Solar power bidding guidelines amended by MNRE
LoU’s from IREDA, PFC, and REC will now serve the purpose of bank guarantees under MNRE amended bidding guidelines for solar procurement tenders
Tariff-based competitive bidding guidelines for the procurement of grid-connected solar power have recently been amended by the Ministers of New and Renewable Energy (MNRE).
Under the amendment, MNRE has confirmed that an undertaking letter (LoU) from IREDA, PFC, or REC would have the same impact as a bank guarantee.
It stated that such ‘payment on order instrument’ would pledge to pay the procurer on-demand within the defined time frame.
In a gazette notification, MNRE said that the letter of Undertaking from the three Non-Banking Financial Institutions – Indian Renewable Energy Development Agency (IREDA), Power Finance Corporation (PFC) or REC would have the same impact as a bank guarantee.
Thus, in an event where solar power generator fails to comply with the tender conditions and a power purchase agreement- the LoUs issued by these 3 institutions will serve the purpose of bank guarantee.
According to the amendments, solar power generators can achieve such LoUs by providing security to any of the three NBFCs. But the letter will not be accepted by any other financial institution.
In addition, the revised guidelines included that, if the successful bidder is a single company, it should ensure that its shareholding in the PPA project firm does not fall below 51% at any point before one year from the commercial operation date (COD), except with the prior approval of the procurer.
While in the case of a consortium, the combined shareholding of the consortium members should not fall below 51 percent at any time as per the above criteria.
In regards to earnest money deposit (EMD), it stated that its quantity should be submitted by the bidders in the form of a bank guarantee or LoU. Earlier, it was only in the form of a bank guarantee.
The amendments in the guidelines have been made further to the approval of a proposal accepting the LoUs from these three NBFCs, as bank guarantees in renewable tenders by Power Minister R K Singh, last month.
