A SOLUTION TO HIGH ELECTRICITY PRICES. THE POWER PURCHASE AGREEMENT (PPA).
PPAs are medium-to long-term contracts that allow electricity prices to be fixed and which guarantee the investor conditions of financial stability to proceed with the investment. Looking ahead, they can be a solution to high prices on the energy market and are an attractive instrument when they are used to buy and sell ‘green’ electricity to promote the spread of renewable energy.
In 2021, the European Commission approved renewable energy purchase agreements (PPAs) as a response to the increase of energy prices, not only for large companies but also for self-consumption.
The main advantages of PPA contracts are:
– savings on investment costs for the construction and maintenance of the plant;
– a key tool to obtain bank financing, thanks to a third-party that buys the energy to be produced by the plant for a number of years;
– access to energy at competitive prices;
– consumption of electricity at a stable and/or predictable price;
– better planning of the long-term cost structure;
– the ability to make investment decisions based on profitability in relation to risk;
– the guaranteed supply of renewable energy;
– the possibility of achieving corporate sustainability goals and improving brand reputation.
Large European companies try to offset their emissions in Europe with green certificates obtained through projects on the territory through virtual PPAs (VPPAs). These companies do not seek aggressive pricing. Their goal is to achieve stability through a fixed price for the cost of energy in the long term.
According to an analysis by the EY Renewable Energy Country Attractiveness Survey, in 2021 Spain, with almost 4 GW of PPAs signed in Europe, accounted for 61% of all long-term PPAs signed on the continent, well ahead of the UK (3 GW), while in the rest of Europe each country did not reach 1 GW.
The PPA market in Spain is a success story compared to other EU countries. At this time of uncertainty, this contract has guaranteed stability for the consumer in a context of volatile prices. The strength of this type of contract is the presence of a maximum and a minimum value that guarantees a certain stability. The parties agree in advance on a fixed percentage discount on the price of the MWh pool and, if the market price falls below the floor clause, the buyer has to pay the amount of the floor clause to the developer.
One of the fundamental reasons for the interest in the development of these PPA contracts in Spain has been the current regulatory framework which leaves ample room for the parties to define the terms of the contract autonomously. Bilateral power purchase contracts are regulated by Directive (EU) 2018/2001, Law 24/2013, and RDL 2019/1997. Recently, the measures adopted in RDL 24/2020 also facilitate the negotiation and implementation of PPAs. In addition, long-term supply schemes under the self-consumption method are starting to be developed in accordance with RD 244/2019.
In Italy, not many national operators have resorted to it yet, mainly due to the complexity of managing long-term contracts at fixed prices, the slowness of the administrative procedures required to construct the plant, and the public incentives that have been preferred by producers in the past. This purchase-sale model is however becoming increasingly common.
The PPA Notice Board was recently set up at the GME, pursuant to Article 28 paragraph 1 of Legislative Decree 199/2001, with the aim of promoting meetings between parties potentially interested in entering into PPAs, and to enable the fulfilment of the obligation to register the same contracts concluded between operators. The Notice Board, in fact, consists of the:
– classified ads section, in which traders interested in proposing or searching can publish, in an anonymous and non-binding way, their own sale or purchase adverts, while traders interested in these adverts can view them and express their interest;
– contract registration section, under which sellers fulfil their obligation to register long-term contracts for the purchase and sale of electricity from renewable sources concluded.
Among the operators that have made use of PPAs in Italy are:
– Ferrero, who signed a 10-year Virtual Power Purchase Agreement (PPA) with Falck Renewables for the production of 100% renewable green electricity through the installation of two photovoltaic plants in Sicily.
– Canadian Solar in joint venture with Manni Energy of Verona, Italy, who signed a contract (PPA) with Trailstone for a photovoltaic plant in Sicily with a ten-year duration, at a fixed price plus a mark-up sharing mechanism. The PV is owned by the joint venture under market parity.
c.colamonico@macchi-gangemi.com
l.irurzun@macchi-gangemi.com
CROSS-BORDER DISTRIBUTION OF UNITS OR SHARES OF COLLECTIVE INVESTMENT UNDERTAKINGS: RECENT AMENDMENTS TO THE ISSUERS’ REGULATION.
