Please find hereinbelow some updates on the status of the contracts for difference (“CfD”) support mechanism in Romania. The below information represents only a non-exhaustive short description of the main requirements/criteria/provisions regarding the auction procedure:

I. Legislation

1. Further to the decision by the European Commission to approve the CfD support mechanism for onshore wind and photovoltaic projects (the “EC Decision”) issued in March 2024, there was issued the Government Decision No. 318/04.04.2024 regarding the approval of the general framework for the implementation and functioning of the support mechanism by contracts for difference for low carbon emissions technologies (“CfD Government Decision”).

2. The template CfD contract is attached to the CfD Government Decision. To be noted that while the CfD Government Decision governs all support schemes that may be rolled out based on the CfD mechanism, the EC Decision approves specifically the first one of such schemes, supporting onshore wind and photovoltaic projects, that is going to be rolled out until the end of 2025, in two rounds (one in 2024 and one in 2025).

3. Based on the CfD Government Decision, other secondary regulations were issued by the Ministry of Energy for the implementation of the support mechanism, namely Order No. 1120/26.07.2024 approving the state aid scheme in the form of contracts for difference for generation of energy from onshore wind and photovoltaic renewable sources and Order No. 1290/05.09.2024 for approving the initiation of the first auction for the state aid scheme in the form of contracts for difference for generation of energy from onshore wind and photovoltaic renewable sources, as well as the rules of the bidding procedure concerning the first auction (”Order 1290”).

II. The support mechanism

1. The approved CfD scheme provides operating aid for renewable energy projects. The aid will be granted through a competitive bidding process supervised by Transelectrica, acting as the CfDs scheme operator. Following each auction, CfD contracts are signed by each of the successful applicants with the CfD counterparty with a duration of 15 years from the payment start date or the target date for commissioning (as submitted in the CfD auction), whichever occurs earlier.

2. The beneficiaries will be required to sell the electricity subject to the CfD on organised marketplaces and will receive from the CfD counterparty or pay back to the CfD counterparty the difference between the strike price set in the competitive bidding procedure and a reference price calculated by ANRE as a monthly output-weighted average of prices achieved in the day-ahead markets, where the output weighting is based on all CfD beneficiaries falling within the same technology category.

3. There are also provisions in the CfD Government Decision concerning the sharing of profits in case the electricity subject to the CfD is sold through bilateral contracts – since the conclusion of bilateral contracts may result in additional revenues compared to the sale of electricity on the day ahead market, which is the source of the reference price – but it results that such bilateral contracts have to be concluded solely on organised marketplaces (i.e., centralized markets operated by OPCOM), and not directly negotiated outside the organised marketplaces (as selling electricity outside the organised marketplaces is prohibited and sanctioned by the exclusion from the CfD scheme).

4. The financing of the CfD support mechanism is ensured through non-refundable EU funds (such as the Modernization Fund which will primarily fund the first approved CfD scheme) and/or collection of the CfD contribution applied to all final consumers.

III. CfD auction – 2024

1. The objective of the first CfD auction – granting of operating aid for new onshore wind and photovoltaic renewable energy generation capacities with not less than 5 MW per project/applicant, as follows:

(i) onshore wind auction: total targeted installed capacity of 1,000 MW; and
(ii) photovoltaic auction: total targeted installed capacity of 500 MW.

2. The estimated total budget of the scheme (both rounds) is of EUR 3,000,000,000.

3. The administrative costs of the scheme will be covered from the CfD contribution applied to the final consumer of electricity.

IV. Submission of Financing Applications in 2024

1. The deadline for submitting the financing applications as per the published indicative calendar is: 18 November 2024.

2. Under Annex 1 to the Order 1290 it is provided that the financing applications will include:

(i) a technical offer demonstrating the fulfilment of the eligibility criteria for both the applicant and the project, stating, among others, the production capacity to be installed and the target date of commissioning, which will not be later than 36 months from the anticipated date of signing the CfD contract,

(ii) a financial offer indicating, among others, the offered strike price (at the value on the date of submission) not exceeding 82 Euro/MWh for the onshore wind auction and 78 Euro/MWh for the photovoltaic auction, and

(iii) an auction participation guarantee of 20,000 Euro/ MW of installed capacity with which the applicant intends to participate in the measure (in RON equivalent, calculated at the National Bank of Romania exchange rate valid on the date of issuance), with a view to guarantee the participation in the auction and the conclusion of the CfD contract if this will be awarded to the applicant.

3. In justified circumstances, the Ministry of Energy may extend any date, period or deadline provided in the indicative CfD auction calendar that was published.

V. Evaluation process of the applications:

1. The evaluation process within the auction shall be carried out in two stages, as follows:

(i) The first stage – an evaluation of the applicant’s technical offer (based on admission or rejection by reference to the eligibility criteria); and
(ii) The second stage – an evaluation of the applicant’s financial offer (ascending order of the strike price for qualified applicants). The evaluation of the financial offers of qualified applicants shall be initiated only after the completion of the potential appeals.

VI. Eligibility criteria for the applicants

1. For the applicant, aside from general criteria (such as to be legally constituted entity and be fiscally registered in Romania, to have the production of electricity as primary or secondary activity, not to be in insolvency, bankruptcy or liquidation, to have fulfilled their obligations to pay taxes, fees and social security contributions, not to have been subject to any international sanctions), it will need to demonstrate expertise in any period within the last 10 years in the development, construction or operation of projects with the same technology for which it applies for aid under the scheme.

2. The CfD Contract may be signed also through an SPV designated by the successful applicant provided that the SPV is held entirely by the successful applicant.

VII. Eligibility criteria for the project (eligible technologies are onshore wind and photovoltaic)

1. The scheme only applies to newly built installations, implemented on the territory of Romania.

2. The start date of the project works cannot be earlier than 9 March 9 2023 or earlier than20 July 2022. Acquisition of land and preparatory works, such as obtaining permits and carrying out preliminary feasibility studies, shall not be considered as start of works.

3. Installed capacity is of minimum 5 MW.

4. The grid connection permit (ATR) will be required to be obtained within maximum six months from the signing of a CfD contract under the scheme.

5. The target commissioning date stated in the financing application shall not exceed a term of 36 months from the anticipated date for execution of the CfD contract.

VIII. Performance guarantee

1. A performance guarantee is required to be submitted by the CfD beneficiary with a view to guarantee the fulfilment of certain obligations undertaken in the CfD contract.

2. The performance guarantee shall be for an amount of EUR 75,000 /MW for the installed capacity of the project.

IX. Indexation of the Strike price under the CfD Contract

1. The Strike Price will be indexed every three years, in accordance with the increases of the Consumer Price Index (CPI) in the Eurozone, if the CPI in the month of indexation is more than 10% higher than the applicable CPI in the month of signing the CfD Contract or the CPI applicable in the month of the last indexation date.

2. The first indexation will not take place earlier than 2027.

Indicative Calendar for CfD auctions