Tripartite Agreement Seci

Payment security mechanisms have had a positive impact on improving the solvency of renewable energy projects and ensuring the security of payments under state discoms. In February 2017, SECI was the beneficiary of a tripartite agreement between the Government of India, the state governments and the RBI. NTPC has been a beneficiary of such a tripartite agreement since 2002. ICRA (a credit rating agency) has increased SECI`s credit quality from AA- to AA+, with the tripartite agreement offering additional collateral against defaults through discoms. Therefore, a payment security mechanism (in this case a tripartite agreement) can also be an effective mechanism to reduce additional risk premiums or forego additional risk premiums that reduce credit interest rates on renewable energy projects. Generators enter into electricity acceptance contracts (ECA) with discoms for the sale of electricity on important contractual terms such as duration, tariff, billing and payment security mechanism. However, the poor financial health of discoms increases the price at which electricity producers can raise capital due to debt risk. In addition, late payments to electricity producers have a serious impact on cash flows for electricity producers and undermine their long-term viability. In order to reduce both the perception and quantum of this risk for investors, the government has guaranteed several stages of payment security in PPAs for renewable energy, such as accreditation, fiduciary agreement, payment security fund, tripartite agreement and government guarantee. This is called the payment security mechanism.

The following list is brief: The Solar Energy Corporation of India (SECI) will benefit from a new agreement between the Government of India, state governments and the Reserve Bank of India (RBI). This agreement protects central government companies in the event of default. NTPC has been a beneficiary of the original tripartite agreement since 2002. When the old agreement expired, a new agreement was recently signed and SECI was also admitted as a beneficiary institution. According to the latest update, 13 of the 30 Member States have signed the agreement and more are expected to do so in the near future (see). Inclusion in the tripartite agreement led iCRA, a credit rating agency, to improve SECI`s internal credit rating from AA- to AA+ (see). The consulting firm also believes that the new SECI tripartite agreement will help generate more interest in future tenders with lower rates. We believe that the expanded tripartite agreement is the most important and effective way to address SECI`s perception of purchase risks. It would allow SECI to generate greater interest in future tenders and further reduce tariffs. . . .

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