As a result of the consultation procedure and in implementation of the so-called CBDF Package (Cross-border fund distribution package, i.e. the Directive (EU) 2019/1160 and Regulation (EU) 2019/1156) on the cross-border distribution of units or shares of collective investment undertakings (UCIs), through Resolution No. 22437 of 6 September 2022, Consob has amended the Issuers’ Regulation (Consob Resolution No. 11971 of 14 May 1999, the so-called Issuers’ Regulation).
The amendments also implement the new pre-contractual disclosure requirements set forth in Regulation (EU) 2019/2088 (dealing with sustainability-related disclosure in the financial services sector, Sustainable Finance Disclosure Regulation, so-called SFDR) and Regulation (EU) 2020/852 (Taxonomy Regulation) for UCIs’ managers.
Among the main changes regarding the cross-border distribution, the new provisions regulate:
– the local facilities, i.e. the facilities for retail investors which must be made available in Italy in the event of distribution in our country of units or shares of EU UCITS (Undertakings for Collective Investment in Transferable Securities), EU AIFs (Alternative Investment Funds) by Italian managers, or EU AIFMs (Alternative Investment Fund Managers), as well as Italian AIFs by EU AIFMs;
– the termination of marketing in Italy and in a Host Member State, in the indicated cases;
– the pre-marketing of reserved AIFs;
– marketing communications in the public offering of UCIs, since the guidelines provided by the CBDF Regulation, as well as the Guidelines on marketing communications under the Regulation on cross-border distribution of funds of 27 May 2021 (ESMA34-45-1244) shall apply.
With regard to the new pre-contractual disclosure requirements, it is envisaged that these are to be provided by UCITS and AIF managers in the prospectus or, in the case of AIFs that are not subject to the prospectus requirements, in the offering document, or in an annex thereto. The new pre-contractual disclosure requirements will be applicable consistently with the dates indicated in the SFDR and the Taxonomy Regulation.
The abovementioned amendments have been published in the Official Gazette No. 215 of September 14, 2022, and they come into effect on the 20th day following the date of publication.
m.divincenzo@macchi-gangemi.com
THE NEW VOLUNTARY SETTLEMENT OF TAX LITIGATION PROCEEDINGS PENDING BEFORE THE COURT OF CASSATION.
Within the framework of the significant recently enacted changes concerning the judicial tax system, it has been introduced the possibility to settle tax disputes pending before the Court of Cassation as of 15 July 2022 and those disputes for which the appeal to the Court of Cassation has been notified by 16 September 2022.
Law No. 130 of 31 August 2022, published in the Official Gazette No. 204 of 1 September 2022, introduced significant changes in the area of the judicial tax system, in order to pursue the objectives identified by the National Recovery Plan (Piano nazionale ripresa resilienza – PNRR), approved by the Italian government in 2021 to give new economic impetus to the country.
Among the various measures outlined therein, Article 5 introduces the possibility to settle tax disputes still pending before the Court of Cassation as of 15 July 2022, and those for which the appeal to the Court of Cassation has been notified by 16 September 2022, with the aim of reducing the backlog of inactive tax disputes at the final (legitimacy) stage.
In particular, the following litigation proceedings can be settled:
– disputes whose value does not exceed €100,000, in which the Revenue Office has been unsuccessful in both previous instances, through the payment of an amount equal to 5% of the value of the dispute;
– disputes whose value does not exceed €50,000, in which the Revenue Office has been unsuccessful in whole or in part, during one or both instances, with the payment of an amount equal to 20% of the value of the dispute.
Thus, taxpayers cannot settle tax disputes if they have been unsuccessful in both instances. It is also not possible to settle disputes concerning:
– the European Union’s traditional own resources (e.g. custom duties) and VAT collected on importation;
– sums due as a result of State aid recovery.
