Economic Coordination Committee of the Cabinet (ECC) has approved the issuance of a Rs. 6.94 billion sovereign guarantee for the construction of Rs. 43.3 billion Sialkot-Kharian Motorway project.
With this issuance of Standby Letter of Credit (SBLC) or the Sovereign Guarantee, the project is all set to start and is scheduled to be completed in 2024. The ECC already approved Rs. 8 billion for the project in its meeting on 31 December 2021. Sialkot (Sambrial)-Kharian Motorway is a 69 km, 4-Lane Access Controlled Facility project.
The project is being built under Public-Private Partnership (PPP) mode and is spearheaded by PPP Authority (P3A). The formal approval of the project was granted in the authority’s 16th Board meeting held on 27 August 2021. The P3A approved the agreement reached between National Highway Authority (NHA), and M/s SKIMS on 13 September 2021.
The procurement of the approved project has been done through a competitive bidding process. Joint Venture (JV) of M/s Frontier Works Organization (FWO) and M/s Sultan Mahmood and Co (SMC) was declared as the successful bidder. The JV registered M/s Sialkot Kharian Infrastructure Management (Pvt) Limited (SKIMS), a Special Purpose Vehicle Company (SPVC), with the Securities and Exchange Commission of Pakistan (SECP) for implementing the project.
According to the documents available with ProPakistani, the release of Viability Gap Funding (VGF) amounting to Rs. 10.9 billion has been agreed to be made available through federal PSDP. The documents reveal the details as follows:
- NHA shall fund, or cause to be funded through the Government of Pakistan (GoP), the NHA funding amount million., i.e., Rs. 4 billion in the class B Equity Subscription Account within three months of the effective date (PPP agreement signing date) in the wake of capital VGF as a condition precedent
- The aggregate amount of Rs. 6.944 billion inclusive of taxes) to be paid, or caused to be paid by NHA through the GoP, as operational VGF in eight equal installments at Rs. 868 million.
The NHA shall fund the 1st operational VGF installment amount by the date occurring three months before the earlier of the scheduled substantial completion date or the service commencement date.
According to the Ministry of Communication, the concession agreement further stipulates that a government sovereign guarantee or Standby Letter of Credit (SBLC) backed by sovereign guarantees the operational VGF financial instrument acceptable to the financiers, to the tune of Rs. 6.944 billion shall be provided or cause to be provided by the NHA through the GoP within three months of the effective date for the comfort of commercial lenders of the project.
The Finance Division had intimated that guarantee space amounting to Rs. 6.9 billion is available for this project.
It is worth mentioning that the Executive Committee of the National Economic Council (ECNEC), in its meeting held on 11 March 2021, approved the project: construction of Sialkot (Sambrial)- Kharian Motorway on a Build-Operate-Transfer (BoT) basis at a cost of Rs. 43.383 billion without Foreign Exchange Component (FEC) including GoP share of Rs. 19 billion and concessionaire share of Rs. 24.309 billion.
