1. Infrastructure Development in India: Opportunities for Co-operation with Europe
Presentation by
Mohit Saraf
Partner
Luthra & Luthra
Law Offices

2. What Does Europe Offer Cheap and surplus capital
Low hurdle rate for investment
Advanced technology
Sunday, April 07, 2019
L&L/MDI

3. 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

4. Complementary
Therefore investment in infrastructure possible only if risks relating to India can be contained.
Sunday, April 07, 2019
L&L/MDI

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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