OFFSHORE WIND CAPITAL GRANT SCHEME

Transcription

1 OFFSHORE WIND CAPITAL GRANT SCHEME

2 Introduction CAPITAL GRANT SCHEME FOR OFFSHORE WIND GUIDANCE NOTES (To be read in conjunction with application form) 1. The proposed obligation on electricity suppliers to secure a specified proportion of their supplies from renewable sources is expected to encompass a significant contribution of electricity from offshore wind. Scheme Aims & Objectives 2. The primary aim of the scheme is to stimulate early development of a significant number of offshore wind farms. This is desirable in order to: deliver an early contribution to the Renewables Obligation and emission reductions; underpin development of the industry and the equipment supply chains; provide a learning experience which can improve confidence and help reduce future costs; enable future projects to proceed without the need for grant support. 3. Other aims include: maximising value for money for the public expenditure involved; providing a fair, transparent and auditable process; State Aids compliance with legal requirements including state aid rules; minimising the burden on applicants and grant recipients; maximising uptake of the funding available while avoiding overspends. 4. State aid approval from the European Commission is required. No grants will be made without clearance of our proposals by the European Commission. Approval for a significant proportion of the expenditure has already been granted under the Community guidelines on state aid for environmental protection, which were adopted in December These suggest maximum investment aid for offshore wind projects of 40% of eligible costs. Approval for the final tranche of expenditure is currently being sought. Cumulation of State Aids 5. Electricity generated by projects supported under this scheme is expected to be eligible for exemption from the Climate Change Levy and to qualify as contributing to Guidance Notes Page 2 of 12

3 the Renewables Obligation on electricity suppliers to be established using powers in the Utilities Act The total state aid for any purpose from any UK source (or other Member State) may not exceed 40% of the eligible costs under this scheme. 7. The maximum financial support available under the DTI and New Opportunities Fund Offshore Wind Capital Grants Scheme will be reduced by any other financial assistance provided by the European Union or other sources of public funding. Total Funding 8. Following completion of Round 1 & 2 of the competition, the DTI has increased the total budget for the Scheme from 64 million to at least 92 million. As a result, at least 30 million of capital grant funding is available from the DTI to support offshore wind demonstration projects under Round 3 of the Scheme. In addition, a further 10 million will be available through the New Opportunities Fund (NOF), bringing the total available under this Round to at least 40 million (subject to State Aids approval). Applicants are at liberty to select whether they wish their bid to be considered for grant funding only by DTI, or NOF, or both (individual projects will not be funded from both source). The same eligibility criteria will be applied to all projects, irrespective of the source of grant funding, although grant terms and conditions may be different. The total funding for the Scheme is summarised in the table below: Source of Funds Total Grant Funding Awarded Grants Rounds 1 & 2 DTI 64 million (Original) 62 million DTI 28 million (Additional) NOF 10 million Grand Total Funds 102 million The DTI and NOF currently anticipate a maximum public contribution of 10 million, or 40% of eligible costs per project. 9. The Cabinet Office's Performance and Innovation Unit published the findings of its study on renewable energy in November 2001 [ Renewable Energy in the UK Building for the Future of the Environment ]. The report allocated the 100 million of further support renewable energy announced by the Prime Minister in March 2001 against identified areas requiring additional support. Offshore wind was identified as an area that should benefit from an allocation of 25 million. This support will take the form of capital grants, and is expected to result in the development of at least an additional 150 MW of offshore wind capacity. This 25 million is included in the above total of 64 million currently available from the Department of Trade and Industry. The additional funding of at least a 28 million for offshore wind projects, will be taken from the 60m funding for renewable capital grants announced in the Energy White Paper February Guidance Notes Page 3 of 12

