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Published byCorey Potter Modified over 6 years ago
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Infrastructure Development in India: Opportunities for Co-operation with Europe
Presentation by Mohit Saraf Partner Luthra & Luthra Law Offices
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What Does Europe Offer Cheap and surplus capital
Low hurdle rate for investment Advanced technology Sunday, April 07, 2019 L&L/MDI
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Opportunities in India
Capital Deficit Good IRR/RoE (provided risks are contained) Willingness to pay for “advanced technology” Sunday, April 07, 2019 L&L/MDI
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Complementary Therefore investment in infrastructure possible only if risks relating to India can be contained. Sunday, April 07, 2019 L&L/MDI
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Construction & Operation Risks
Finance Risks Market Risks Lenders Promoters Supplier – Credit Agreement – Security Documents Shareholder’s Agreements Supply Agreement Offtaker Offtake Agreement Project company Insurances Insurers – Concession Agreement – Consents Operating and Maintenance Agreement Construction Contract Government Contractor Operator Construction & Operation Risks Sunday, April 07, 2019 L&L/MDI
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Risk Matrix Financial Risk Political Risk Environmental Risk
Market Risk Financial Risk Political Risk Environmental Risk Force Majeure Risk Sunday, April 07, 2019 L&L/MDI
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Investors’ Requirements
Hate surprises; will not accept risks which are either incapable of proper assessment or which are potentially open-ended in their effect No change in law risk No discriminatory taxation Matured legal system Principles of Natural Justice Advance Regulation Independent Regulatory Body Sunday, April 07, 2019 L&L/MDI
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Investors’Requirements (Cont’d)
Regulators should not be able to vary the terms of consents unduly Government Support Agreements Terms of concession fixed for life of project No unduly onerous terms on project company Extension of term for force majeure Sunday, April 07, 2019 L&L/MDI
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Investors’ Requirements (Cont’d)
Foreign exchange protection Take or Pay obligation: Concession Agreement Credit enhancement including Government Guarantees Sunday, April 07, 2019 L&L/MDI
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Emerging Changes Gradual increase in FDI Limit
Labor laws are in the process of being reviewed and revised Exit policy Company Law being modernized and simplified Electricity Bill Competition Act Moving from “Licensing Raj” to “Regulatory Regime” Sunday, April 07, 2019 L&L/MDI
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Uncertainities Sanctity of Contract Judicial and Regulatory Activism
Government Policies: Peace meal approach Reluctance to learn from other experience: Reinventing the wheel Sunday, April 07, 2019 L&L/MDI
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