Energy Transition | The final version of the Contract for Difference for Sørlige Nordsjø II has been announced
On 15 November 2023 the pre-qualification process for award of the 1.5 GW offshore wind project area in Sørlige Nordsjø II (SNII) will commence. Pre-qualified participants will be eligible for participation in the CfD auction expected to be held in February next year.
On 7 November 2023 the MPE published the final version of the Contract for Difference, which is the support scheme applicable to the SNII offshore wind project. The contract price in the Contract for Difference will the lowest contract price offered in the auction, and the winning bidder must enter into the Contract for Difference within 4 weeks of completion of the auction to avoid triggering a NOK 400 million penalty. The Contract for Difference is in material respects the same as announced on 20 September 2023, but some important changes have been made following a consultation process. The main changes are:
- The ownership control remains strict but clarify the MPE shall not reject consent to ownership changes without reasonable cause.
- Prior MPE consent is still required for any direct transfer of ownership in the project company, any change of control or any direct or indirect reduction in the influence or ownership of the parent entity of any owner in the project company (Nw: Opprinnelig Bakenforliggende Eier). However, it is made clear that consent shall not be rejected without reasonable cause. This is an important clarification as the previous version of the Contract for Difference included that MPE consent could not be expected before the wind farm had achieved commercial operations – which may be into the 2030ies.
- It is further clarified that transfer of shares in an indirect owner listed on a regulated marketplace (stock exchange) does not require prior MPE consent, except where it leads to a change of control.
- It is also clarified that the change of control test shall be assessed by reference to the control definition in the Private Limited Liability Companies Act (50.1%), and not the control definition applied by MPE under the Petroleum Act (which is triggered by changes in negative control at 33.4%).
- It is in addition clarified that pledging of shares in the project company as such is not restricted by the contract (although enforcement of any share pledge will be subject to the ownership control restrictions)
- In the calculation of the reference price (being the wind weighted monthly average spot price in NO2), it is made clear that periods with negative spot prices shall be excluded from the calculation. Updated calculation models have been appended to the Contract for Difference.
- The requirements for a sustainable project with positive ripple effects set in the pre-qualification process have been embedded as requirements in the Contract for Difference. This is a consequence of the latest amendments to the pre-qualification process made by the MPE, where these pre-qualification criteria were changed to minimum criteria subject to a pass/fail assessment only.
Whilst the Contract for Difference still include strict requirements on the developer in terms of progressing the Offshore Wind project without material delay, and a high penalty of up to NOK 2 billion upon failure to do so, the recent changes are positive. The ownership control remains strict, with a very low threshold for MPE consent (any reduction in ownership by any original parent of any owner in the project company). It is nevertheless positive that the MPE confirms that it will provide consent under this provision unless having a reasonable cause for not doing so.