The Italian Parliament approved Financial Law 2018, introducing an amendment to article 42 of Legislative Decree 28/2011 on incentives granted by GSE S.p.A. (GSE) to RES power plants in Italy. In particular, paragraph 533-bis of the Financial Law 2018 sets out that:

  • If GSE ascertains an infringement in the context of an inspection procedure, the incentive granted to the relevant RES plant will be reduced by an amount ranging from 20% and 80%, taking into account the seriousness of the violation, in compliance with the general legal principle of proportionality of administrative provisions and sanctions;
  • If a violation is spontaneously reported outside the context of an inspection procedure by the plant owner, the reduction of the incentive will be further decreased by one third;
  • The Ministry of Economic Development, based on recommendations provided by GSE, will set out the violations subject to the aforementioned reductions.

The amendment introduces a significant legal improvement considering that, pursuant to the regulations currently in force, if a violation is ascertained, GSE is entitled to revoke the entire amount of the incentives granted and to request the repayment of all incentives already paid in the past. The new regime affords greater certainty on the entitlement to incentives and on the violations grounding either the reduction or the revocation. Consequently, in the context of M&A transactions in the RES sector in Italy, it is now highly advisable to carefully consider the contractual implications including: (i) relevance of self-disclosure for the purposes of the Purchaser’s mitigation duty in respect of the Seller’s indemnification obligations, if any, and (ii) Seller’s indemnification obligations, if any, when the GSE adopts any provision or imposes any sanction following a self-disclosure by the Purchaser.

The text of paragraph 533-bis of Financial Law 2018, as described above, should be final. However, after the publication of the law in the Official Gazette it will be possible to confirm the above change in law.