4 Expenditure Profile 10. The total grants awarded under the first two rounds of the competition are shown below: Round No of Grants Awarded Grant Award Proposed commissioning m Late 2003 to early m Mid 2004 to late 2005 Grand Total 62m In accordance with the grant offer terms in Appendix 1, initial disbursements totalling 75% of the awarded grant sum will be made following construction and commissioning of a project. The balance of expenditure will be made over the following 3-year period. Regional Coverage 11. The Renewables Obligation will apply to licensed electricity suppliers operating in England and Wales. A separate obligation for suppliers operating in Scotland will be administered by the Scottish Executive under devolved powers. The DTI and NOF capital grants schemes will be open to all parts of the United Kingdom - it is however necessary for offshore wind farms supported under the scheme to connect to the public electricity supply network of Great Britain and to supply electricity to customers in Great Britain for a minimum of 10 years. This will be evidenced by the output of the scheme being eligible to receive Renewable Obligation Certificates. 12. Support for offshore wind energy in Northern Ireland (NI) has recently been reviewed. One NI offshore wind farm project has now pre-qualified to be eligible to submit a proposal under the Capital Grant Scheme. 13. For offshore wind-farms the ambit of the scheme is currently limited to projects sited within UK territorial waters, adjacent to England, Wales, Scotland and Northern Ireland. This brings the schemes within the ambit of the consents processes in to England, Wales, Scotland and Northern Ireland. A total of 19 projects, including the NI project, have pre-qualified for a lease from Crown Estates and which are expected to compete for the funding available all fall well within territorial waters due to the costs and risks associated with projects further afield. Two of these projects were awarded grants under round 1, and five projects are due to be offered grants under the second round of the competition Timetable & Competition Procedure 14. The first and second rounds in the scheme were completed in September 2002 and April 2003, respectively. The outline timetable for the remaining third round of competition is shown below. The competition is open to projects that have met prequalification requirements, set by the Department, to participate in the remaining Round 3 of the scheme. The third round has set deadlines (also see paragraph 15) for applications, and has been designed to balance the key objective of encouraging early Guidance Notes Page 4 of 12

5 deployment of offshore wind schemes, with the minimum of delay while ensuring effective competition between potential applicants. ROUND 3 5pm 30 June pm 15 September 2003 Initial deadlines for sealed bids Acknowledgement of receipt within 2 weeks No examination of bids prior to deadline Withdrawal of any bid permitted at any time before offer acceptance Resubmission or alternative bid permitted at any time prior to deadline Deadline for receipt of all necessary consents and Crown Estate s lease 30 September 2003 Completion of Assessments 31 December 2003 latest Notification and announcement of Awards 6 months for acceptance of grant offer 30 June 2004 Deadline for acceptance/rejection of offer July 2004 Selection and notification of next bid(s) following any withdrawals after offer or failure to accept by due date 15. The competition deadline for receipt of round 3 sealed bids is 5pm on 30 June all applicants must submit evidence of all necessary consents and a Crown Estate s lease before 5pm on 15 September Applications should be sent to the address given in paragraph -52. Applicants failing to meet the above deadlines will be ineligible for a capital grant award. All proposals will be assessed against the scheme criteria (paragraphs 19 to 33) and awards made up to the limit of funding available in Round 3. Award Criteria 16. All bids will be assessed for compliance with the criteria in paragraphs 19 to 33, then selected for funding according to a of DTI or NOF grant /MW (electricity) of installed capacity ranking. Should there be two or more equally ranked bids at the margin, preference would be given to the proposal with the lowest percentage contribution to eligible costs. If a further ranking criterion were necessary then the marginal projects would be ranked by total award required with preference given to the project requiring the lowest absolute grant. The same award criteria will be applied to all bids, irrespective of whether the grant funding is requested from DTI or NOF. Essential Qualifying (Compliance) Criteria 17. Key aims are to ensure, as far as is possible, that: successful proposals progress to completion and generate, as swiftly and efficiently as possible; Guidance Notes Page 5 of 12

