Nepal Purwadhar Bikash Company Ltd (NPBCL) and three Canadian companies today signed a ‘Master Agreement’ to finance $280 million for the proposed Kathmandu-Kulekhani-Hetauda Tunnel Highway.

NPBCL chairman Kush Kumar Joshi and representatives of Canada’s Infrabanx Corporation, Shej Global Canada, and Global Financial Associates Canada signed the agreement here today.

Under the deal, the Canadian companies have agreed to lend $280 million for a minimum period of 15 years, which will be paid back from the income generated from the operation of the toll highway.

Nepal Purwadhar Bikash Company – the developer of 58-km tunnel highway – and the three Canadian companies – termed as Team Canada – will workout detailed finance, construction, management and operation of the first express highway within three months, Joshi said, adding that the company is planning to start construction in three months at the earliest. “There will be other separate agreements like contract work, interest rates, loan repayment period agreements within three months before starting the construction.”

Shej Global Canada will arrange the contracts with other contractors to develop the project, and Global Financial Services Canada, will arrange the fund collection from any organisation abroad including Infrabanx Corporation, informed chief executive of Nepal Purwadhar Bikash Company Subarna Lal Bajracharya.

Experts from EXP – an American company – has been conducting a Technical Due Diligence and another firm The Total Infra Solution is doing Financial Due Diligence.

NPBCL has entered into the project financing agreement with the Team Canada, after Securities Board of Nepal took long time to allow it float pre-Initial Primary Offering (IPO).

Project financing is a loan structure which relies on the project’s cash flow for repayment and with project assets as collateral to finance the project.

The Canadian companies that are renowned international firms with a strong and adequate capital base and proven experience and expertise in exploring appropriate investment opportunities for national and international level capital and mobilising them in a secured way to finance the projects of economic development and infrastructure construction will bring international expertise and is expected to help transfer the technology.

The tunnel express way – the first mega road project planned by private sector – is expected to pay out annual earnings of 16.68 per cent approximately, according to the company.

According to the agreement, Nepal Purwadhar Bikash Company is going to change the current share structure. The new share structure will be 80 per cent (Team Canada )and 20 per cent Purwadhar Company that currently has 50 per cent share. “The company has submitted its proposal to revise share structure,” Bajracharya added.

The project that is estimated to cost around Rs 35 billion. The company has so far Rs 1.4 billion commitment from various institutions,  individual investors and Non-Resident Nepalis (NRNs),

The Tunnel Highway project, after completion, is going to give a new dimension to the infrastructure development of the country.

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