HAM gains traction with investors
The annuity hybrid model (HAM), introduced by the Narendra Modi government to de-risk public-private partnership (PPP) highway projects, seems to be gaining traction with investors.
Sources said the government agency NHAI has awarded highway projects worth 2,500 km in 2016-17; nearly double the length it auctioned in 2015-16.
The growing investors’ interest assumes significance given that banks were initially reluctant about lending to HAM projects.
The ministry of road tra­n­sport and highways and its agencies together awarded projects 10,001 km in 2015-16. Of this, 4,344 km long were auctioned by NHAI.
The road ministry’s implementing agency had awa­rded about 1,200 km under HAM in 2015-16 while the rest were auctioned for construction on EPC basis.
Given their mixed experience with BOT model, ba­nks have been wary of lending to HAM projects. In February, banks led by SBI had stated their reluctance to fund HAM projects at a clo­s­ed-door meeting with transport minister Nitin Gadkari, citing uncertainty over getting their money back.
If a road project were terminated after completion of 40 per cent work, there would not be any repayment to banks, as per the HAM guidelines. Even if the project were terminated after completion of 85 per cent work, lenders would get back just 65 per cent of the loan, analysts said. Developers’ low equity risk also added to bankers’ concerns.
As of March this year, 17 out of 26 projects awarded under HAM have achieved financial closure. The government introduced this model in January 2016 to ensure implementation of highway projects not found viable on (BOT) basis.
Columnist: 
Noor Mohammad
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