro announced that it had won three international contracts worth US$889mn in the UAE and Thailand. The first contract, worth US$189mn, was awarded by Abu Dhabi Gas Industries and involves the engineering, procurement and commissioning (EPC) of 123km of pipelines for its Habshan-Ruwais-Shuweihat gas pipeline project. The second US$450mn EPC contract was awarded by UAE-based ADMA-OPCO. The contract involves the development of towers, bridges and pipelines. The third contract, valued at US$250mn, was awarded by Thailand-based PTTEP International for the Phase-1A of the Zawtika Development Project.
In July 2011, Larsen & Toubro announced that it had won a INR12.1bn (US$269mn) EPC contract from Qatar General Electricity & Water Corporation for the supply and construction of 13 extra high-voltage substations in Qatar. The project will be completed in between 18 to 26 months times.
In June 2011, Larsen & Toubros L&T BPP Tollway Private Limited announced that it had signed the INR26bn concession agreement with NHAI for the four-lane widening of the 24km stretch of NH14 between Beawer and Pindwara in the state of Rajasthan. The project will be executed on a BOTDBFO (Design, Build and Finance & Operate) basis and is expected to be completed within 30 months.
In May 2011, Larsen & Toubro announced that it had won a INR35bn order from PPN Power Generating Company to develop a three 360MW gas-based power plants in the Nagpattinam District of Tamil Nadu state on a EPC basis.
Company Data
Gross revenue (April 2010 to March 2011): INR109bn, % y-o-y Net profit (April 2010 to March 2011): INR11.39bn % y-o-y
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Global Overview
BMI View: There is a sense of dj vu in the infrastructure space. Valuations are falling, credit is drying up, demand risk is rising and investors are avoiding risk; factors seem to be aligning for a repeat of the fall of 2009. While we see several red flags in the infrastructure finance market, we do not believe that the market will come to a standstill. Instead we anticipate a much more select pipeline of projects coming to market, particularly from the energy infrastructure segment, for which there is willingness to finance. The crisis in the European, and by extension the global banking sector, is leading to tightening financial conditions and credit scarcity. To be sure, in the global infrastructure space, and specifically the infrastructure finance market, there was not the sense these past two years that the credit freeze of 2008/2009 had thawed completely, or that the circumspection of sponsors had eased much. Just as things were looking up, a bearish sentiment has gripped the markets since the start of the second half of 2011 and we anticipate volatility and risk aversion to persist. Crucially in 2011, as opposed to 2009, governments in several of the markets cannot bolster the industry through stimulus plans, though cash rich governments in emerging markets like Russia and the GCC states will continue to channel money into big public spending programmes. Our forecasts for infrastructure industry value for 2012 are relatively sanguine, but we note risks to the downside. If capital constraints are restricting project finance then infrastructure industry values could decline.
Moderation In Growth And Downside Risks Ahead For 2012

Global Construction and Infrastructure Industry Value Forecasts
*Sum of 76 markets globally. **Sum of 35 markets globally. 2012-2016 = Forecasts. Source: National Statistics Agencies, BMI
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We look for indicators in the banking and financial sector as proxies to gauge sentiment and look for red flags for infrastructure finance. What we see gives reasons for concern that a new credit crunch is underway, with banks unwilling to lend to each other. Spreads between the London Interbank Rate (LIBOR) and the US swap rates have been rising steadily since August 2011 reflecting stress in the banking sector.
Stress In The Banking Sector

Spread: 3-month LIBOR and 3-month US swap rates
Source: Bloomberg
More specifically, and tied to the above, is the picture from the credit default swap rates (CDS) for major banking institutions around the world. Universally, they are at their highest levels in two years, reflecting deep investor concern about the prospects for the sector.
Pricing In The Risks

