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MNRE directs the release of PBGs within 45 days after project completion

September 2019

Reportedly, the Ministry of New and Renewable Energy (MNRE) has instructed NTPC and Solar Energy Corporation of India (SECI) to release performance bank guarantees (PBGs) for all the commissioned wind and solar power projects. The PBGs can be released in the span of 45 days from the commercial operation date (COD), on the condition that all required submission of necessary documents is fulfilled.

 

Additionally, MNRE has also stated that under any circumstance developers find delay in the release of the PBGs, they should inform the ministry as well as the managing director of the respective procurer.

 

When wind or solar power developers successfully bid for certain projects, they are issued a letter of intent. Following 30 days from the time of its issuance, they must deposit a PBG, which is an irrevocable unconditional ban guarantee, to the SECI or NTPC.

In most situations, the PBG is released as soon as a renewable energy project is successfully commissioned, after considering issued related to liquidated damages or penalties arising from delay in commissioning in accordance to the provisions mentioned in a power purchase agreement.

As reported, however, most developers are troubled with issues relating to the timely release of bank guarantees. This is a worrying factor since any delay in the release of PBGs can lead to financial losses for these developers due to blockage of funds.

In one such case, the Central Electricity Regulatory Commission (CERC) ruled in the favor of three separate power producers against NTPC and declared that the retention of PBGs by the power corporation was illegal and arbitrary.