Transcript Tamilnadu Urban Development Fund (TNUDF) A Presentation January 2003 Scheme of Presentation  Introduction • • • • • Purpose of the fund Objectives Eligible borrowers / sectors Lending policies and procedures Project Prototypes.

Tamilnadu Urban Development
Fund (TNUDF)
A Presentation
January 2003
Scheme of Presentation
 Introduction
•
•
•
•
•
Purpose of the fund
Objectives
Eligible borrowers / sectors
Lending policies and procedures
Project Prototypes
Introduction

A Trust established under the Indian Trusts Act, 1882,
by GoTN, ICICI, HDFC and IL&FS with a line of credit
from the World Bank
Purpose of the Fund


TNUDF is a trust fund engaged in the development of
urban infrastructure in the state of Tamilnadu. This trust
was created as part of a restructuring exercise of an
existing World Bank credit to the Government of
Tamilnadu (GoTN) in September 1996.
Under the World Bank credit of Rs.167 crores, the
Municipal Urban Development Fund (MUDF) was set
up in 1988 to fund urban infrastructure needs. The fund
has been in existence for 8 years and had extended loans
of about Rs.200 crores to 74 Urban Local Bodies
(ULBs) upto September 30, 1996.
Purpose of the Fund



Successful track record enabled GoTN to broaden the scope of
the fund so as to attract private capital into urban infrastructure,
and facilitate better performing ULBs to access capital markets.
In 1996, GoTN, with the assistance of World Bank, invited three
financial institutions namely, ICICI, HDFC and IL&FS to
convert MUDF into a full fledged trust, namely TNUDF with a
private fund manager to deploy the resources of the trust.
Accordingly, TNUDF was established as a trust under the Indian
Trusts Act 1882, and is managed by an Asset Management
Company, Tamilnadu Urban Infrastructure Financial Services
Limited (TNUIFSL)
Fund Objectives



Fund urban infrastructure projects which improve the
living standards of the urban population;
Facilitate private sector participation in infrastructure
through joint venture and public-private partnerships;
Operate a complementary window, the GRANT FUND,
to assist in addressing the problems of the urban poor.
Eligible borrowers / sectors


Urban Local Bodies (ULBs), statutory boards, public
sector undertakings and private corporates are the
eligible borrowers of the Fund.
The eligible sectors include water supply, sanitation,
solid waste management, roads / bridges, transportation,
sites and services and integrated area development
Lending policies & procedures

Eligible items for TNUDF funding
• Only for capital expenditure
– Civil works
– Services
– Goods / Materials
• TNUDF will not fund
– Land acquisition costs
– O&M expenditure / other revenue expenditure such as salaries etc.
Eligibility Criteria

For ULBs etc.
• TE / TR < 1
• Annuity / Total revenue < 30%
In case where ULBs fail to meet above criteria, the
project specific returns (IRR) should be greater than
18.5% p.a.
For private sector borrowers

• Long term debt < 1.5
Net worth
• Net fixed assets > 1.5
Long term debt
• Average DSCR > 1.5
Security Measures


Special recovery mechanism such as escrow accounts of
property tax, water charges etc. and hypothecation of
movables are being put in place.
In case of commercial complexes,default option of
conversion of upto 40% of loans outstanding into office
space is being stipulated.
TNUDF Experience - Project Proto types
Commercial and Non-commercial
Three fold categorisation indicates on the demand side certain types
of urban infrastructure such as toll bridges, markets and byepasses can be supported by reliance on project cash flows to
service debt.
• Projects such as stand alone commercial complexes and office
space which rarely recover debt service from rentals are not worth
investing in and do not constitute infrastructure in any real sense.
• Second, environmental infrastructure namely water supply,
sanitation and solid waste need a mixture of debt and grant
financing and should attempt to recover appropriate user charges.
• Third, other municipal infrastructure such as internal roads, parks,
crematoriums etc would have to rely solely on general revenues to
service debt.
TNUDF Experience - Commercial
KARUR BRIDGE
•
•
•
Based on these principles, TNUDF has facilitated the first
BOT / Toll bridge, contracted by an ULB in India at an
estimated cost of Rs.16 crores.
The users of the bridge are freight traffic with the capacity to
pay. As the bridge would substantially reduce vehicle
operation costs (VOC) and time, cash flows to the operator is
expected to be predictable.
The enabling provisions of Tamilnadu State Toll Act has been
amended allowing ULBs to enter into BOT style operation,
thus offering the investor a stable regulatory framework.
Toll Fixation Criteria
The tolls are as follows:
Vehicle Type