2-Year Credit Default Swap Rates For Banking Groups
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Source: Bloomberg
Worryingly for the infrastructure market, some of the largest and most active lenders, including Sumitomo, Societe General and Credit Agricole and the export import banks of China and India are amongst the banks globally with the highest premiums.This spike in CDS rates leaves us with two main conclusions: Firstly, we see trouble ahead for the French infrastructure market, as its domestic banks may struggle to support Europe's largest PPP market. Secondly, and most importantly, we believe that it raises red flags in emerging markets, particularly subSaharan Africa, Asia and Latin America, which rely on export credit from China to finance a lot of the larger infrastructure projects. The state-owned nature and strategic value the export credit agencies means that their operations will be supported by a constant supply of state money. However, the movements in their CDS highlight the deteriorating market perceptions of the risks the banks are exposed to. Having said all of the above, we stress that we do not see the market being in a funding drought, nor do we believe the infrastructure finance market will descend into the hibernation we saw in 2008/2009. We have not seen deals failing to be financed, on the contrary there has been a healthy PPP pipeline. However, it is much leaner. What we expect is that the project finance market will become much more selective and we highlight the energy sector (excluding renewables) as the most likely candidate to see the highest level of activity. Already, this seems to be the case with major financings announced in recent days for the Origin LNG terminal and the SIR refinery in Cote d'Ivoire.
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Private Capital Not Meeting Expectations Against the backdrop of one of the worst climates for private equity fundraising, infrastructure fundraising activity has also come to a standstill with a mere US$2.8bn raised between July and September 2011, according to data from the industry journal Infrastructure Investor. This is significantly below the US$100bn target set by the industry in 2011. In April 2011, research firm Prequin said that there were 131 unlisted infrastructure funds in the market seeking to raise a total of US$92bn from institutional investors. This ambitious fundraising target reflects a perceived appetite in the market from institutional investors to become involved in infrastructure. However, the disappointing fundraising achieved in the first nine months of the year however reflects that institutional investors are reluctant to part with their money. It also reflects a change in the infrastructure finance markets, whereby big institutional investors are circumventing fund managers and private equity firms and going straight to the market themselves, as was the case with the Gassled divestment in Norway and the Brussels and Copenhagen airport stakes, where large Canadian pension funds went for a direct stake in the assets.
Fundraising Struggles To Recover In Spite Of Numerous New Funds

Capital Raised By Infrastructure Funds, US$bn
*BMI Estimate based on 9-month 2010 actual figures; **BMI estimate. Source: Preqin
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Therefore, with more and more data suggesting tightness ahead we believe that, once again, demand sensitive assets, such as toll roads, ports and airports, will be the most vulnerable to falls in investments. BMI's revised Infrastructure Index, a weighted index of 65 companies involved in infrastructure, corroborates this view. Nearly half the transport operators that we include in our Index are amongst the worst performers year-to-date, namely port operator COSCO Pacific, Chinese toll road Zhejiang Expressway, India's GMR Infrastructure, Mexico's Empresas ICA and Portuguese toll operator Brisa.
BMI's Infrastructure Index

PE Ratio (Dark Grey Bar)/ % Change in Share Price YTD (Light Bar)
BMI's Infrastructure Index (Cont.)

PE Ratio (Dark Grey Bar)/ % Change in Share Price YTD (Light Bar)
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Source: BMI
We anticipate that the energy sector will perform much better, buoyed very much by the flurry of activity in oil and gas exploration and production, which will also require new infrastructure. According to estimates, shale gas E&P will require around US$200bn for new infrastructure in the United States to support the sector. Tied to this is BMI's bullish view on oil and gas services companies, which prompted a bullish outlook for the S&P Oil & Gas Services & Equipment Index (see BMI's Global Market Views - Oil Equities On Sale, 11 October 2011) Gas mid-stream infrastructure therefore is a favourite amongst investors (both equity investors and institutional). El Paso Corp., Enbridge and TransCanada - the North American transmission operators - are the top performers in our Index in terms of year-to-date (YTD) share price gains, as the companies are operating right at the heart of the shale gas developments in the United States. On the institutional front, we see more and more infrastructure investors, and pension funds going into gas associated infrastructure. Most recently, PE firm First Reserve entered into a joint venture with Energy Corp of America to invest in gas gathering facilities in Pennsylvania, home to the giant Marcellus Shale formation.
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Valuations Falling, But Gas-Related Equities Outperform