By express law provision, the value of the dispute is determined by considering the amount of the tax contested only in first instance, net of penalties and interest. If the dispute only relates to the imposition of penalties, the value is made up by the sum thereof.
For the purposes of the settlement, any payments already made during the proceedings shall be taken into account. There is no possibility of requesting the reimbursement of sums that have already been paid in excess of the amount due for the settlement.
The voluntary settlement of the dispute is finalized by submitting the appropriate application and paying the amounts due within 120 days from the entry into force of Law No. 130/2022 (i.e. 16 September 2022). If there are no amounts to be paid, the settlement is completed through the mere submission of the application.
For the purposes of the settlement, any payments already made for any reason throughout the pending proceedings shall be taken into account. In any event, it should be noted that the identification of the methods to implement the settlement procedure is subject to additional ad hoc regulations to be issued by the Director of the Italian Revenue Agency.
a.salvatore@macchi-gangemi.com
f.dicesare@macchi-gangemi.com
REFORM OF THE ITALIAN CIVIL PROCESS: WHERE DO WE STAND?
On 2 August 2022, the (outgoing) Government submitted to Parliament the draft legislative decree that should implement the reform of the civil process in accordance with the Enabling Law No. 206/2021.
As known, the Enabling Law came into force on 24 December 2021 and the next Government must implement it within the year, i.e. by 24 December 2022.
The next elections will be held on 25 September 2022 and it is difficult to make predictions.
In any case, we wonder whether – regardless of the political orientation – the new Government will be able to complete the reform work and whether, therefore, among the Christmas presents, instead of the usual book, we will unwrap a new updated edition of the Code of Civil Procedure.
There has been no shortage of criticism of the Enabling Law, nor is there likely to be any shortage of criticism of the implementing legislative decree, the scheme of which – already forwarded to Parliament – is expected to receive the opinion of the House and Senate Committees by 2 October 2022, failing which the legislative decree may still be issued.
While waiting for the unpredictable political developments, let us recall that the legislative decree scheme provides for numerous and substantial amendments to the Code of Civil Procedure, including (to name a few):
– the express inclusion of the lack of power of attorney to the attorney among the cases subject to the regularization pursuant to Article 182 of the Code of Civil Procedure;
– the extension to 120 days of the minimum time limit to appear as provided for by art. 163 bis of the Code of Civil Procedure, if the place of notification is in Italy, and the extension of the backward time limit for the defendant’s appearance, provided for by art. 166 of the Code of Civil Procedure, from 20 to 70 days before the hearing;
– the obligation to indicate in the summons, if the claim is subject to conditions of admissibility, that the plaintiff has fulfilled obligations) required to overcome it;
– the reintroduction of the obligation for the parties to appear in person at the first appearance hearing, their questioning and an attempt at conciliation by the judge;
– the introduction of the following time limits, under penalty of forfeiture, for the filing of supplementary pleadings prior to the hearing, and equal to:
1) at least forty days before the hearing to propose the claims and exceptions that are the consequence of the counterclaim or the exceptions proposed by the defendant or the third party, as well as to specify or modify the claims, exceptions and conclusions already proposed. In the same pleading the plaintiff may request to summon a third party if the need has arisen as a result of the defendant’s defence;
2) at least 20 days before the hearing, to reply to the new or amended claims and objections made by the other parties, to propose the objections that are the consequence of the new claims made by them in the pleading referred to in paragraph 1), and to indicate the means of proof and produce the documents;
3) at least 10 days before the hearing, to reply to the new objections and indicate the evidence to the contrary;
– the introduction of the following time-limits to be counted backwards from the hearing at which the case will be retained for decision:
1) a time limit not exceeding sixty days (before the hearing) for the filing of written notes containing only the specification of the conclusions;
2) a time limit not exceeding 30 days (before the hearing) for the filing of closing arguments;
3) a time limit of no more than 15 days (prior to the hearing) for filing replies.