Car/Jeep/Van
LCV, Tractors
Trucks
Bus
Multi-axle trucks, Cranes,
Earth-moving machines &
similar heavy vehicles
Single
Multiple Monthly
Pass (Rs.) Pass (Rs.) Pass(Rs.)
10
15
300
25
35
1050
30
45
1350
30
60
1800
50
--
--
TNUDF Experience - Commercial
MADURAI BYE PASS
• Madurai the second largest city in Tamilnadu, is a Corporation
with an area of 51.82 sq.kms and a population of 9.4 lacs (1991
census). It is a major commercial and religious centre in the
Southern region, linking important trade and tourist flows within
Tamilnadu.
• The scheme is the construction of a 2 lane Inner Ring Road (IRR)
of 27.2 kms between Kanyakumari Road and Melur Road; for
which land acquisition has been completed. The IRR would also
include construction of 2 Railway Over Bridges (ROB), one each
at Ramnad road and Tirunelveli road, and a high level bridge
across the Vaigai River.
TNUDF Experience - Commercial
MADURAI BYE PASS
Madurai replaced its traditional borrowings in the
form of long term loan by its own debt paper.
Madurai is the first municipal corporation in Tamil
Nadu, which has issued debentures for its project
refinancing viz., the Inner Ring Road. The servicing
of the bonds would be met out of the toll collections
arising out of the traffic on the road. This issue
resulted in a flat cost saving of about 2.50 to 3.00
percentage points to the corporation.
Madurai Toll Collection
(All Fig Rs in Lacs )
S . No
Months
Amt
days / Mt
Avg daily
1
Nov -00
35.31
30
1.18
2
Dec
40.47
31
1.31
3
Jan-01
42.23
31
1.36
4
Feb
41.54
28
1.48
5
March
43.03
31
1.39
6
April
45.62
30
1.52
7
May
43.71
31
1.41
8
June
43.20
30
1.44
9
July
52.17
31
1.68
10
Aug
49.25
31
1.59
436.54
304
1.44
Total
Avg Mt
37.89
(for Nov-Dec)
44.67
(for April-May)
50.71
(for July-Aug)
43.65 (Avg over 10 mts )
Analys is :
Total Collection till date
No. of Days
Avg. Daily Collection
Avg. Monthly Collection
436.54
304 days
1.44 lacs
43.65 lacs
Trend Analys is
Avg. Collection in Nov - Dec 00
37.89
Avg. Collection in April-May 01
44.67
17.9%
Increas e
Avg. Collection in July-Aug 01
50.71
13.5%
Increas e
Rites Projected Collect. - 31s t March 01
458.0
Actual Collection till March 01
202.6
Avg Collections for the 5 mts ended March 01
Achivement as a % of projections
40.5
44.2%
Rites Projected Collect. p.m in 2001
80.15
Avg Collections till date pm in 2001
46.79
Achivement as a % of projections
FY 2001
58.4%
FY 2002
TNUDF Experience
Commercial - Madurai Bye pass
TNUDF Experience
Loan Grant Blending - Storm Water Drain in
Valasaravakkam
TNUDF Experience - Commercial
SOLID WASTE MANAGEMENT
CONTRACTS
• Conversion of Municipal Solid Waste into
Organic Manure (50 tpd plant)
• Supply of pay contract between ULB and
Private Sector operator at Rs.3.50 pt + lease
rentals
• Pressure / Incentive for the ULB to keep the
streets clean.
TNUDF Experience
Public - Private Partnerships
ALANDUR MODEL
• 15,000 Households out of 17,000 have
contributed Rs.5000/- per household
representing one third of Project Cost of
Rs.34 crores.
• Initial tariff in Alandur fixed at Rs.150 per
house per month.
• Private Participation in that the private
sector has invested equity in the STP.
TNUDF Experience
Public - Private Partnerships
ALANDUR MODEL
Vision