BMI Infrastructure Index, Major Stock Indices / Best and Worst Performers In BMI's Infrastructure Index, 100 = January 2011
Source: BMI
The successive sell offs in global equity markets in August and September pushed down all equities, and infrastructure saw a steeper fall led by declines in construction and building materials, with Mexico's CEMEX having witnessed the largest fall YTD. With valuations falling, cash rich companies (particularly ones backed by big sovereign wealth funds, like Qatari Diar and Mubadala) could move to snap up attractive, but undervalued assets. Already Qatar has been on the prowl, looking to increase its infrastructure portfolio in Europe. If wider M&A activity picks up globally then we see opportunities in the market as our Infrastructure Index suggests that companies with strong underlying assets are trading at low valuations.
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Methodology
Industry Forecasts
BMIs industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. BMI mainly uses ordinary least squares (OLS) estimators and in order to avoid relying on subjective views and encourage the use of objective views, uses a general-to-specific method. BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary. During periods of industry shock, for example a deep industry recession, dummy variables are used to determine the level of impact. Effective forecasting depends on appropriately selected regression models. BMI selects the best model according to various different criteria and tests, including, but not exclusive to: R2 tests explanatory power; Adjusted R2 takes degree of freedom into account; Testing the directional movement and magnitude of coefficients; Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); All results are assessed to alleviate issues related to auto-correlation and multi-co linearity.
BMI uses the selected best model to perform forecasting. It must be remembered that human intervention plays a necessary and desirable role in all of BMIs industry forecasting. Experience, expertise and knowledge of industry data and trends ensures that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Within the infrastructure industry, this intervention might include, but is not exclusive to, new investments across sectors or cancelled projects; general investment climate and business environment changes; changing domestic or regional trends; macroeconomic indicators; and regulatory changes. Example Of Construction Value Model (Construction value)t = 0 + 1*(Gross Fixed Capital Formation)t + 2*(inflation)t + 3*(lending rate)t + 4* (population)t + 5*(government expenditure)t + 6*(construction value)t-1 + t Note: Infrastructure sub-sector values are forecast using a similar regression model.
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Construction Industry
A number of principal criteria drive our forecasts for each construction and engineering variable: Construction GDP And Infrastructure Spending Figures for construction GDP and infrastructure spending are based, where possible, on national accounts as published by relevant central banks, as well as primary government/ministry sources and official data. Where these are unavailable, construction GDP forecasts are based on a range of variables including: Stated infrastructure and development programmes; Likely increases owing to related urban or industrial sector developments; Political factors (such as an electorally motivated public works programmes). Construction as a percentage of GDP is calculated using BMIs own macroeconomic and demographic forecasts. Employment Within The Construction Industry These figures are forecast based on: The growth or otherwise of the construction industry; Company results and expansion plans.
Data Methodology New Infrastructure Data Sub-sectors

