VNPartners: A Short Guide to the Renewable Energy Component of NRRP

After a public consultation period, the Guide for the Energy Component of the National Recovery and Resilience Plan was eventually approved by the Ministry of Energy under Order no. 282/30.03.2022. The Guide has clarified most of the unknowns of the draft previously circulated for public consultation; it should also be stated that it did incorporate some of the requirements of the industry players and other stakeholders.

Below, the experts from Vlasceanu, Nyerges & Partners have tried to present the main elements of the Guide as well as the problems that might be faced when accessing the NRRP Renewable Energy Financing.

Who can access NRRP Financing?

The NRRP Financing is now available not only for self-consumption players seeking to produce their own energy but also for the energy producers which do not use the energy for self-consumption. The latter will, however, loose the 15 points granted for at least 50% self-consumption (i.e. the third evaluation criterion of assessed applications, as below detailed).

Therefore, the NRRP Financing may be accessed by any Romanian company or EU Member State company registered in Romania which is a microenterprise or small, medium or large enterprise and is authorized to perform, as main or secondary activity, the production of electric energy under NACE 3511 – Production of electric energy; as customary, the Guide imposes other conditions related to the applicant (e.g. no state budget debts, not being subject to Competition Council or European Commission decisions for recovery of funds, not benefitting from a state aid declared illegal/ etc).

Submission Timeline

Applications are received from March 31, 2022 till May 31, 2022.

Concerns have been voiced by interested companies regarding the insufficient period for the preparation of the complex documentation to be submitted. As such, it is likely to see an extension (depending on the number of applications & the problems[1] encountered during the submission process).

Main eligibility requirements

the project must consist in the construction of new solar or wind energy production capacities[2] (with or without storage); upgrading an existing capacity or the replacement of an old one is not subject to financing.
the works for the project should not be commenced or irrevocably assumed prior to the application date (i.e. the construction works have not started and no binding commitment was undertaken for ordering an equipment or through which the investment becomes irreversible). It is accepted to have secured the land and obtained permits and authorizations. After the application date, the investor may carry on with the works.
the project must be finalized by June 30, 2024;
the urbanism certificate is issued upon the application date; with respect to this requirement, the Guide is not entirely clear. It mentions the urbanism certificate as a pre-requisite for the approval of the project by the corporate bodies of the applicant (which must be submitted at the application date). However, there is no express requirement for the urbanism certificate to be submitted at the application date. Moreover, the Guide provides that the urbanism certificate should be submitted for the contract signing. As such, to be on safe side, it is advisable for the urbanism certificate to exist at the application date.
eligible projects include both projects generating energy into the grid as well as projects generating energy for own consumption; (note is to be made that the ATR is required in all cases, irrespective if the beneficiary intends to use 100% of the produced energy for self-consumption).
the ATR is not required upon the application date, but it must be obtained by the signing date of the financing contract;
nor the environmental permit or, as applicable, the Natura 2000 approval and/or the Natura 2000 statement, are required upon the application date, but they must be obtained by the financing contract signing date; however, the investor must prove that, upon the application date, the documentation for obtaining such permits/approvals was submitted to the competent authorities;
the equipment to be used for the project must comply with the minimal technical requirements included under the Guide.

Main requirements related to the real estate assets of the project

such real estate: (i) must be secured or (ii) such securisation must be initiated upon the application date, provided that the real estate shall be secured by the signing of the financing contract. Securisation in this case entails a right of use, which must be embedded in the ownership right, concession right, superficies right and any other rights which provide/include the right of use over the real estate assets.
the real estate must be secured for at least 5 years following the final payment of the NRRP Financing;
the real estate must be free of encumbrances (except the ones set up in favor of the financing bank); such encumbrances include any litigations involving the real estate and the existence of any deed or legal fact that obstructs or limits the exercise of the rights over the real estate and, consequently, obstructs the project. In case of bank financing, the bank must issue a statement undertaking not to initiate enforcement procedures having as object said real estate and the investments under the NRRP Financing for 5 years following the putting into function of the project.