TNUDF would position itself as a strategic intermediary
linking capital markets with Urban Infrastructure needs.
Positive performance during the plan period, achievement
of lending targets, high repayment rates and quality
infrastructure would demonstrate a track record enabling
market access for the Fund.
Capacity building activities, financially disciplined ULBs
and strong project pipeline are enabling factors.
Preparation includes rating of TNUDF risk assessment of
ULBs, setting up a credit enhances, revenue intercepts etc.
Resources
1) As a part of its vision raising exercise, TNUDF raised
Rs.110.05 crores from the capital market during September November 2000, by way of issue of unsecured non convertible
debentures of Rs.1,00,000/- each. This is the first nonguaranteed, unsecured bond issue by a financial intermediary in
India, with urban municipal cash flow as its base.
2) The terms of the issue are as follows:
Size of the issue
Tenor
Coupon
Interest payment
Redemption
Credit Rating
Rs.110.05 crores
5 years
11.85% p.a.
Half yearly on May 7th and November 7th
In Five equal annual instalment
LAA+(SO) by ICRA Ltd.,
Way Forward - Water Sanitation Fund
•
Urban Infrastructure, especially water and sanitation investments
require long term debt on account of externalities over time and
space, severe fiscal constraints on the supply of equity from State and
local Governments for new investments and substantial low income
population constraining the ability to pay for high financing costs.
•
Consequently, the need to link city infrastructure financing
requirements with domestic capital markets is well understood.
•
Debt finance is a pre-requisite for undertaking essential civic
investments, and in the long run, domestic savings through capital
markets would have to be, predominant source of supply.
•
The need for an institutionalised mechanism to raise low cost funds
for water and sanitation is clear cut with the US Bond Bank as a
potential model.
WAY FORWARD
Linking Markets & Cities with Intended Use Plans
• Creation of a revolving fund by GoI - States
• Tax concessions for municipal bonds by GoI
• Structure a statutory framework to manage the fund
• Borrowing eligibility criteria to be established
• Project implementation procedures including rational & quick
procurement
• Framework for tariff setting - through a democratic process
• Fixation of rational levels of upfront contribution by the
community / local body
• Capacity building for the raters/Merchant Bankers
Resources – Water and Sanitation
Pooled Fund
•
A Pooled entity namely, a Trust called Water and
Sanitation Pooled Fund (WSPF) has been registered.
•
The initial contribution of the trust is Rs.10,000/-
•
Objective is to link civic financing needs with the
capital market
Resources – Water and Sanitation
Pooled Fund
The terms of the issue are as follows:
Issue
Water and Sanitation Pooled Fund
Tenor
15 years
Put / call option
At the end of 10th year
Redemption
In 15 equal annual instalments
Interest payment
Annually in diminishing balance
Face Value of a Bond
Rs.1,00,000/-
Credit Rating
AA (SO) by ICRA,
Ind AA (SO) by Fitch Ratings
Guarantee
50% of the principal guaranteed by USAID and GoTN has undertaken
to top up the shortfall through interception of State Finance
Commission Devolution
Debt Service Reserve Fund
Rs.6.90 crores to be invested in highly secured and liquid investments
in the name of Bond Service Fund.
Resources – Water and Sanitation
Pooled Fund
The subscribers include Banks and Provident Fund Trust.
The sectorwise subscription of the bonds is as follows:
Sector
Banks
Provident Fund Trust
Rs. (crs)
30.25
0.16
30.41
Resources – Water and Sanitation
Pooled Fund
LIST OF POOLED PROJECTS
S.No.
Particulars
Water Supply Schemes:
Ambattur Municipality
1
2 Tambaram Municipality
3
Madhavaram Municipality
4
Rajapalayam Municipality
Adjacent Urban Areas - AUA
5
(I) Alandur Municipality
6
(ii) Pammal Municipality
7
(iii) Ankapathur Town Panchayat
8
(iv) Ullagaram Town Panchayat
9
(v) Porur Town Panchayat
10
(vi) Maduravoyal Town Panchayat
11
(vii) Valsaravakkam Town Panchayat
12
(viii) Meenambakkam Town Panchayat
13
Under Ground Drainage:
Madurai Corporation
Project Cost
Rs. In lakhs
Loan amt
Sanctioned
Loan
Disbursed
336.56
182.00
325.00
85.00
67.32
109.20
195.00
51.00
67.32
109.20
105.75
51.00
427.00
378.00
188.00
298.00
579.00
146.00
189.00
17.00
403.00
357.00
178.00
281.00
547.00
138.00
179.00
16.00
403.00
357.00
178.00
281.00
547.00
138.00
179.00
16.00
1407.00
4557.56
500.00
3021.52
325.00
2757.27
TNUDF - Institutional Positioning
PAPER ONE
RESERVE FUND MODEL
STRUCTURE
Simplified Flow of Funds
For Reserve Model Pooled Financing
Bonds
Long term
Pooled Financing
Authority
Investors
Funds
Market Rate
Sovereign
Govt.
Transfer
Payments
Sovereign
Govt.
Grant
Reserve
Fund
Revenue
Intercept
Local Govt.
Project
Local Govt.
Project
Local Govt.
Project
Local Govt.
Project
Local Govt.
Project
Principal & Interest
Payments
Trustee
If necessary
If necessary