Government abandons clawback plan for wind farm windfalls

August 8, 2013 by  
Filed under Green Energy News

Typically a refinancing might see a company benefit by renegotiating its
debt-equity structure for a project, taking advantage of a fall in interest
rates or improvement to its risk profile.

But on Wednesday ministers said: “Feedback received from investors and
developers was that the imposition of such refinancing gain-share clauses
could create an upfront barrier to certain forms of investment, and may have
introduced additional risk.

“We are also mindful of the importance of capital recycling to investment in
new-build projects, and of the impact of these conditions on investors’
perceptions of the attractiveness of the UK as a place to invest
(particularly those less familiar with the UK framework and who have a
choice about where they invest their capital).”

The Government had therefore concluded “that a refinancing/gain-share clause
is not required” in most standard contracts.

While most subsidy contracts will follow a standard 15-year format, some, such
as those for new nuclear reactors, will be negotiated directly.

Ministers are in negotiations with French giant EDF over the strike price for
its proposed £14bn Hinkley Point nuclear plant in Somerset, which is thought
to be in line for a 35-year contract.

In a document on Wednesday ministers said it “may be appropriate to include
refinancing provisions” for contracts that are directly negotiated.

A spokeswoman for the Department of Energy and Climate Change said: “Government
is currently engaged in bilateral negotiations with EDF on new nuclear at
Hinkley Point. The terms of this contract will be published in a transparent
way after the negotiations have concluded.

“For bilateral negotiations contract terms will be determined on a case
by case basis. An agreement will only be reached if it provides value for
money for the consumer.”

Wednesday’s document also revealed that ministers had decided against use
power price indices compiled by price reporting agencies when setting
subsidy levels, because of “concerns around the reliability”.

It said it would only consider using them in some extreme cases and then only
when it could be sure that the prices had not been affected by “market
manipulation”.

Energy regulator Ofgem is investigating how price reporting agencies work
following allegations of price-rigging in the gas and petrol markets.

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