NEURC’s Resolution “On Introducing Amendments to the Resolution of the National Energy Regulatory Commission № 1314 from 11 October 2012”

Resolution “On Introducing Amendments to the Resolution of the National Energy Regulatory Commission № 1314 from 11 October 2012” on amendments to the Standard Power Purchase and Sale Agreement  (PPA) between State Enterprise Energorynok and a producer of renewable energy was adopted on 9 January 2018. 

The Resolution introduced minor correctional changes to the arbitration clause to reflect the effective legislation, in particular its availability for companies with foreign investments. There are certain changes to expand and detail a force majeure clause to bring in line with international practice.

It also provides that the creditors may enter into direct agreements with the purchasers; provided however, that such agreements contain provisions that limit the period for exercise by the purchaser of the termination right. In particular, a purchaser of electricity has no right to terminate the agreement within 120 days from the date of a written notice to the creditors (or their agents) regarding its intent to terminate the agreement; such term will be granted to the RES Producer to cure a breach of his obligations;

The Resolution defines a change of law concept. In particular, such changes include any essential adverse consequences for functioning of the RES producer and its financial condition (reduction or suspension of “green” tariff, cancellation or any adversary change in licenses or permission documents issued to RES producer in the absence of its fault, certain other adverse legislative changes). It is specified that the parties shall introduce amendments to PPA where as a result of one or more change(s) of law the RES Producer's expenses increased by 5% of his proceeds from electricity sales against his proceeds for 12 months (except for changes in feed-in tariff and its payment that shall be reflected in PPA regardless of the financial effect).

The PPA may be terminated upon the RES producer’s initiative, if:

  • Energorynok and/or a guaranteed purchaser are insolvent and/or liquidated;
  • Energorynok defaults on payment within 90 days of the respective notice to pay from the RES producer;
  • any other material breach (other than a payment obligation) by Energorynok if not cured by Energorynok within 120 days after the receipt of the notice from RES producer;
  • failure to fulfil an arbitration award;
  • a force majeure which last more than 180 days in a row or 365 in general or longer;
  • changes in the legislation which reduces RES Producer’s income for 10% and more in comparison with the last 12 months;
  • no consent regarding changes in the legislation which should be reflected in PPA.

If the PPA is terminated on the mentioned grounds, RES producer shall be entitled to the reimbursement of damages caused by the termination (the “Termination Amount”). The Termination Amount shall be paid in 4 instalments: 1st within 90 days upon notice and then each 90 days after each payment (calculated in EUR and converted in UAH on the payment date).  The Termination Amount shall not be less than the principal of any loan from IFIs, international ECAs and certain other institutions unpaid by the RES producer and payments to hedge companies and all other respective losses of the stated institutions and companies due to the termination PPA adjusted by any compensation paid by state authorities to the RES producer as a result of nationalization/expropriation. All such payments are calculated in EUR shall be made in UAH based on the official exchange rate as of the date of the payment.

It is specified that PPA is not terminated automatically after cancellation of the license but after the completion of all contesting procedures for such a decision for the cancellation.