Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 267
Offshore Wind Worldwide 2023
calculated for the purposes of the eligibility
review process for grid allocation and, if
necessary, to decide the successful bidders
at the price competition process.
For electrical facilities, underwater foundation, and wind turbine parts and components, the Localization Policy under Phase
III of the Program requires local contents to
make up only 60% of the proposed installed
capacity while the remaining 40% will be
scored as bonus points, such mechanism
provides more flexibility compared with the
Phase II of the Program. Regarding maritime
engineering service, priority shall be given
to domestic vendors; meanwhile, domestic
companies participating in implementing
the engineering design service items should
not be lower than 50%. Also, the implementation of the localization obligation
for Phase III of the Program is also more
flexible. Each bidder may choose from local
procurement, co-operation with domestic
players (via technology transfer, technology
licensing, or contract manufacturing), or investment in local industry (via sole proprietorship or partnership) to make its bid more
competitive.
Any deviation from the localisation commitments under the AC requires MOEA’s prior
approval. Under the AC for the Phase II Selection Projects, failure to comply with such
requirements will trigger damages payable by
the project company, including a drawing on
performance bond, adjustment of the FiT, liability for damages to the MOEA or, for certain
enumerated breaches, rescission of the AC.
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As compared to Phase II Selection Projects,
in order to verify and check whether the
localization obligation is duly performed
or not, the AC for the Phase III-1 Projects
prescribes quite detailed penalty mechanism which have been discussed between
the MOEA and the developers several times
before finalization of the AC template and,
to our understanding, have also triggered attention of the lenders from the perspective
of the Phase III-1 Projects’ overall bankability. For example, in addition to the penalties
for failure to achieve the committed localized amount of the required items, penalties
will also be imposed in connection with the
project company’s failure to complete the
relevant activity for each checking point
during the construction phase as prescribed
under the AC (e.g. supplier’s obtaining the
design drawings or specifications, notice to
proceed (the relevant construction work),
and others) at the proposed time under the
inspection schedule to be submitted by the
project company after execution of the AC.
While delay in achieving the milestones for
each checking point will be subject to delay
penalties: (A) the delay penalties associated
with the project company’s localization
obligation should be paid in a lump sum
payment only after completion of the project (i.e., the MOEA will not draw the performance bond during the construction phase
of the project due to the non-compliance or
delay in performing the localization obligation)5; and (B) the delay penalties accumulated during the construction phase may be
waived by the MOEA if the project company
ultimately achieves the committed localized
5 However, the MOEA may request for an undertaking from the project company and/or the promoter of the project company for unconditional payment
of the relevant punitive damages for the non-compliance with the localisation obligation during the construction phase.