6 the output is made available to GB electricity suppliers for a minimum of 10 years to help them fulfil their obligations (see paragraph 12 in relation to supply to NI customers); a diversity of companies capable of implementing such projects in future is developed and maintained, together with their supply chains; (assured through the Crown Estates procedure); the available funds are spread over a range of projects involving different technical and commercial approaches. Level Of Funding Requested 18. All applications seeking more than the maximum available under the scheme, taking account of any State or European aid already obtained or applied for, will be ruled ineligible. DTI/NOF will not scale back the funding request and then process the proposal on that basis. Applicant Eligibility 19. Proposals from both individual companies and consortia are eligible. 20. Consortia proposing to operate through a collaborative agreement must have the collaboration agreement in place at the time they submit their proposal and must furnish a copy of the signed legal agreement with their application. They must also, as part of the application, nominate a lead partner to whom the grant would be paid on their behalf. 21. Consortia proposing to operate through a joint venture must have the joint venture vehicle in place at the time they submit their proposal and must furnish a copy of the relevant legal agreement(s) with their application. They must also, as part of the application, nominate either the joint venture or a lead partner as the organisation to whom the grant would be paid on their behalf. 22. Applicants must be the legal entities who would hold beneficial ownership of the completed project. This would include equity investors but not financial organisations or individuals lending money to finance a project, even if loans were secured against the project income. The joint venture vehicle of a consortium described at paragraph 21 would be the applicant but for consortia described at paragraph 20, the individual consortium partners would be joint applicants. 23. All applicants and each partner in any consortium will be subject to a financial viability test to be specified by DTI/NOF. To facilitate the test the applicant and each partner must provide copies of their annual accounts for the last two years. If the latest annual accounts are more than 12 months old, then the organisation must provide management accounts. If the applicant or each partner has been trading for less than two years then they must submit cash flow forecasts and trading forecasts for the next two years, or at least to cover the proposed project construction and commissioning duration. Proposals from any organisation failing the test (including failure to provide additional requested information within 14 days of the request), or involving a consortium that includes any organisation failing the test will be ruled ineligible. Guidance Notes Page 6 of 12

7 24. Public sector organisations are not eligible for the scheme and proposals involving any public sector organisation, acting on its own or as part of a consortium, are not eligible. Project Eligibility 25. Proposals must be for a specific location, within UK territorial waters adjacent to England, Wales, Scotland and Northern Ireland. 26. Proposers should either be in possession of a suitable lease from the Crown Estate or provide evidence that they are in negotiation with the Crown Estate to obtain a lease. In either case, a copy of the lease must be provided by the deadline (paragraph 15) for the competition round under which the proposal was submitted. 27. Projects which have benefited, or will benefit, from a Non-Fossil Fuel Obligation, Northern Ireland Non-Fossil Fuel Obligation or Scottish Renewables Order contract will not be eligible for capital grant support. 28. Projects must have an installed capacity of not less than 20MW (electrical). This is in line with the Crown Estate's requirements for pre-qualification for lease. 29. Proposals will be ineligible unless all necessary consents have been granted and evidence of consent must be provided by the deadline (paragraph 15) for the competition round under which the proposal was submitted. This is likely to include evidence of approval under relevant legislation. In England and Wales this includes the following: Section 36 Electricity Act 1989; Section 5 Food and Environment Protection Act 1985; Section 34 Coast Protection Act 1949; Section 57 or 90 Town and Country Planning Act 1990 (e.g. for onshore substation); Section 37 Electricity Act 1989 (for onshore overhead lines); Section 109 Water Resources Act 1991 (if erecting structure in a water course); Section 3 of the Transport and Works Act Please note that the above list is not necessarily exhaustive, and that it is the responsibility of the proposers to determine which consents they require for their proposal. 30. Proposals must be for projects that will be connected to a local distribution network or the National Grid in England and Wales, or their equivalent in Scotland, or Northern Ireland. Evidence of an offer of connection (which must be time-valid to 15 September 2003, at least) must accompany the proposal. Evidence of any consents necessary for connection works (including both sub-sea and land connections and modifications to grid or distribution network) must be submitted with proposal. 31. Applicants (and consortia as appropriate) must undertake: Guidance Notes Page 7 of 12

