Infra.india Regulatory News (IIP)

Infrastructure India plc

Update on Investments

Introduction

Further to the announcement made today, Infrastructure India plc ("Infrastructure India" or the "Company"), the investment company focussing on Indian infrastructure assets, announces an update on its investments as set out in the circular convening an extraordinary general meeting of the Company that has been posted to shareholders today.

Update on the Company's Investments

The Company made its first investment in June 2008, when it invested a total of £13.2 million (Rs 1.1 billion) in Shree Maheshwar Hydel Power Corporation Limited ("SMHPCL"), in return for a 6.23 per cent. equity interest (post all dilution effects). SMHPCL was specifically established to own and develop a 400MW hydroelectric power project situated on the Narmada River in Maheshwar, in the southwestern region of Madhya Pradesh in India. This project is expected to be one of the largest privately owned hydroelectric schemes to be commissioned in India within the next two years. A power purchase agreement for the project has been signed between SMHPCL and Madhya Pradesh Electricity Board ("MPEB"), the state government body. Under the power purchase agreement, which is for a term of 35 years from the date of commissioning of the first turbine of the project, MPEB has agreed to buy the net electrical output generated from the Shree Maheshwar hydroelectric power project.

This asset is now at an advanced stage of construction, with over 90 per cent. of the civil works completed to date. Further, the first of the ten turbines of 40MW each to be installed and commissioned at the project is now currently undergoing final assembly at the project site. It is expected to be installed and begin operational testing during the next few months. The first turbine is due to be operational in the first half of 2010, to be followed by a roll out programme of the remaining nine turbines over approximately the following twelve months. Testing of the electrical grid connection system is due to be undertaken within the next month and is expected to be energised by the external grid for full scale testing.

The Company also invested £11.3 million (Rs 960 million) in a toll road in Central India - Western Madhya Pradesh Infrastructure & Toll Roads Ltd. ("WMPITRL"), representing a 26 per cent. shareholding in the project. WMPITRL was awarded the toll road project on a DBFO (Design, Build, Finance, Operate) basis in August 2007 for a term of 25 years. The toll road project comprises a single 125 km stretch of road which is being widened from the existing two lanes to four lanes in order to reduce congestion experienced on the route and is part of the local state government sponsored road upgrade programme. While tolling operations were originally anticipated to commence around April 2010, as announced on 15 January 2010, the Board is pleased to report that partial tolling began ahead of schedule and has commenced on approximately 67 km of the road. The final sections of the road will begin tolling on completion of various bridges currently under construction.

In respect of the marginal cost overrun on the toll road project, which was expected at the time of the investment, the Company contributed a further £881,000 in October 2009. An announcement made on 16 November 2009 informed shareholders that the overall liability of the Company in respect of its contribution to the cost overrun was Rs 128 million (c. £1.6 million) and the Company therefore anticipated having to make an additional payment of approximately £719,000 (representing c. £1.6 million in total). However, following a re-analysis of certain documentation by the Company's recently appointed asset adviser, Akur Partners LLP, the Company now believes that its obligation to fund the immediate further sum of approximately £719,000 was based on an incorrect assessment of the documentation and is not required now.

The overall liability of the Company in respect of the cost overrun could in time equal approximately Rs 197 million (c. £2.4 million), but only if the current 70:30 debt: equity project finance ratio is not maintained for the cost overrun. If the debt to equity ratio is not maintained, the maximum exposure the Company would have, assuming no debt is raised for the cost overrun, would be an additional payment of approximately £1.5 million (representing c. £2.4 million less the £881,000 payment made in October 2009), to be made in due course. However, this would only be due once all potential options of funding by debt, which are currently being discussed with the existing debt providers, have been exhausted. Shareholders should note that this removal of the immediate payment obligation does not affect the Company's shareholding in WMPITRL.

-Ends-

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