Sukkur-Hyderabad Motorway project likely to backfire

ISLAMABAD   -  After getting a setback over Kharian- Rawalpindi Motorway, another multibillion project Sukkur- Hyderabad Motorway of the National Highway Authority is likely to be backfired as its contractor has failed to show ‘financial close.’

An extended deadline for the successful contractor to show its financial capabilities to execute the project has already expired on 30th September 2023 but NHA instead of immediately revoking Letter of Intent (LOI) has decided to give him a cure period of another 45 days.

According to the sources, the road authority is under pressure after withdrawing Letter of Intent of the same lead contractor on Kharian-Rawalpindi Motorway about a month ago after its consortium disintegrated because NHA could not take a similar decision on Sialkot-Kharian Motorway, which is being executed by a state owned company.

Well-placed sources informed that after getting a strict criticism over withdrawing of LOI for Kharian- Rawalpindi Motorway by a parliamentary body, NHA is reluctant to take a strict action on Sukkur-Hyderabad motorway.

When contacted, the NHA spokesperson Sohail Aftab said that after necessary approval from Public Private Partnership Authority (P3A) and ECNEC, the road authority signed a PPP Agreement, on December 02, 2022, with M/s TECMC (Private) Limited (a project company duly incorporated with SECP by M/s TECHNO-CMC-ACC), as concessionaire.

The concessionaire was obliged to achieve Financial Close till September 30, 2023. The concessionaire has only managed to submit a Term Sheet for securing loan from the banks. The Term Sheet is under review by NHA.

Under the provisions of PPP Agreement, NHA is considering to serve a Preliminary Notice. Subsequent to Preliminary Notice the concessionaire would have forty-five (45) days’ time, as a cure period, to remedy its default.

If the concessionaire successfully fulfils its obligations, the Preliminary Notice shall be withdrawn and if it fails to meet the contractual obligations, even in a given cure period, a Termination Notice shall be issued. In case, the PPP Agreement is terminated, NHA shall explore options to implement the project, which may include, PSDP or EPC or PPP again.

Inaugurated by the former premier Shehbaz Sharif in December 2023, the project was awarded to a consortium M/s Techno-CMC-ACC after a yearlong deliberations as concerned circles were not fully convinced with a highly optimistic bid submitted by the said contractor. 

Only two companies were in the run in final stages of the competition but M/s Techno- CMC-ACC remained successful bidder by ousting M/s ZKB. 

The evaluated bid cost of ZKB was Rs275.25 billion while the bid cost of M/s Techno-CMCACC was Rs307.71 billion.

However, unlike M/s ZKB, the successful bidder demanded low capital viability gap funding while it did not demand any operational viability gap funding. M/s ZKB in its proposal demanded Rs37 billion as Capital VGF while M/s Techno-CMC-ACC demanded only Rs9.5 billion. 

On the other side, M/s ZKB demanded Rs143.9 billion as operational VGF while M/s Techno- CMC-ACC did not ask for any operational VGF. 

Meanwhile, the revenue share of NHA from the proceeds of the project promised by M/s Techno- CMC-ACC was also much higher than the M/s ZKB. The M/s ZKB offered Rs.20.11billion as revenue share to NHA while M/s Techno-CMC-ACC promised to share Rs73.58 billion with NHA. 

It is pertinent to mention here that if the successful bidder would fail to fulfil its commitments, the project execution would be delayed for at least one year. 

The timely completion of the project is quite necessary as it is the last missing link of Peshawar- Karachi Motorway route. 

Under the project a 306kmlong green-field six-lane access controlled motorway is planned to be constructed on build-operate- transfer (BOT) basis having a concession period of 25 years

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