On 9 January 2018, the National Energy and Utilities Regulatory Commission (the "Regulator") adopted Resolution No.1, further amending the template form of the power purchase agreement (the "PPA") between the State Enterprise “Energorynok” and producers of electricity from alternative energy sources ("AES"). The Resolution will become effective on the day following its official publication.

The amendments are aimed at enhancing the bankability and insurability of the PPAs, spurring investment in the industry and strengthening protection of producers’ and creditors’ rights in the context of the ongoing reform of the electricity market. Most of the risks associated with changes in law or events beyond parties’ control are expressly vested in the off-taker. AES producers will have broad powers to seek reimbursement in case of termination of the PPA they initiate, including by triggering the change of law clause.

Some of the amendments may raise competition concerns or provide different interpretations as to their exact scope or enforceability due to the lack of clarity and precision (e.g., references to producer’s profits, direct agreements, procedures of negotiation or “challenging” arbitral awards, etc.). It remains to be seen whether the new approach to risk allocation and payment of damages would prove feasible and sustainable.

Key changes relate to the following:

  • Force majeure clause is further extended and refined
  • Creditors can enter into direct agreements with the off-taker, with limits set on the off-taker’s right to terminate the PPA
  • Consent of the off-taker no longer required for a producer to assign the PPA to creditors
  • Changes in law are defined, entitling parties to amend the PPA or withdraw, including for changes in the feed-in tariff
  • Producers will have broad rights to terminate PPAs
  • The off-taker should indemnify producers for damages if a PPA is terminated
  • Amendments to the dispute resolution clauses
  • Cancellation of a licence for electricity production will not automatically entail termination of the PPA
  • The template grid connection agreement is cancelled.

Information is kindly provided by LF Redcliffe Partners, UWEA Member.