MERC Rejects ACME’s Case For Replacing 300 MW Solar Project Bank Guarantee

MERC rejected the case filed by ACME Solar for replacing the Bank Guarantee of 300 MW solar project in Maharashtra.

ACME Heergarh Powertech Pvt. Ltd had approached Maharashtra Electricity Regulatory Commission to seek replacement of Bank Guarantee submitted under the Power Purchase Agreement dated 21 August 2019 with equally effective alternate proposed mechanism.

Acme’s subsidiaries, AHPPL and ASHL, requested MSEDCL to replace the PBG of Rs. 42 Crores, as submitted by AHPPL, with alternative options of either a Corporate Guarantee of Parent Company (or) Bonds for the amount equivalent.

AHPPL stated that it has been adversely impacted due to the unprecedented
situations and effects arising out of COVID-19 including severe financial crisis coupled with various other issues of obstruction of global supply chain, lack of logistics, etc.

It also stated that it will utilize the refunded PBG amount towards raising margin money and other collateral securities to fund the construction and commissioning of the project within the prescribed timelines.

Opposing such request, MSEDCL contended that there is no provision under the RfS and PPA which provides for any replacement of PBG. MSEDCL also said that AHPPL has been trying to absolve itself of its obligation under PPA, initially by filing Petition seeking frustration of PPA and now by seeking return of PBG, which is currently under MSEDCL’s possession.

In its case, AHPPL had highlighted the amendment to the tariff-Bidding Guidelines for procurement of grid-connected solar power notified by MNRE on 25 September 2020 whereby a Letter of Undertaking from IREDA/PFC/ REC would have the same effect as that of a bank guarantee:
“Procurer(s) may release the Bank Guarantees submitted by a Solar Power Generator as
‘Performance Bank Guarantee (PBG)’ if the Solar Power Generator is able to replace the
same with “Payment on Order instrument”/Letter(s) of Undertaking from Indian Renewable Energy Development Agency Limited (IREDA) or Power Finance Corporation Limited (PFC) or REC Limited (REC) to pay in case situation of default of Solar Power
Generator in terms of Power Purchase Agreement (PPA) arises. Solar Power Generators
can seek such Letters(s) by offering due security to the above mentioned three non-banking financial institutions (IREDA, PFC & REC) for seeking replacement of their Bank
Guarantees already pledged with the Procurer(s).”

The Commission said that though the amendment to the tariff-Bidding Guidelines for procurement of grid-connected solar power provides the option of replacing PBG with Payment on Order instrument or Letter of Undertaking from IREDA/PFC/REC, the Petitioners have not offered any of the options as provided in the amended guidelines dated 25 September 2020.

ACME has received the Rupee Term Loan equivalent of Rs. 1152 Crores from REC on 24 November 2020, has acquired land for developing the project and has also achieved the FC. Further, it has made certain payments to the vendors for the development of the project.

However, in the present case, the commission stated that the PPA clearly provides submission of PBG and conditions under which it can be returned. Under such circumstances, this Commission cannot go beyond the provisions of PPAs and direct return of PBG.