NHAI Revises Refinancing Policy for HAM Projects under PPP Framework

Recognizing the strategic importance of refinancing in Hybrid Annuity Model (HAM) projects, the National Highways Authority of India (NHAI) has issued a Policy Circular No. 8.4.50/2025 dated June 21, 2025, revising the delegation of powers for processing proposals related to refinancing and restructuring in Hybrid Annuity Model (HAM) projects (the “2025 Circular”).

Refinancing in HAM projects is more than a financial adjustment; it is a critical enabler of long-term infrastructure viability. Given HAM’s unique structure, wherein 40% of the project cost is funded by the government via annuity payments and the remaining 60% is mobilized by the concessionaire through a mix of debt and equity, refinancing becomes essential for managing interest rate fluctuations, optimizing debt servicing, and attracting long-tenure, low-cost capital.

The 2025 Circular builds upon the earlier Policy Guidelines No. 8.4.25/2021 dated March 2, 2021 (the “2021 Guidelines”), which provided the foundational framework for refinancing PPP projects.

The original clause governing refinancing, particularly Sr. No. 5 of the table in Para 3 of the 2021 Guidelines, reflected a conservative stance shaped by concerns about NHAI’s termination payment obligations. However, as the PPP ecosystem has matured, so has the need for a more flexible and efficient refinancing regime that balances fiscal prudence with operational agility.

Key features of the revised 2025 policy:

1. Streamlined Approvals: Refinancing and restructuring proposals for HAM and other PPP projects will now be approved by the Executive Committee, with subsequent intimation to the Authority. This replaces the earlier requirement for direct board-level decision-making in all cases, thereby streamlining approval processes while maintaining transparency.
2. Continuation of Pre-2020 Framework, with Enhancements: The refinancing/rescheduling system prevailing prior to the 149th Board Meeting (dated September 8, 2020) shall continue, with the following enhancements:
   1. Loan restructuring involving extended repayment schedules will be permitted, provided the full repayment is completed at least two years before the end of the Concession Period.
   2. Infrastructure Debt Fund (IDF) refinancing must adhere to the Model Tripartite Agreement issued by the Ministry of Road Transport and Highways (MoRTH).
3. Specific Provisions for HAM Projects:
   1. For HAM projects that have achieved COD (Commercial Operation Date): There are no restrictions on refinancing, as the termination payment liability is not linked to debt due.
   2. For HAM projects that have not achieved COD, refinancing will be allowed only if the delay is attributable to the Authority and if:
      1. The refinancing is between Scheduled Commercial Banks, RBI-regulated NBFCs, or Government of India Financial Institutions; or
      2. The existing lender(s) is/are unable or unwilling to disburse funds for the project.

Mandatory Legal Undertaking: The concessionaire will be required to submit a legal undertaking, incorporated into the Supplementary Escrow and Substitution Agreement, clearly affirming that NHAI’s termination payment liability shall not exceed the amount stated in the Financial Model approved at Financial Close.

This policy shift reflects NHAI’s effort to create a more responsive and pragmatic financial environment for HAM projects, balancing risk mitigation with the need for streamlined project execution. By delegating approval to the Executive Committee and setting clear refinancing criteria, the Authority aims to:

1. Encourage early financial closure and mitigate construction delays.
2. Lower borrowing costs through access to better lending terms.
3. Preserve NHAI’s fiscal discipline by safeguarding against unintended liabilities.

The updated circular is expected to be particularly beneficial in circumstances where market refinancing conditions evolve or where existing lenders face liquidity constraints. As infrastructure growth accelerates, such clarity and responsiveness reinforce a regulatory framework that is both investment-friendly and financially responsible.