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The Ministry of New and Renewable Energy has allowed the Indian Renewable Energy Development Agency Ltd (IREDA), Power Finance Corporation Ltd (PFC) and REC Ltd to issue a Letter of Undertaking to back renewable energy generation projects.
An official statement said that a ‘payment on order instrument’ will act as a letter of undertaking from IREDA, PFC, or REC Ltd in case there is a default by the renewable energy (RE) power generator under the terms of the tender or the power purchase agreement (PPA).
“Such letters will have the same effect as that of a bank guarantee issued by any public sector bank. It would promise to pay the procurer on demand within the stipulated time. RE power generators can seek such letters by offering due security to the three non-banking financial institutions,” an official statement said.
The decisions will require an amendment to the standard bidding guidelines for solar and wind projects and it will be notified accordingly, the statement added.
These letters can be issued in lieu of bank guarantees for earnest money deposit (EMD) by SECI, NTPC and NHPC in the case of tenders or biddings for developing RE projects in the country.
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