Water Concession Agreement on Construction of Small Hydro Power Plants for Electricity Generation

Region
Europe and Central Asia
Country
Macedonia
Publication Year
Jan,2007
Keywords
Concession
Public Private Partnership

 

 

Agreement Synopsis, Context and Review

 

Sector:

Energy, Hydro-Electric

Name of Agreement:

Draft Concession agreement to design, construct, operate, maintain and manage a hydro-electric generating Facility with associated fixtures and equipment

Type of Agreement:

Concession Agreement

Region (if known):

Southeast Europe/ Balkans

Year of Agreement/ Draft:

2007

Principal Author(s) (firm and contact person):

Consulting Firm

Annotated by:

Shalini Soni-Bhagat

Purpose and Context:

 

Circumstances where this contract may be appropriate:

Concession agreement to design, construct, operate, maintain and manage a hydro-electric generating Facility with fixtures and equipment

Drafted for common law/ civil law jurisdiction:

Civil Law

Main Features:

The Concessionaire has the exclusive right to manage, operate, and maintain a hydro-electric generating Facility of nominal capacity with associated fixtures and equipment which include generators, turbines and water conveyance systems, transformers, breakers, etc. located on the Concessionaire’s side of the interconnection point; design, construct, operate and maintain a small hydro-generating unit; and design, construct, operate and maintain a large hydro unit on the site. (Article 1, Section 1.3)

The Concessionaire must be in possession of an interim generation license for nominal generating capacity prior to or the day the agreement is signed. The Concessionaire is required to obtain a water-use license. The Concessionaire must to obtain a permanent generation license prior or by the Scheduled Commercial Operations Date. (Appendix 1)

Concessionaire has to furnish Performance Security during the period of the Concession. (Article 1, Section 1.4 and Appendix 1, Clause 2.2 (c))

Concessionaire has no ownership rights to the site or the Facility including improvements financed, constructed or installed by the Concessionaire.  (Article 1, Clause 1.3)

 

Term: Twenty years from the issuance of the generation license.  (Article 1, Section 1.6)

 

Fee: The Concessionaire to pay an upfront fee and an annual fee equal to 2% of the revenues.  (Article 1, Section 1.7)

 

Concessionaire is entitled to all the revenues from the electricity generated by the Facility. The electricity that is generated is to be purchased by the market operator/distribution company. Tariff is based on a feed-in tariff published by the Energy Regulatory Commission, in the alternative, other law or the state source of tariff.  (Appendix 1)

 

Site: The Concessionaire has the right to land and water on the site subject to restrictions if any in the water-use license. (Article 1, section 1.9)

 

The Concessionaire is liable for all costs and compensation for land acquisition, including expropriation of private land for the completion of the Facility. (Article 1, Section 1.10)

 

The Concessionaire is required to operate, maintain and repair the Facility in accordance with laws and good-utility practice.  The Concessionaire will be liable for any costs or expenses incurred by the Government on its behalf for failure to meet such requirements. (Article 1, Section 1.15)

 

The Concessionaire does not have the right to divest, alienate or create encumbrances over or relating to the Facility.  (Article 1. Section 1.16) 

Concessionaire is required to maintain insurance coverage for the Facility.  Relief from the obligation to insure if unavailable at a reasonable cost would mean that on occurrence of that particular event the Facility is uninsured.  (Article 1. Section 1.21)

Force Majeure (FM) events: FM events are events unforeseen and beyond the reasonable control of the parties but do not excuse the non-performing party from using its best efforts to avoid or rectify the event. (Article 1, Section 1.22)

The parties may mutually decide to terminate or continue the agreement on revised terms as a consequence of Natural FM events continuing for over a period of 120 days. In the likelihood of a Political FM event, the parties are required to consult each other for a period of up to 90 days to reach agreement on steps to deal with the effects of the FM event. (Article 1, Section 1.24)

The Government is liable to reimburse the Concessionaire for all costs arising out of a Political FM event that cannot be recovered through an insurance claim.  (Section 1, Section 1.25 (a)).

The Concessionaire is liable for all costs arising out of a Natural FM not recovered through an insurance claim. (Article 1, Section 1.25 (b))

If the parties are unable to reach an agreement within 90 days of a Political FM event, the Concessionaire has the right to terminate the agreement. (Article 1, Section 1.26)

 

Events that constitute default by the Concessionaire include the failure to provide Performance Security, non-possession of a Generating or Water-Use license on or before the specified date in the agreement or purports to transfer the Concession to another entity without the prior approval of the Government. (Article 2, Section 2.1)

In the event of a default the Concessionaire will forfeit the Performance Security.  (Article 2. Section 2.2)

Liability and Indemnity with regard to third party claims clearly set out.  (Article 3, Section 3.1)

 

Dispute Resolution:  In the first instance, negotiation between executive management for amicable settlement, if it fails maybe referred to Arbitration or for appointment of a technical expert.  The technical expert acts as an Arbitrator.  Arbitration award is Final. (Article 5)

Good faith requirement for parties to continue to perform their obligations pending dispute resolution. (Article 5, Section 5.4)

Waiver of Sovereign Immunity by Government in that it is subject to Arbitration.  (Article 6)

 

Possible additional provisions that it might be appropriate to include:

Concessionaire to be liable for liquidated damages if the construction of the Facility is not within the time-frame

Provisions that may not be advisable to replicate/ may need further thought:

Technical Expert determination is binding on both parties.

Provisions of wider general use:

Force Majeure provisions, Waiver of Sovereign Immunity; Liability and Indemnity with regard to third party claims (seem pretty well laid out)

Experience Since Coming Into Force (including any amendments)/ if draft form, whether it has been applied:

 

Tracking Number:

REf #: Macedonia Hydro-Electric generation 

WATER CONCESSION AGREEMENT_Fina28HECl

 

Last Updated : Wed,2017-01-04