Esther Ayuso

ibtta.org

Esther Ayuso

The Indian Road Sector – An Overview

IBTTA, Berlin

Esther Ayuso

13 th September 2011


Isolux Corsán is a leading Global Spanish Company

We work in the fields of Construction, Energy, Concessions,

Environment and Engineering Services across the globe. The

Company’s cornerstones are creating Transport Infrastructure,

Specialized Buildings, Conventional & Renewable Energy,

Telecommunication, Water & Sewerage, Oil & Gas .

The Company, with a portfolio of 26 Billion Euros and Turnover

of 3.5 Billion Euro, is actively present in 32 countries including

Brazil & India (out of BRIC). The company is ranked 56 in ENR’s

Top 225 International Contractors in 2010

Group has some illustrious companies as Tecna for Oil & Gas;

Emesa for Prefabricated Metal Structures , T Solar Global in

Photovoltaic Energy and Infinita Renovables for Biofuel Energy.


How we grown in India Region

(India Region– includes in our

expansion other countries in Asia)

In 2003, Isolux

Corsán

deputed a

Business

Representative

in India for

exploring

opportunities

In 2007, a

commercial office

was established

at Gurgaon.

In February 2008

Isolux Corsán was

awarded the

largest highway

concession project

in India (291 Km) ,

and also set up an

engineering office

for its Power

Projects worldwide.

In 2009, Isolux

Corsán India opens

its Corporate Office

in Gurgaon and

added two more

road concession

projects to the

portfolio. The first

EPC project in HV

transmission lines

was awarded.

In 2011 Isolux

Corsán is executing

4 Highway

Concessions and 4

Transmission Lines

projects and a

Power Plant at

Bangladesh.

We are one of the

few multinationals

to have grown

really in diversified

infra business in

Indian

subcontinent


Bidding Phase

Opportunities

• NHAI believes that 7,000 km of project award in FY2011-12 is achievable (Vs 5,000 km in FY10-11).

While it has already awarded 1000 km of projects in FY2011-12, it has also received bids for

another 1,000 km.

• States following NHAI’s path. Up gradation of Highways trough BOT system in most of the States.

Project Award momentum to step up further

•Ground work ready: Feasibility reports and DPR ‘s completed for 6,000 km

•Fast tracking the process: Annual Technical Qualification and E-bidding underway.

•Qualification Criteria: based in the size of the company and the projects performed before.

•Transparency: only one economical figure is submitted (premium or grant)

Competitive intensity

• Very aggressive bidding

• Subdued capital markets and limited participation from private equity players is making difficult for

most players to raise fresh capital to fund their equity commitments.

• With larger and bigger ticket size of BOT contracts coming up for bidding and NHAI preferring the

toll model, bigger players will be greatest beneficiaries of expected awards.

Some issues

• More than 40 bidders in small-medium size projects

• Technical qualification for successful bidders is uncertain in some cases


Implementation Phase

Limitations to overcome

• Innovation on design and value engineering is seen as a negative approach by NHAI

• Lack of coordination between Government Departments

• Land Acquisition (Acquisition law from 1894 in revision)

• Mapping of utilities in urban areas (at least) should be compulsory

• Railway coordination is still an unresolved mystery

• Forest and environmental clearances needs expedition

• Lack of good subcontractors. Project Management Vs deploying own machinery and human

resources.

Limitations result in time and cost overruns

• The Golden quadrilateral (GQ) contracts encounter higher number of legal issues . Out of the total

(128) contracts awarded nearly 66 % were under dispute.

• After an lengthy process, most of the claims end up in Arbitration Tribunal (taken up by the Higher

Court). Disputes between NHAI and the contractors have seen over Rs10,000 Cr-of the latter's

money getting stuck in legal wrangles, which has delayed project completion. Almost 90% of the

arbitration cases have been won by the contractors, but NHAI has not accepted them and

challenged them in court.


O&M Phase

Leakage: a big issue

• Open Toll

• Improvement of alternative routes

• Low value of time

• Big gap between cost of toll and cost of manpower

O&M activities

• Performance indicators in road maintenance activities

• Operations based in extensive use of manpower

• Trade off between cost saving introducing technology and very cheap non qualified manpower

• Integral Operation and Maintenance subcontractors are showing up due to the lack of capabilities

of small-medium Indian developers

Control Corridor & Safety: the major concern

• High rates of accidents

• The CA provides a good standard in Control Corridor activities and Safety in the Highways: ATMS,

compulsory patrolling, ambulances, cranes...

• Lack of driving education

• Incredible diversity in the types of vehicles in the highways


Thank you

Esther Ayuso

CEO

Isolux Corsan Concessions India Pvt Ltd

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