Legal & Tax Alerts

The general framework for implementing the Contract for difference aid scheme

Following our previous Legal and Tax Alert on the CfD scheme (available here), we inform you that on the 10th of April 2024, the Government Decision no. 318/04.04.2024 for approving the general framework for the implementation and operation of the Contract for difference support mechanism for low carbon technologies (“GD no. 318/2024”), which includes as annex a template Contract for difference, has been published in the Official Gazette.

GD no. 318/2024 provides new information regarding the implementation of the CfD scheme, but a lot of details are still left to be determined by secondary legislation, i.e. by orders of the Ministry of Energy or by ANRE decisions. Therefore, there is no information yet regarding the maximal strike price or regarding the value of the guarantees to be provided by the participants and/or beneficiaries.

The main findings from GD no.318/2024:

The tender process is scheduled for 2024 and 2025 based on the CfD scheme. Implementation of the CfD scheme, the eligibility conditions for participants, and the organisation of the tender process will be regulated under orders to be issued by the Ministry of Energy;

All the energy produced by the power generation capacities under the CfD Agreement must be delivered in the National Energy System and must be sold on the organised markets;

Beneficiaries are expressly forbidden to sell any quantity of energy produced under the CfD Agreement outside the organised markets under the sanction of being banned from the CfD scheme. Every year, ANRE will verify the beneficiaries to ensure compliance;

The reference price will be determined by ANRE based on the wholesale energy markets. ANRE may, from time to time, revise the reference price if (i) the beneficiaries are overcompensated and there is a cost increase for retail consumers or (ii) if the beneficiaries are under-compensated and more than 50% of them report this to ANRE;

The strike price will be indexed once every 3 years, based on the Consumer Price Index, as per the template Contract for difference annexed to the Draft Decision;

The maximal strike price will be determined by the Ministry of Energy (through orders initiating CfD tenders) based on factors such as the cost of the project, envisaged yield; results of previous CfD tenders, and market conditions evolution;

To partially finance the CfD scheme, a specific CfD levy will be imposed on retail customers in an amount to be determined by ANRE. The CfD levy will be collected by energy providers, who must provide ANRE with a financial guarantee to ensure the fulfilment of their obligation to collect the levy. The amounts collected will be transferred into the CfD liquidity fund, which will be managed by the CfD Counterparty for the implementation of the CfD scheme;

Funding for the CfD liquidity fund will also be ensured through non-reimbursable European funds and through payments for differences made by beneficiaries under the CfD Agreement;

Excess revenue from bilateral energy agreements must be returned to the CfD Counterparty (i.e. OPCOM). Depending on the price of Mwh used in the bilateral energy agreements, the beneficiaries of the CfD scheme may have to return to OPCOM either 50% or 100% of the received income under the bilateral energy agreement. The methodology for determining the excess revenue shall be drafted and approved by ANRE in the following months;

Beneficiaries will not receive the top-up payment (i.e. received when the reference price of electricity is below the strike price) for the intervals in which the values used for determining the reference price are negative;

Disputes between the beneficiaries and the CfD Counterparty will be settled by the Romanian Court of International Commercial Arbitration, supervised by the Romanian Chamber of Commerce and Industry. Prior to applying for the arbitration procedures, the parties can apply for a mediation procedure, as regulated by Law no. 192/2006 on mediation;

If a Supplier (i.e. the CfD beneficiary who entered into a CfD Agreement) is in breach of an obligation under the Agreement, this will constitute a Non-Fulfilment Event, which could cause the termination of the Agreement. There is no remedy term, so the CfD Counterparty could use this provision to terminate the Agreement if the Supplier is in breach of its obligations under the CfD Agreement.

We will provide additional information on this topic as soon as the legal framework is published and/or approved by the competent authorities (i.e., the Romanian Government, Ministry of Energy, ANRE, etc.).

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