BMIs new Infrastructure Data examines the industry both from the top down and the bottom up in order to calculate the industry value of infrastructure and its sub-sectors. For the bottom up - a country-specific - approach, we have made full use of BMIs Infrastructure Major Projects Databases for each country, in most cases dating back to 2005. This has allowed us to calculate historical ratios between general infrastructure industry value and its sub-sectors, which we then use for forecasting. Our Major Projects Tables are not exhaustive, but they are sufficiently comprehensive to provide a solid starting point for our calculations. The top down approach uses deduction to form the main hypothesis. We have separated the 35 countries into three Tiers. Each Tier comprises a group of countries that are on a similar economic development trajectory and have similar patterns in terms of infrastructure spending, levels of infrastructure development and sector maturity. This methodology enables us to confirm and overcome any deficiencies of infrastructure-specific data, by applying an average group ratio (calculated from the countries for which official data exists) to the countries for which data is limited.
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Tier I- Developed States; common characteristic: mature infrastructure markets, investments typically target maintenance of existing assets or highly advanced projects at the top of the value chain. Infrastructure as percent of total construction on average around 30%. Countries in Tier I: Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel, Japan, Australia. Tier II Core Emerging Markets; common characteristic: the most rapidly growing of emerging markets, where infrastructure investments are a strategic priority for the government. There is significant scope for new infrastructure facilities from very basic levels (highways, heavy rail for instance) to more high value projects (renewables, urban transport). Infrastructure as percent of total construction on average around 45% and above. Countries in Tier II: Mexico, South Korea, Peru, Turkey, Vietnam, Poland, Hungary, South Africa, Nigeria, Russia, China, India Brazil, Indonesia. Tier III- Emerging Europe; common characteristic: regional socioeconomic trajectories, development has been defined by the recent or pending accession to European structures such as the European Union. Infrastructure development to a large degree dictated by EU development goals and financed through vehicles such as the PHARE and ISPA programmes, and institutions such as the EBRD and EIB. Infrastructure as percent of total construction on average between 30% and 40%. Countries in Tier III: Czech Republic, Romania, Bulgaria, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Croatia, Ukraine. This methodology has enabled us to calculate infrastructure industry values for states where this was not previously possibly. Furthermore, it has enabled us to create comparable indicators. The top down hypothesis-led approach has been used solely to calculate the Infrastructure Industry Value as a Percentage of Total Construction. For all sub-sector calculations we have applied the bottom-up approach, i.e. calculated the ratios from our Major Projects Tables where data was not otherwise available.
Construction
Construction Value Our data is derived from GDP by output figures from each countrys national statistics office (or equivalent). Specifically, it measures the output of the construction industry over the reported 12 month period in nominal values (i.e. domestic currency terms). As it is derived from GDP data, it is a measure of value added within the industry (i.e. the additional contribution of the construction industry over other industries, such as cement production). Consequently, it does not measure the nominal value of all inputs used in the construction industry, which, for most states would increase the overall figure by 50-60%.
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Furthermore, it is important to note that the data does not provide an indication of the total value of a countrys buildings, only the construction sectors output in a given year. This data is used because it is reported by virtually all countries and can therefore be used for comparative purposes. However, it is important to note that, where we are able to locate them, data released by national statistical offices or industry groups or associations for the overall value of the construction sector also taken into account and published by us. Growth Our data and forecasts for real construction measures the real increase in output (rather than nominal growth, which would also incorporate inflationary increases). In short, it is an inflation adjusted value of the output of the construction industry year-on-year. Consequently, real growth will in virtually all instances be lower than the nominal growth of our construction value indicator. Construction Industry, % Of GDP/Construction Value (US$) These are derived indicators. We use BMIs Country Risk teams GDP and exchange rate forecasts to calculate these indicators.
Capital Investment
Total Capital Investment Our data is derived from GDP by expenditure data from each countrys national statistics office (or equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12 month period. Total capital formation is a measure of the net additions to a countrys capital stock, so takes into account depreciation as well as new capital. In this context, capital refers to structures, equipment, vehicles etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a proxy for a countrys commitment to development. Capital Investment (US$), % Of GDP, Per Capita These are derived indicators. We use our Country Risk teams population, GDP and exchange rate forecasts to calculate them. As a rule of thumb, we believe an appropriate level of capital expenditure is 20% of GDP, although in rapidly developing emerging markets it may, and arguably should, account for up to 30%. Government Capital Expenditure This is obtained from government budgetary data and covers all non-current spending (i.e. spending on transfers, salaries to government employees, etc.). Due to the absence of global standards for reporting budgetary expenditure, this measure is not as comparable as construction/capital investment. Government Capital Expenditure, US$bn, % Of Total Spending These are derived indicators.
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Construction Sector Employment

