Decc scraps clawback clause for renewables contracts

Renewable developers will be allowed to keep windfall gains from refinancing their projects, under standard contract terms revealed on Wednesday.

Government scrapped plans to claw back higher returns from schemes that successfully refinance, in response to concerns such a move could put off investors.

Contracts for difference (CfDs) will offer developers of standard renewable schemes a guaranteed power price – the “strike price – for 15 years.

Nuclear and carbon capture and storage schemes may be subject to a refinancing clause, however, as well as non-standard renewable projects such as tidal range and large hydro.

Documents published by the Department of Energy and Climate Change said: “We considered the potential role for ‘refinancing’ clauses, which would have reduced strike prices should certain refinancing events reveal particularly high returns.

“Feedback received from investors and developers was that the imposition of such refinancing gain-share clauses could create an upfront barrier to certain forms of investment, and may have introduced additional risk…

“We are also mindful of the importance of capital recycling to investment in new build projects, and of the impact of these conditions on investors’ perceptions of the attractiveness of the UK as a place to invest…

“Therefore we have concluded that a refinancing/gain-share clause is not required in the CfD used within the standard allocation process.”

Where CfDs are directly negotiated, for example with EDF over the proposed Hinkley Point C nuclear power station, “it may be appropriate” to include such a clause.

“This is because the process of directly negotiating a CfD is likely to include the detailed scrutiny of financial models, which allows bespoke refinancing terms to be developed.”