8 to sell both the electricity output from the project, any Levy Exemption Certificates and any Renewable Obligation Certificates for which the project qualifies to licensed electricity suppliers in GB on whom a Renewables Obligation under section 32 of the Electricity Act 1989 is placed to do so for a period of not less than ten years from the date of commissioning of the project Please provide evidence to support the applicant s intention to meet the above requirements and include a written explanation of how this will be achieved. Copies of any relevant agreements including drafts and supporting documents should accompany the proposal. 32. Proposed commissioning date must be within 3 years of the competition round closing date under which the proposal was submitted. 33. All proposals must be accompanied by independent consultant s report providing evidence that the information and data relating to the proposed project has been reviewed in sufficient detail to enable the independent consultant to confirm, that in their opinion that stated efficiencies, availability, annual output, capital cost, and operating cost can be achieved. Other 34. Incomplete applications and any containing incorrect or false information will be rejected. 35. Costs should be denominated in GB pounds. Applicants should indicate where conversion has been made to GB pounds from other currencies and indicate the rate and assumptions used. For the purposes of ranking proposals an exchange rate to be defined by DTI/NOF will be used to convert costs to GBP. 36. Applicants must identify any other public support awarded or applied for in their proposal. Public support includes funding from the European Commission, Other Government Departments, Carbon Trust, etc. 37. An authorised representative of the applicant must endorse the application before submission to DTI/NOF. For applications made on behalf of consortia operating through a collaborative agreement or through a joint venture, an authorised representative of each partner must endorse the application before submission to DTI/NOF and in the latter case an authorised representative of the joint venture must also endorse the application. 38. Where an applicant or partner in a consortium is wholly owned by a parent company, an authorised representative of the parent company must endorse the proposal. 39. Authorised representatives endorsing the application must be the Company Secretary, President, Chairman, Managing Director, Chief Executive, Chief Operating Officer or Finance Director of the organisation concerned. 40. All signatures required under paragraphs 37 and 38 must be on the same side of a single sheet of paper and must be witnessed. Guidance Notes Page 8 of 12

9 41. Each proposal must indicate the funding to be provided by the applicant, and by each partner in a consortium. Loans secured against the project itself or unsecured loans specifically for the project must be shown separately, whether made to a joint venture or to one or more partners in a collaboration or to a single applicant. 42. Proposals for all projects involving loan finance of any amount against the project itself (secured or unsecured) must be accompanied by the following: Evidence that a credible prospective lender(s) has reviewed the economics of the project and consider them suitable. A statement to the effect that the lender(s) would seriously consider providing loan(s) finance for the project if they were approached today. A statement from the lender(s) to the effect that they consider the project applicants possess suitable experience to undertake the proposed project, and the lender s view on the applicant(s) financial strength and technical ability. Evidence that an investment committee or equivalent has a positive interim view of the project. 43. Each applicant and all the partners in any proposal from a consortium must undertake to proceed with the project if the requested grant is awarded [subject to force majeure]. 44. Applicants must agree to publication by DTI/NOF of identity, consortium membership and information specified at paragraph 49 and Applicant(s) must provide a description of the impacts that the proposed project may have on the social context. The description should reference the following two aspects: Direct opportunities for local employment and skill development during construction, operation, and maintenance Opportunities for educational provision raising awareness of renewable energy and associated environmental issues. Links with local schools and communities. Grant Offer Conditions 46. Following notification and announcement of Awards, applicants that qualify for a grant award will receive a grant offer letter. The DTI and NOF grants are administered from separate funds, hence the grant offer will be made either by DTI (DTI Grant Offer Letter) or NOF (NOF Grant Offer Letter). The full terms and conditions of each of the grant offers are shown in Appendix 1 and Appendix 2, respectively. Applicants are advised to read both sets of conditions before making the decision on which funding to apply for. Guidance Notes Page 9 of 12