Total Construction Employment This data is sourced from either the national statistics office or the International Labour Organization (ILO). It includes all those employed within the sector. Construction Employment, % y-o-y; % Of Total Labour Force These are derived indicators. Average Wage In Construction Sector This data is sourced from either the national statistics office or the ILO.
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Infrastructure Business Environment Rating

Risk/Reward Ratings Methodology BMIs approach in assessing the risk/reward balance for infrastructure industry investors globally is fourfold. First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) that represent opportunities to would-be investors. Second, we identify country and industry-specific traits that pose or could pose operational risks to would-be investors. Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/trends to avoid subjectivity. Finally, we use BMIs proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only the aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an industry-leading, comparative insight into the opportunities/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas: Rewards: Evaluation of sectors size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks: Evaluation of industry-specific dangers and those emanating from the states political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall risk/reward rating a weighted average of the total score. Importantly, as most of the countries and territories evaluated are considered by BMI to be emerging markets, our rating is revised on a quarterly basis. This ensures that the rating draws on the latest information and data across our broad range of sources, and the expertise of our analysts.
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Table: Infrastructure Business Environment Indicators
Indicator Rewards Industry rewards Construction expenditure, US$bn Sector growth, % y-o-y Capital investment, % of GDP Government spending, % of GDP Country rewards Labour market infrastructure Financial infrastructure Access to electricity Risks Industry risks No. of companies Transparency of tendering process Country risks
Rationale
Objective measure of size of sector. The larger the sector, the greater the opportunities available. Objective measure of growth potential. Rapid growth results in increased opportunities. Proxy for the extent the economy is already oriented towards the sector. Proxy for extent to which structure of economy is favourable to infrastructure/ construction sector.
From BMIs Country Risk Ratings (CRR). Denotes availability/cost of labour. High costs/low quality will hinder company operations. From CRR. Denotes ease of obtaining investment finance. Poor availability of finance will hinder company operations across the economy. From CRR. Low electricity coverage is proxy for pre-existing limits to infrastructure coverage.
Subjective evaluation against BMI-defined criteria. This indicator evaluates barriers to entry. Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability of operating environment.
Structure of economy External risk Policy continuity Legal framework Corruption
From CRR. Denotes health of underlying economic structure, including seven indicators such as volatility of growth; reliance on commodity imports, reliance on single sector for exports. From CRR. Denotes vulnerability to external shock principal cause of economic crises. Subjective rating from CRR. Denote predictability of policy over successive governments. From CRR. Denotes strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets. From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies ability to compete.
Source: BMI
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INDIA INFRASTRUCTURE REPORT Q1 2012

Part of BMI's Industry Report & Forecasts Series

India Infrastructure Report Q1 2012

Business Monitor International Ltd

India Infrastructure Report Q1 2012

Market Overview ............................................................................................................................................... 7

Building Materials .......................................................................................................................................... 14

Industry Forecast Scenario ........................................................................................................................... 26

Transport Infrastructure ................................................................................................................................ 35

Energy and Utilities Infrastructure ............................................................................................................... 72

Business Environment ................................................................................................................................ 128

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India Infrastructure Report Q1 2012

Table: Regional Infrastructure Business Environment Ratings...........................................................................................................................136

Company Monitor ......................................................................................................................................... 137

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

t i m eSource: Planning Commission

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

Investment Into Roads And Highways Under 11th Five-Year Plan

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

Still Eroding Profits

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India Infrastructure Report Q1 2012

Developed Economies With Declining Share

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India Infrastructure Report Q1 2012

Global Steel Growth Outlook

China Steel The Driving Force

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

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India Infrastructure Report Q1 2012

Robust Growth Potential Cement Production (thousand tonnes)

Source: US Geological Survey