On 14 September 2017, the Ukrainian regulator, the National Energy and Utilities Regulatory Commission ("Regulator"), approved Regulation No. 1118 amending the template power purchase agreement ("PPA") between the State Enterprise “Energorynok” and producers of electricity from alternative energy sources ("AES"). The Regulation will become effective on the day following its official publication.
The template PPA has been improved in many respects, which are hoped to improve the bankability of renewable energy projects. Key changes relate to the following.
The Term of Validity of the PPA is Aligned with that of the Feed-in Tariff
The PPA will now be valid until 1 Jan 2030, which corresponds to the term of validity of the feed-in tariff. This has been one of the most sought-after amendments. Previously, the PPAs were concluded for a one-year term, subject to annual extensions.
PPAs Permitted Pre-Completion
PPAs can now be concluded before the completion of construction or commissioning (putting into operation) of a plant, and will enter into force subject to certain conditions precedent (for example, obtaining of a licence for electricity production; granting the feed-in tariff to a producer; and the producer joining the Wholesale Eletricity Market).
Assignment of Receivables (Step-in by Creditors) Permitted
Producers can assign, pledge or otherwise encumber the rights to receivables under the PPA to third parties who provide financing, thus allowing creditors additional security relative to the PPA.
Producers` Liability Relieved
The new PPA no longer provides for a penalty of 25% of the costs of the electricity produced in non-compliance with quality standards.
Dispute Resolution Options Provided
The dispute resolution clause of the PPA was amended to enable parties to resort to negotiations or mediation under the auspices of the Dispute Resolution and Negotiation Centre of the Energy Community Secretariat. Should such negotiations/ mediation fail, parties can opt for arbitration under the ICC Rules of Arbitration (with the place of arbitration in Paris) or litigation in the Ukrainian courts. Previously, it was only possible to bring cases arising out of, or in connection with, the PPA to Ukrainian courts. Ukrainian law will still govern the PPAs.