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26 April 2019

National Energy and Utility Regulatory Commission has approved the Order of purchase of electricity under the feed-in tariff and the Power Purchase Agreement

What happened?

On 26 April 2019, the National Energy and Utility Regulatory Commission (the “NEURC”) adopted the Resolution “On approval of legal acts governing the activities of the Guaranteed Buyer and purchase of electricity under the feed-in tariff” (the “Resolution”). This document contains the Order of purchase of electricity under the feed-in tariff (the “Order”) and the template of Power Purchase Agreement (the “PPA”). The Resolution was adopted by NEURC for producers of electricity from renewable energy sources (“RES”). With the introduction of the new electricity market, the guaranteed buyer (“Guaranteed Buyer”) will be the legal successor of State Enterprise “Energorynok” (SE “Energorynok”).

The Order and the PPA contain the following key provisions:

1. General conditions
In order to receive payments for electricity under the feed-in tariff (“FiT”), RES producers shall:

  • become a participant of the electricity market;
  • conclude a PPA with the Guaranteed Buyer;
  • enter into a balancing group of producers under the FiT;
  • carry out operations of sale of electricity only with the Guaranteed Buyer.

2. Conclusion of the PPA
For future RES producers with approved FiT, the following documents are required for PPA conclusion:

  • certified copy of charter;
  • copy of order confirming the appointment of a director or other authorized person for conclusion of a PPA;
  • example of signature of director or authorized person.

For future RES producers without approved FiT, the following documents are required for pre-PPA conclusion:

  • documents confirming ownership or right to use land plot for construction of RES object;
  • registered notification about commencement of construction works or obtained construction permit;
  • grid connection agreement.

After conclusion of the pre-PPA, the RES producer shall commission the RES object during 3 years from the date of registration of notification or obtaining a construction permit. Otherwise, the pre-PPA may be terminated unilaterally by the Guaranteed Buyer.

3. Replacement of SE “Energorynok” by the Guaranteed Buyer
The procedure of replacement of SE “Energorynok” by the Guaranteed Buyer under the previous PPAs consists of two stages:

1) conclusion of additional agreement for the replacement SE “Energorynok” with the Guaranteed Buyer;
2) bringing such agreement in line with the new template PPA under the Resolution.
Additional agreement for the replacement of SE “Energorynok” by the Guaranteed Buyer shall have the following mandatory terms:

  • SE “Energorynok” is not legally liable for any obligations of the Guaranteed Buyer to the RES producer;
  • SE “Energorynok” and the Guaranteed Buyer are not legally liable for any obligations of the RES producer to lenders and investors.

Conclusion of additional agreement between SE “Energorynok”, the Guaranteed Buyer, and the RES producer shall be performed by 1 July 2019.

4. Payments
Unlike the previous PPA, the Guaranteed Buyer will perform advance payments to RES producers.

The Guaranteed Buyer shall perform payments for electricity to RES producers as follows:

  • for the first 10 days of electricity production – by 15th day of the estimated month;
  • for the first 20 days of electricity production – by 25th day of the estimated month;
  • the remaining part of produced electricity – after signing of sale and purchase certificate.

5. Dispute resolution
All disputes arising from or in connection with the PPA shall be settled in arbitration or state court at the discretion of claimant / applicant.

All disputes in arbitration shall be resolved by the International Court of Arbitration of the International Chamber of Commerce (ICC).

6. Assignment
Assignment of rights and obligations may be performed after obtaining the written consent of the other party.

7. Liability of the Guaranteed Buyer / RES producer
In case of non-performance of obligations, the Guaranteed Buyer / RES producer shall:

  • pay default interest of 0.1% of the non-performed payment (but not more than twice the discount rate of the NBU) for each day of delayed payment;
  • pay an additional fine of 7% of the non-performed payment, if the delay exceeds 30 days.

8. Amendments to the PPA
In case of legislative changes or amendments to the PPA, the Guaranteed Buyer publishes such changes on website and sends an additional agreement to the RES producer to bring the PPA in line with the changes.

Within 15 days, the RES producer shall sign the additional agreement. In case of non-provision of signed additional agreement to the Guaranteed Buyer within one month, the PPA shall be terminated.

This Resolution shall come into force from the day following its publication in an official print publication, and shall be effective from 1 July 2019. Resolution in part of approval of the template of a PPA, as well as the Order in part of procedures for PPA conclusion and replacement of SE “Energorynok” by the Guaranteed Buyer shall be effective from the day following its publication in an official print publication.

Do not hesitate to contact with us and we will assist you in resolving any issue related to this new legal framework.

Please contact partner Nazar Chernyavsky and counsel Maryna Hritsyshyna for further details.

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