The Ministry of New and Renewable Energy (MNRE), through a letter, has directed NTPC and Solar Energy Corporation of India (SECI) to release performance bank guarantee (PBGs) for the solar and wind power projects that have been commissioned. According to the letter PBGs may be released within 45 days from COD (Commercial Operation Date), subject to fulfillment of requirements of submission of all the requisite documents.

Further, MNRE also mentioned that in case any developer finds delays in release of PBGs, it should be brought to the notice of the MNRE and the managing director of the concerned intermediary procurer.

The letter was approved by the secretary of the MNRE.

A PBG is an irrevocable unconditional bank guarantee deposited by wind or solar power developers to SECI/NTPC after 30 days from the date of issuance of the letter of intent, which is issued when they successfully bid for projects.

Typically, a PBG is released immediately after the successful commissioning of a renewable energy project after taking into account any liquidated damages or penalties due to delays in commissioning as per provisions stipulated mentioned in a power purchase agreement.

However, it seems like developers have been facing issues concerning the timely release of bank guarantees. The delay in the release of PBGs can result in financial losses for developers as their funds get blocked.

In a recent case, the Central Electricity Regulatory Commission (CERC) had ruled in favor of three independent power producers (IPPs) regarding the payment of their performance bank guarantee (PBG) to the tune of ₹255 million ($3.7 million). The three IPPs had petitioned the CERC seeking the release of the performance bank guarantees retained by the NTPC. In its order, the commission has ruled that the retention of the performance bank guarantees by NTPC is illegal and arbitrary.

IAmage credit: AEPC