Hogan Lovell OffshoreBook 2023 230809 OnlinePDF - Flipbook - Page 261
Offshore Wind Worldwide 2023
Projects by entering into a PPA with Taipower (of which the tariff would be set at the
bidding price of the subject project).
4.2 Consequences of a project delay.
Under the template PPA of Taipower ("Template PPA"), there is no specific commercial
operation date or any provision explicitly
dealing with the delay of completion of
the OWF project. Moreover, there is no
minimum generation requirement under
the Template PPA. However, as mentioned
above, the FiT is decreasing year by year,
and the current rule provides that the FiT
is fixed based on the year in which the PPA
is executed. Hence, other than delay of the
execution of the PPA which could lead to
lower FiT rate, there should generally be no
liabilities or negative consequences under
the offtake regime. However, according to
the FiT applicable for 2021 announced by
the MOEA on January 7, 2021, the FiT for
OWF projects is subject to the AC. Under the
AC for Phase II of the Program, if a project
company delays in achieving certain milestones, for each month of delay, a percentage
of performance bond may be deducted as
damages. In addition, if the accumulated delay in achieving any of the required synchronization milestones reaches 12 months or
60% (for Phase II Selection Projects) / 100%
(for Phase II Auction Projects) of the performance bond has already been deducted,
the FiT for a period equivalent to the delay
period in excess of said 12 months or 60% /
100% of the performance bond ("Excessive
Delay Period") should be the lower of (a)
the avoided costs; or (b) the FiT applicable
to the year when the PPA is executed by the
project company, and should be included as
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part of the 20-year term of the PPA with the
Excessive Delay Period being counted toward the expiry of the PPA. Hence, although
there should generally be no liabilities or
negative consequences in terms of the delay
of completion of OWF projects under the
Template PPA, technically, an OWF project
company’s delay in meeting certain milestones under the AC would affect the revenue
that it will generate under the Template PPA
down the road. Please also refer to section
4.3 below.
On February 18, 2023, the MOEA announced
the AC template for the Phase III-1 Projects.
Similar to the AC for Phase II of the Program,
if a project company delays in achieving
certain milestones, for each month of delay,
certain percentage of the performance
bond may be deducted as damages. If the
project company delays in achieving the
required synchronization milestone, under
the AC for the Phase III-1 Projects, a twotier punitive damage mechanism has been
adopted, whereby (i) the project company may be subject to punitive damages
equivalent to 5% of the total performance
bond for each month of delay during the
initial six-month period; and (ii) where the
total overdue period exceeds six months,
for a period equivalent to the default period
calculated from the seventh month to the
date of the actual completion of synchronization, the project company should pay the
MOEA an amount equivalent to 10% of the
total performance bond for each month of
delay as punitive damages. The mechanism
of deduction in FiT (as part of the penalties)
as prescribed under the AC for Phase II of
the Program has been removed from the AC
