Model Concession Agreement For Hybrid Annuity Projects

The government approved the proposal to allow NHAI to monetize publicly funded NH projects, which are in service and generate toll revenue for at least two years after the cod through the transfer (ToT) model, subject to case-by-case approval by the MoRth/NHAI competent authority. View YOG INFRA – This change may require a preliminary review by developers as to their ability to obtain financing from banks. Since no minimum amount of debt has been set in previous projects, developers have often used equity to finance part of the project. However, bank proponents should find more debt in future projects. The Ministry of Road Traffic and Highways has adopted a hybrid annuity model for the implementation of highway projects in order to encourage private sector participation through appropriate incentives. The goal is to maximize the amount of highway projects implemented in the government`s available financial resources. Under this model, 40% of the project costs must be paid by the government as a “construction aid” for the private developer during the construction period, and 60% of the balance in the form of annuity payments during the concession period, as well as interest on the amount owed to the dealer. There is a separate provision for government payments made by the government to the dealership. The private party is not obliged to bear the risk of trafficking. All payments were indexed by a multi-price index, which is a weighted average of WPI and CPI (IW) at 70:30 bases. This reduces the risk of inflation for the developer.

View YOG INFRA – This change is a negative development for developers. The increase in Mobilization Advance`s interest rate is very significant (compared to previous provisions). Most developers, especially new entrants for the development of HAM projects (such as former EPC players), have used the mobilization advance provided by the Authority; However, given the high interest cost of such an amount, developers should provide sufficient liquidity. In the TOT model, the right to collect and usurp royalties for certain operational projects of national highway (NH) built with public funds is granted to concessional dealers (developers/investors) predetermined with a prepayment of a lump sum to NHAI. This transfer of rights is based on the potential for toll revenue from identified NH projects. The operating and maintenance obligations (O-M) of these projects must be met by the dealer until the concession deadline. Dealers of such projects are designated as part of a pre-defined implementation framework and approved as part of a transparent and consistent procurement process. Interest rates on annuities for HAM projects are considerable and amount to about 45% of total inflows during the concession period.

The Ministry of Road Transport and Highways (MoRTH), the empty 10-Nov-20 Memorandum, has tendered for a number of amendments to the Model Concession Agreement (“MCA”) for P3 projects in the road sector in India under the Hybrid Annuity Model (“HAM”). These amendments were introduced in consultation with industry experts; and should strengthen investor confidence and interest in the implementation of HAM road projects in India. ABC Constructions (“Concessionaire”) won the project highway development offer on the HAM model; and the list below contains important assumptions that are generally taken up as part of each dealer`s preparation of the financial model for a HAM PPP project in the road sector. View YOG INFRA – This change is particularly beneficial for EPC players who have a strong project development capacity; and would prefer to leave the project after commissioning to continue to build other road projects of this type.