New Delhi: A large portion of under-construction road projects under the hybrid annuity model are trailing on execution schedule, yet their credit risk profiles remain stable, supported by protection under concession agreement, rating agency Crisil said on Thursday.
In the hybrid annuity model (HAM), the government pays a predetermined amount to the private construction company as an annuity until the expiry of the concession period.
According to Crisil, the majority of these projects received a time extension from the concessioning authority, given that the delays were due to reasons beyond the control of the concessionaire.
Though this increases project cost, the inflation indexation available under the concession agreement will limit the impact on credit risk profiles of concessionaires, the rating agency said.
Crisil said the finding is based on its analysis of a pool of 72 under-construction HAM projects, covering 2,600 km, forming about one-third of the length awarded by the authority, which are under construction with an appointed date between calendar years 2021 and 2025.
Crisil Rating director Anand Kulkarni said the delays expose the concessionaire to cost-overrun risks. As per our estimates, the delays have increased project costs by 5-10 per cent on average.
Crisil Ratings senior director and deputy chief ratings officer Manish Gupta said, "Around 60 per cent of under-construction HAM road projects are delayed by over 11 months on average.
Non-availability of right-of-way is the primary reason 75 per cent of these projects are delayed, it added.
Other reasons include delays in environmental and forest clearances, design approvals, clearances from local authorities, as well as force majeure events such as heavy rains and protests.
In the hybrid annuity model (HAM), the government pays a predetermined amount to the private construction company as an annuity until the expiry of the concession period.
According to Crisil, the majority of these projects received a time extension from the concessioning authority, given that the delays were due to reasons beyond the control of the concessionaire.
Though this increases project cost, the inflation indexation available under the concession agreement will limit the impact on credit risk profiles of concessionaires, the rating agency said.
Crisil said the finding is based on its analysis of a pool of 72 under-construction HAM projects, covering 2,600 km, forming about one-third of the length awarded by the authority, which are under construction with an appointed date between calendar years 2021 and 2025.
Crisil Rating director Anand Kulkarni said the delays expose the concessionaire to cost-overrun risks. As per our estimates, the delays have increased project costs by 5-10 per cent on average.
Crisil Ratings senior director and deputy chief ratings officer Manish Gupta said, "Around 60 per cent of under-construction HAM road projects are delayed by over 11 months on average.
Non-availability of right-of-way is the primary reason 75 per cent of these projects are delayed, it added.
Other reasons include delays in environmental and forest clearances, design approvals, clearances from local authorities, as well as force majeure events such as heavy rains and protests.
