Region: Global
Country: Global / Non-Specific
Keywords: PPPs by Topic *, Disruption and PPPs **, Financing
Document Link(s):
Document Summary:
The Coronavirus outbreak has prompted many government interventions, resulting in a partial economic standstill in a number of countries. These restrictions have implications for contractual relationships, including for the performance of obligations under project finance documentation.
Document Details:
Typically, a Concession Agreement or a PPA will provide for Force Majeure relief to extend beyond the Concession Agreement/PPA to other project agreements that the Concession Agreement/PPA parties are also party to, including the EPC contracts or the O&M agreements. For example, where the occurrence of a Force Majeure event prevents the EPC contractor from building the power plant, the project company may be able to seek relief from its contractual obligation under the Concession Agreement/PPA.
Given the fact that the affected party may wish to seek Force Majeure relief for events that occur under other agreements, it is important to aim to have a harmonised concept of Force Majeure across all the project agreements. Otherwise, there is a risk that an event that is defined as a Force Majeure in the EPC contract, for instance, may not constitute a Force Majeure event under the Concession Agreement/PPA. In such a case, the project company would be unable to seek relief “up the chain” for the same event.
In summary, for any future project contract to be signed after the beginning of the Covid-19 pandemic, the risk allocation of the Covid-19 pandemic should be carefully assessed. Parties will need to take great care in relation to how the risk is finally allocated between governments, project companies and other counterparties.
Updated: