NHAI terminates Samrala Chowk, Kishangarh-Udaipur-Ahmedabad projects

With lenders doubtful over the completion of Samrala Chowk and Kishangarh-Udaipur-Ahmedabad (KUA) Package VI projects, the National Highways Authority of India (NHAI) has terminated the ventures, sources confirmed to FE. Both projects were to be built through the hybrid annuity model (HAM). Raghav Chandra, chairman, NHAI, told FE that both the projects have been terminated. Chandra, however, denied that banks were uncomfortable lending to the projects.

“KUA Package VI was annulled and Samrala Chowk was rebid as the bids were not found to be proper. We have received two bids for Samrala Chowk now,” the NHAI chairman said declining to give further details.

Samrala Chowk-Ludhiana in Punjab and Kishangarh-Udaipur-Ahmedabad (Package VI) in Gujarat, won by Gawar Infrastructure and Overseas Infrastructure (Alliance) (OIA), respectively, were bid out between April and June 2016.

However, both the projects missed the deadline of 150 days within which the financial closure must be achieved, sources said.

Gawar bagged the Samrala Chowk-Ludhiana project in mid-April at a bid amount of R1,049 crore, 23% higher than the NHAI bid of nearly R853 crore, according to a report from Jefferies. Details of KUA (Package VI) which was bagged by OIA around July this year could not be ascertained.

Overseas Infrastructure did not respond to the email sent by FE seeking responses over the termination of the project till the time of going to the press. Repeated calls made to Gawar remained unanswered.

Industry watchers say lenders are being choosy when it comes to backing the contractors bidding for HAM projects. Of the 30-odd road projects bid out so far, only about 10 projects are understood to have achieved financial closure.

“Banks are following a stringent process to assess HAM projects. Only contractors with an execution track record and strong balance sheets have managed to get loans, for others it’s a challenge,” said a top executive of an infrastructure firm which managed to access bank funds for one of its HAM projects.

Banks have suggested to the ministry of road transport and highways (MoRTH) that the compensation or termination charges, in the event of the concessionaire’s inability to complete a project, should be 100% of the debt due. “The entire loan amount or most of it would have been drawn down, except perhaps for a small sum,” a banker explained.

Currently, the rules for HAM projects stipulate a far lower level of compensation to lenders which is worrisome for them. Lenders also want NHAI to not insist on a guarantee for extending an advance in the early stages of construction.

Among the projects that were bid out in March and April, MEP has achieved financial closure for two projects with four more under evaluation.

Two projects awarded to MBL are also being evaluated as is the Delhi-Meerut Expressway, Package III, awarded in December 2015. Sadbhav has also achieved financial closure for two projects. However, financial closure of the project bagged by Eagle Infra in April is taking longer than expected.