Those just mentioned represent a drop in the ocean in terms of the amendments that could be introduced to the Code of Civil Procedure also with reference to proceedings before the Giudici di Pace, appeals (and, in particular, to proceedings before the Supreme Court), enforcement proceedings and implementing provisions.
Therefore, while we wait for the formation of a new Government, it is advisable to immediately start getting acquainted with the new terms of the reform which, pursuant to Article 35 of the Legislative Decree Scheme, could come into force (with some exceptions) as from 30 June 2023.
THE COURT CONSULTANT LOSES HIS RIGHT OF REMUNERATION: CAN THE COURT’S DECREE DENYING REMUNERATION BE CHALLENGED? HERE ARE SOME OF THE ISSUES THAT SHOULD BE KEPT IN MIND.
The compensation of the consultant appointed by the Court may be denied by the judge if the Court’s expert requests the remuneration for his/her activities and expenses after a specific deadline.
Sadly, it is quite frequent that the Court’s consultant runs late in the deposit of his/her technical report, yet it can also run late in requesting the Court to assign the due compensation and reimbursement for expenses incurred while caring out the assigned task.
Article 71 of the Italian Presidential Decree no. 115/2002 foresees a specific hypothesis of loss of the right to demand compensation, in the following case: “The compensation’s request for the activities and expenses incurred in during the execution of the tasks assigned by the judge must be filed within 100 days from the date of the testimony, or the date of the execution of said activities”. The term goes up to 200 days from the date of the trip if the Court’s consultant has to carry out the activities outside the jurisdiction of the judge giving the assignment (section 2, article 71 cit.).
Therefore, the Court’s consultant has only 100 days, counting from the execution of the assignment (i.e. filing of the final report), to request the remuneration for the activities carried out and the reimbursement for expenses incurred in, such as laboratory tests, possible auxiliaries and so on. It is clear, therefore, that the consequences of a simple distraction or oversight can be important.
Should the request for compensation be filed when the deadline has already expired, the Court shall reject such request, declaring the loss of the right to claim compensation. Said declaration of the Court can be challenged by proposing a summary judgement (see article 15 of the Italian Legislative Decree 1st September 2011 no. 150).
The challenge is decided by the head of the judiciary office to which the judge who issued the challenged decree belongs (article 170 DPR 115/2002 by ordinance, which is not subject to appeal but can be challenged before the Italian Court of Cassation (see article 360, section 4 of the Code of Civil Procedure).
The Supreme Court has clarified some aspects of the discussed loss of the right, contained in the provision of article 71 DPR no. 115/2002:
– First of all, in the light of article 2966 of the Italian Civil Code, the loss of the right shall be prevented by a specific lawful act, which in our case, is the formal request filed with the Court to obtain compensation for the activities executed by the judge’s consultant;
– Secondly, once the deadline of 100 days has elapsed, the consultant cannot invoke the longer statute of limitation of the right to compensation. In fact, the Italian Supreme Court affirms that the survival of the right even after the deadline “…it is groundless since the right can be exercised within the limits of its statute of limitation as long as the right’s loss has not yet occurred. The loss of the right following the expiration of the deadline prevents who was once entitled to it from its exercise, notwithstanding the fact that the statute of limitations has not expired yet…” (see Civil Court of Cassation, Section II, 4th March 2015, no. 4373);
– The material capability of the consultant to quantify exactly the expenses incurred during the activities cannot be considered the dies a quo for the mentioned 100 days deadline. As a matter of fact, the starting date cannot depend on the auxiliary of the Court’s consultant who runs late in the quantification of its own compensation (see Court of Cassation cit.).
In conclusion, it seems that the Court’s expert who carelessly forgets to file within the terms of the law a formal request for the compensation of his activities and expenses has no choice other than accepting the loss of his right to be paid.
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
TO READ OUR PREVIOUS NEWSLETTER OF 29 JULY 2022: