L R AS Published on Monday 4 May 2020 - n° 320 - Categories:purchase/sale contracts
What is the status of PPA contract signatures?
European law firm Fieldfisher says PPA negotiations are already back on track!
At the end of April, six to eight weeks after the containment of most European countries, positive signs are beginning to emerge, both with the reopening of the European industry and with the resumption of discussions on Power Purchase Agreements (PPAs).
- particularly in the Netherlands, Spain, Portugal and the United Kingdom.
Resumption of discussions on Power Purchase Agreements (PPAs)
Energy buyers who had come forward prior to the containment indicate their intention to continue negotiations.
The easing of the containments in Europe makes it possible to resume negotiations on power purchase agreements (PPAs). Energy prices and delivery dates are still a sticking point for the conclusion of contracts.
A new clause appears in the negotiations, risk sharing, liability thresholds and damages in case of delays clearly caused by a pandemic.
For energy purchase agreements already signeddisputes arise over the applicability of the contracts while awaiting the opinions of lawyers and arbitrators. This is because many companies are reluctant to take delivery of the agreed volumes of energy when they no longer need it. Or, conversely, delivery dates may not have been met by producers because of the shutdown of construction due to containment: can there then be claims for losses? This depends on the size of the production asset: if it is small, the supplier is unlikely to have the resources to cover the buyer's losses. With larger projects, it is possible to reach an agreement to cover some of the losses caused by a delay in commissioning, but full compensation is rarely considered.
Delays in delivery seem to find a solution with compensation to reduce losses.
Looking ahead
Most PPA agreements will only be concluded once a contractual risk-sharing agreement acceptable to both parties has been reached.
It is still too early to say whether the unprecedented circumstances of pandemic containment will have led to significant innovation in PPAs. There is evidence of more comprehensive clauses in the contracts, including specific pandemic clauses that attempt to address the impact of future infection control measures on the scale of those observed in Europe over the past two months.
The standard force majeure clauses will not automatically cover the effects of the coronavirus on the PPAs, which has led to new grounds for negotiation.
One of the effects of the pandemic has been to increase the interest in stockpiling. Indeed, negative electricity prices have justified the interest in postponing the use of energy, which will thus be sold at a higher price.
https://www.pv-magazine.com/2020/04/29/light-after-lockdown-in-europes-corporate-ppa-market/
PV Magazine of April 29th
