All road projects are likely to get extension in construction span for lockdown period under force majeure political event, rating agency Icra said on Tuesday.
There are 181 projects totalling 13,670 km with a total project cost of Rs 2.20 lakh crore awarded under public private partnership (PPP) route, which are under construction, it said.
"All road projects will likely get extension in construction period for lockdown period under force majeure political event. In addition, these projects will also get reimbursement of cost escalation which covers both inflation linked increase in construction cost and interest payments on debt due for the period of lockdown," Icra said in a statement.
It said as on December 31, 2019, there are 181 projects totalling 13,670 km with a total project cost of Rs 2,20,294 crore awarded under PPP route which are under construction (this excludes projects for which appointed date has not been announced).
Shubham Jain, Senior Vice President, Corporate Ratings, Icra said, "BOT (build, operate and transfer) projects are well protected from both time and cost overruns on account of lockdown. As it is for HAM (hbrid annuity mode) projects, the bid project cost is adjusted for inflation (price index multiple)".
"Therefore, for NHAI the additional burden will be in terms of reimbursing the interest on debt due for all BOT projects along with cost escalation for BOT-Toll and BOT-Annuity projects. This is estimated to be Rs 1,329 crore for the 40-day lockdown period," he added.
The statement said during the operations period for a HAM project, the recovery from authority is in the form of fixed annuity payments along with interest on balance accumulated annuity payments and added overall, such interest receipts accounts for around 45 per cent of total inflows.
"Therefore, sustained low interest rate regime is a challenge for operational BOT-HAM projects. ICRA in its earlier research dated February, 2020 has highlighted declining interest rates as a major risk for HAM projects," it said.
Seven HAM projects have attained a provisional completion certificate and two more are in the process of attaining the same (applied and final approval awaited), according to the statement.
"The interest rates are expected to remain at low levels to revive growth and mitigate impact of Covid-19 on the economy. Decline in bank rate would reduce the overall inflows for a HAM project thereby adversely affecting its debt coverage metrics," he added.
Around 23 projects totalling 1,493 km are expected to become operational in the next one year, it said, adding these projects are likely to get more impacted.
Disclaimer: No Business Standard Journalist was involved in creation of this content