We have already witnessed concerns expressed by the banks’ representatives with respect to such requirement. As such, one may see potential negative consequences in a large number of projects becoming non-eligible if the banks and the Ministry of Energy do not agree on the implementation of this requirement in an appropriate manner. However, note is to be made that most previous state aid schemes required that financed investments were free of any encumbrances (without any exception). In the case at hand, the exception consisting in the above referred bank encumbrances shows the Ministry’s intent to address the fact that many projects will include assets under bank financing.

Non-Eligible projects

projects entailing only storage;
projects replacing older solar / wind energy production capacities;
projects expanding existing electric energy production units;
hybrid projects, combining solar and wind.

Payment mechanism

The financing mechanism entails reimbursement of eligible expenses (i.e. the investor must advance the project using its own or attracted funds, which are subsequently reimbursed if the project is approved for NRRP Financing).

Financed amount

Up to 100% of the eligible expenses.

The maximum value of the of the state aid accessible from European funds is:

EUR 15 mln per enterprise, per project; and
for wind power:
for capacities between 0.2MW and 1MW: EUR 1,300,000/MW
for capacities exceeding 1 MW: EUR 650,000/MW
for solar power:
for capacities between 0.2MW and 1MW: EUR 750,000 /MW
for capacities exceeding 1 MW: EUR 425,000 /MW.

The EUR 15 mln. threshold is applicable to any state aid granted for all the similar projects of the same group of companies performed within the same NUTS 3 region (respectively the same county) in a period of three years from the date when the works for the first state aid financed project have commenced. Considering that this limitation of the group projects may lead to a limited attraction of the NRRP Financing and impede totally autonomous entities from submitting their projects for financing, the business community is requesting the elimination of this requirement.

The total estimated budget of the European funds of the NRRP Financing is of EUR 457.700.000, out of which EUR 382,700,000 for projects exceeding 1MW and EUR 75,000,000 for projects between 0.2 MW and 1 MW.

An additional 30% over-contracting scheme may be accessed from national funds (as approved under OUG 124/2021).

Eligible activities

The eligible activities include acquisition of installations/equipment and construction activities.

Eligible expenses

Are computed by using a formula identifying the difference between the investment cost for a classic, polluting power plant (to be computed as per the figures set under the Guide) and the cost of the renewable energy power plant for which the NRRP Financing is requested (to be determined by the investor);
Must be incurred after the application date and until June 30, 2024;
Must comply with all applicable laws; it and must be considered as crucial for reaching the project objectives;
Exclusions: second-hand equipment, operation costs, expenses related to the self-directed works (in Romanian: lucrari realizate in regie proprie), connection to the transforming station expenses (in Romanian: bransament), permitting expenses; feasibility study related expenses.

Evaluation criteria

1^st Criterion (maximum 75 points): the quantum of the state aid required for the project out of the eligible expenses per installed MW (i.e. the lower the quantum, the higher the score).
2^nd Criterion (maximum 10 points): storage capacities integrated into the project.
3^rd Criterion (maximum 15 points): the applicant must use at least 50% of the produced energy for own consumption.

Other important aspects

Project expenses not covered under the NRRP Financing must be covered by the investor from own or attracted non – state aid sources. The only possible proof of attracted funds can be a binding comfort letter issued by a Romanian/ an EU banking institution. As such, it appears that, in case group financing is considered, such financing will not be accepted. Nevertheless, since intra-group financing is a more suitable alternative for the investors, a clarification/amendment of the Guide in this respect should be requested to the Ministry of Energy.
The project cannot benefit of funding under other state aid schemes.
The feasibility study which must be submitted with the application must comprise at least two technical options.

If the applicant complies with all the above, a more in-depth analysis of the other conditions provided under the Guide must be performed [such as those related to the technical, management and financial capacities, the sustainability of the project, compliance with the DNSH (“do not significant harm”) principle, etc].

The Ministry of Energy has opened a communication line, where any questions related to the call may be addressed, at support.pnrr@energie.gov.ro

[1] We have already witnessed such technical issues of the submission platform that was not operational when the call was initiated.

[2] Only new equipment is considered.

DMCA

PROTECTED