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The NHAI proposal to extend the concession period and Covid-19 loan for operational BOT (Toll) projects and non-treatment of toll suspension as political force majeure could become contentious, according to ICRA.
Extension of the concession period by the NHAI and the Covid-19 loan for Operational BOT (Toll) projects does not compensate for loss in net present value terms for majority of the projects.
For entities who have not opted for moratorium on project loans earlier, the Covid-19 loan is a positive in terms of liquidity.
The Ministry of Road Transportation and Highways had suspended tolling on all national highways for a 25-day period between March 26, 2020 to April 19, 2020.
As per ICRA, this was expected to be treated under the political force majeure clause of the concession agreement, as was done during demonetisation, when the tolling was suspended for 24 days in November 2016.
As per the concession agreement, all force majeure costs (including interest and O&M) are to be reimbursed by the concessioning authority in case of a political event and revenue loss is to be compensated with an extension in concession period.
Different approach
As per the rating agency, the total O&M expenses and interest costs for the BOT Toll concessionaires for the period of toll suspension is estimated at ₹649 crore.
Many BOT concessionaires have already opted for loan moratorium on their project debt. For those who have not, the Covid-19 loan provides some relief in terms of liquidity.
Rajeshwar Burla, Vice President, Corporate Ratings, ICRA, said: “The NHAI seems to have taken a different approach when compared to the toll suspension during demonetisation period, when it compensated the concessionaires for the interest and O&M costs.”
“One possible reason for this deviation could be the availability of moratorium on debt servicing under RBI guidelines. Further, O&M costs for an operational toll project are also not expected to be significant,” Burla added.
“This approach may end up becoming contentious with concessionaires disputing the proposed relief measures. Also, these measures discriminate between concessionaires, as entities that have not opted for loan moratorium earlier are better off — they would now have access to the Covid-19 loan from the NHAI at a much cheaper rate of bank rate plus 200 bps with flexible repayment terms,” he added.
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