The Sukkur-Hyderabad Motorway (M-6) project is the largest Public-Private Partnership (PPP) project in the country, with a total cost of Rs. 307 billion. The concession agreement between the concessionaire and the National Highway Authority (NHA) was terminated because the concessionaire was unable to complete the financial close within the allotted time.
According to government sources, the agreement’s termination would cause the massive project to be further delayed.
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Officials revealed that a build-operate-transfer (BOT) deal was signed on December 02, 2022, for the construction of the Hyderabad — Sukkur Motorway (M-6) between the National Highway Authority (NHA) and M/s TECMC (Private) Limited (the concessionaire). The Concessionaire was required to attain Financial Close within six (06) months of the Effective Date in compliance with Section 10.4.1 of the PPP Agreement.
However, following Section 10.4.2 of the PPP Agreement, the Concessionaire’s request resulted in a four-month, or until September 30, 2023, extension of the deadline for achieving Financial Close.
Due to the concessionaire’s failure to reach financial close within the allotted time, NHA issued the “NHA Preliminary Notice” on October 16, 2023, under Section 21.2.2(a) of the PPP Agreement. This notice reminded the concessionaire to correct any violations and reach a financial close within the allotted 43 days.
Meanwhile, the concessionaire sent a letter to NHA requesting specific confirmations that went against the terms and conditions of the PPP Agreement. As a result, NHA reacted following the terms of the PPP Agreement and asked the concessionaire to correct its defaults and complete the Financial Close by November 30, 2023, at the latest.
However, despite the concessionaire’s chance to make amends and the time extension granted, the concessionaire has not been able to fulfill the financial close deadline or to remedy the defaults, breaches, or deficiencies listed in the NHA Preliminary Notice.
In addition, NHA issued the following notice of termination: “Termination in accordance with Section 2 1.2.2 (b)-i read with Section 10.4.3 further read with Section 21.2.1 (c) and Section 21.2.1 (a) together with other enabling provisions and encash the Bank Guarantee (Financial Close Bond) in accordance with Section 2 1.6.1 (a)-i read with Section 10.2.2 along with other enabling provisions of the PPP Agreement, without prejudice to any other right or remedy which NHA may have under the PPP Agreement and/or under the applicable laws.” Official records said that as a result, the PPP Agreement is terminated, effective as of this date.
The Public Private Partnership (P3A) Authority Board authorized the concession deal for the building of the M-6 project, which has an estimated total cost of Rs. 307 billion.
The P3A Board authorized a transaction structure that required the Pakistani government to contribute just Rs. 9.5 billion over the course of the construction phase, with the private party covering the remaining Rs. 297.5 billion in project costs through equity and commercial debt.
In addition, the private party was expected to pay estimated corporation taxes of Rs. 908 billion throughout the concession period and a minimum of Rs. 408 billion to the NHA. Furthermore, at the conclusion of the concession period, the project was to be returned to the NHA at no cost.
The 306-kilometer freeway was intended to have six lanes in its design. The private party will build and manage the project, intended to be built in a climate-resilient manner, for 25 years starting on the date the PPP Agreement is executed.
The project was hailed as a PPP industry first in light of the current economic downturn and declining fiscal room. Officials stated that the project is once more postponed indefinitely following the most recent development.
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