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State guarantee for procurement of solar power from Rewa Ultra Mega Solar Project by the state DISCOMs was signed

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Daily Pioneer
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The State guarantee for procurement of solar power from Rewa Ultra Mega Solar Project by the state DISCOMs was signed on Monday.

The Guarantee is a unique initiative by the state Government of Madhya Pradesh for Payment Security Mechanism, which had a great role to play in the phenomenally low tariff achieved by the Rewa Project.

An unconditional Guarantee has been offered by the Government of Madhya Pradesh, assuring that all payments on behalf of the state DISCOMs in case of any default would be made by the state Government.

Rewa Ultra Mega Solar Project (750 MW) in Madhya Pradesh is one of the largest upcoming solar projects in the world. It is a key initiative towards achieving greater penetration of solar power in India’s energy mix, and achieving nation’s vision of 100 GW solar capacity by 2022.

Implementation agency for the projectis Rewa Ultra Mega Solar Limited (RUMSL), which is a Joint Venture between MP Urja Vikas Nigam Limited (MPUVN), a company entirely owned by Government of Madhya Pradesh, and Solar Energy Corporation of India (SECI), a company entirely owned by Government of India.

IFC was the transaction advisor for the project and played a crucial role in making the project eminently bankable.

The Project has been awarded World Bank Presidents’ Award. The World Bank is giving loan for development of internal infrastructure for the Project.

Mahindrssa Renewables, Acme Solar and Spring Energy are the three Solar developers that were selected through a competitive bidding process to develop each of the 250 MW of the units. This was achieved after unprecedented, online reverse auction that went on non-stop for 33 hours. As many as 20 firms, including international investors, participated in the tender with total bid received being ten times the desired capacity of 750MW for the project.

The project set a new benchmark tariff of INR 2.97 without any Viability Gap Funding to developers, whereas, prior to Rewa bid,similar large-scale projects had achieved the lowest tariff of INR 4.34, with substantial Viability Gap Funding (SECI bids) or subsidy (NTPC bids). One of the unique features of the project is a three-tier Payment Security Mechanism for securing payments to developer from the state utility Madhya Pradesh Power Management Company Ltd (MPPMCL).

Under the Payment Security Mechanism, the first two tiers are a Letter of Credit and Payment Security Fund. The third tier is a guarantee from the state government.

The three-tier payment security mechanism is hailed as an innovation and has been recommended by MNRE as a model to be replicated in other solar projects as well.