The OPA announced yesterday that it will offer to amend the contracts of all Feed-in Tariff suppliers who have not yet reached commercial operation to extend the milestone dates for commercial operation for up to one year. The milestone dates are the contractual deadlines for achieving commercial operation. The 20-year term of the FIT contract runs as of the milestone date, whether or not the project has achieved commercial operation. Many project developers expected to miss their milestone dates, particularly as a result of delays by the Ministry of the Environment in developing and implementing the Renewable Energy Approval Process. The amendments will therefore be welcomed by developers with FIT contracts in hand, but may be criticized by those who lost out during the launch phase of the FIT program.
The OPA will be emailing amendment offers to developers in the next several weeks. The OPA has indicated that the offer to extend the milestone date for commercial operation will be conditional of the developers agreeing to certain trade-offs on the force majeure rights under the FIT contract. As currently drafted, the FIT contract includes in the definition of force majeure teh inability of the supplier to obtain permits. Developers were taking the position that, without the amendment, they would have sought to extend their milestone dates for commercial operation by reason of force majeure arising from the REA delays. Through the amendments, the OPA appears to be offering a common settlement of such claims of force majeure. The details of the amended force majeure provisions have not yet been released.
The OPA has indicated that the domestic content thresholds for projects will be based on each projects original milestone date for commercial operation and will not be affected by the amendment.
The amendment will certainly be welcomed by those developers whose projects have been delayed as a result of the issues with the REA process. It resolves a significant piece of uncertainty that, amongst other impacts, likely complicated negotiations with sources of project finance.
It remains to be seen if some developers will take issue with the offer. The FIT program commenced with a "launch phase" in which connection capacity was allocated in part based on the developers' proposed milestone dates for commercial operation, with capacity being allocated to projects with earlier dates first. Developers who did not get contracts during the launch phase may take the position that the extension undermines the process used by the OPA to allocate these initial contracts.
The OPA has posted a Q&A document with additional details about the announcement.