MEP eyes Rs 10,000-cr projects after landing 6 national highway contracts

download (1)Source: Business Standard, Apr 03, 2017

New Delhi: MEP Infrastructure Developers is eyeing Rs 10,000 crore worth of contracts to be tendered by the end of the year. The company already has six of the 17 national highway projects that have so far tied up all funds after being bid out on the hybrid annuity model (HAM).Jayant D Mhaiskar, vice-chairman and managing director of MEP Infrastructure, told Business Standard that these six projects have been bagged by the company since the government started bidding highway contracts on the basis of HAM.

The highway contracts that are in the states of Maharashtra and Gujarat would be commercially operational in the third and fourth quarters of 2019.

In the case of HAM-based projects, the central government pumps in 40 per cent of the total cost of the project.

The latest project bagged by the company is the Mahuva–Kagavadar section in Gujarat. The bid cost of the project is Rs 606.68 crore. The project will be funded by IDBI bank and IIFCL.

“We are evaluating Rs 10,000 crore worth of projects to be bid out in the next 6-7 months. These are a combination of state and central government projects,” Mhaiskar said.As far as financing these highway projects is concerned, MEP Infra has faced no difficulty.

Earlier, Mhaiskar had said that lenders were apprehensive in funding these projects as they felt that these HAM contracts were a replica of the PPP (public-private-partnership) model that had not delivered the desired results.

Banks had red flagged some of these HAM projects as they felt that since the government provided 40 per cent of the equity in these contracts, the concessionaires would bring down their share of the equity and fund the remaining projects through debt. Hence, banks and financial institutions had been reluctant to provide loans for such contracts.

“The lenders concerns have been addressed by our debt and equity ratio of 1:3,” he said.

According to official figures, of the total 50 highway contracts awarded till January 31, 2017, HAM constitutes 36 per cent. Furthermore, of the 26 HAM contracts bid out so far, 17 have achieved financial closure.

According to sources, of the contracts awarded by the National Highways Authority of India in the current financial year (2017-18), 40 per cent are likely to fall under HAM, an equal percentage under EPC (engineering, procurement and construction), and 20 per cent under BOT (build, operate and transfer).

Meanwhile, the Union Ministry of Road Transport and Highways had set a target of building 15,000 km of roads in 2016-17 but achieved only 8,200 km.

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