Bidding guidelines to improve bankability of solar PPAs: ICRA

The recent bidding guidelines framed for solar power projects are favourable for developers and will improve the bankability of the power purchase agreements (PPAs) signed by them, said ICRA today.
The guidelines address some of the key concerns pertaining to off-taker credit profile, grid curtailment and termination payments, which is a positive development for the sector, the rating agency said in a statement here.
"Barring the Rewa solar park bid, where there is a guarantee by the Madhya Pradesh government to cover for payment delays, the payment security approved in the bidding guidelines has not been seen in PPAs signed directly by the state discoms under state policy framework," ICRA Senior Vice President and Group Head Sabyasachi Majumdar said.

He said this measure, if implemented in PPAs signed directly by state discoms, is favourable for the solar power developers and improves the bankability of the PPA document.
The guidelines require the procurers to provide a payment security through letter of credit equivalent to one month average billing and a payment security fund to support payment for at least three months of receivables for the projects tied up.
In addition, the procurer may also choose to provide state government guarantee in a legally enforceable form, both for payment of energy charges and termination compensation.
The guidelines also provide for compensation to solar power generators in case of off-take constraints arising from the delay in commissioning of transmission infrastructure, grid unavailability and grid back-down, which is favourable for solar power generators, ICRA said.

"It is noteworthy that these regulations shall be applicable only for new projects. The aforementioned concerns would continue to prevail for existing projects," Majumdar added.