10 Eligible Costs 47. Eligible costs comprise of the additional cost of building the project, over and above that of building a conventional power station of comparable output 1. Eligible costs include: Only costs incurred after date of offer of grant; Cost of all goods and services purchases necessary to build proposed project; Own labour costs, including agreed overheads but not profit, for construction and commissioning and project management In this context own costs include applicant s own costs and eligible costs incurred by consortium members and eligible costs incurred by companies connected to any of these. The cost of work contracted to connected companies, to consortium members or to companies connected to consortium members should not include any element of profit. Hence, total eligible cost = eligible cost comparative cost Where: comparative cost = MW x 0.43 x 400k 48. The following are excluded from eligible costs: input VAT (except where it cannot be reclaimed by grantees); interest charges, bad debts, advertising, entertaining; hire purchase interest and any associated service charges; mark up and profits; profit earned by a subsidiary or by an associate undertaking work sub-contracted under the project; notional costs (e.g. opportunity costs); audit fee for certification of claims by an independent accountant; purchase cost of any land or water on which the project is built. Release of information by DTI/NOF 49. DTI/NOF are at liberty to publish details of all proposals submitted to the competition. DTI/NOF intends to publish the following information for all bids: Identity of applicants (including consortium or joint venture membership where relevant); Project location and capacity; Expected annual output; Number and size of turbines; Estimated investment cost; Grant requested Total public support from all sources Proposed commissioning date 1 The comparative cost of conventional generation is based on that for gas fired combined cycle gas turbine (CCGT) plant with a capital cost of 400,000 per MW adjusted by a factor of 0.43 to allow for differences in output. Guidance Notes Page 10 of 12

11 Project description (including any key technical features) List of compliant bids List of successful bids 50. DTI/NOF may also publish information based on information provided in commissioning report and annual performance reports see Appendix The Secretary of State s decision on applications for DTI funding is final. Similarly the Board of the New Opportunities Fund decision is final on applications for NOF funding. Further Information 52. Applications and any correspondence in relation to this scheme should be sent to: Offshore Wind Capital Grants Scheme c/o Jacquie Westerhof CGS Administrator B156 Future Energy Solutions Harwell Didcot Oxon OX11 0QJ Tel: Fax: jacquie.westerhof@aeat.co.uk Guidance Notes Page 11 of 12

12 APPENDIX 1 1. DTI GRANT OFFER LETTER Guidance Notes Page 12 of 12

13 Company X Address FAO: Mr X Department of Trade and Industry c/o AEA Technology plc B156, Harwell Didcot Oxon, OX11 0QJ Direct line Fax DTI ref Your ref Date jill.hopkins@aeat.co.uk WI0X/00/0000X/00/00 DD/MM/YYYY Enquiries Website Minicom Dear Sirs 1. I am pleased to inform you that subject to the terms and conditions of this letter the Secretary of State for Trade and Industry ("the Secretary of State") is prepared to pay COMPANY X ("the Company") a grant not exceeding X MILLION POUNDS excluding VAT under Section 5 of the Science and Technology Act 1965 to xxxxxxxxxx ("the Project") at Company X Address and xxxxxxxxxx in accordance with the following: The Company s Proposal dated dd/mm/yyyy submitted to the Department of Trade and Industry ("the Department") under the Capital Grant Scheme for Offshore Wind Development ( the Scheme ). 2. This offer is conditional on the Department receiving within six months of the date of this letter the grant offer duly signed by the Company s authorised representative. If this condition is not met, the grant offer will lapse automatically. The grant offer may be renewed or extended at the discretion of the Secretary of State. In accepting the offer it is understood that the Project will comprise two phases: Phase I construction and commissioning - dd/mm/yyyy to dd/mm/yyyy Phase II operation dd/mm/yyyy to dd/mm/yyyy. Financial 3. The grant will be payable at X % of the net eligible costs (as defined and detailed in Schedule 1) incurred and defrayed on or after dd/mm/yyyy and will be payable by instalments on submission by the Company of a statement of monies expended (as defined in Schedule 1) by the Company on the Project. The table below sets out the forecast of expenditure for the Project, noting that the figures may be adjusted as the Project progresses in accordance with the details given in Schedule 3: Page 1 of 16

14 Phases I and II Eligible Costs: Grant Offered: Level of Support (%): Project Totals ( ) X million X million X.XX Unless the Secretary of State otherwise agrees, payments will be made in accordance with the details in Schedule 3. Claims for payment should be made to the AEA Technology plc (AEAT) project monitoring officer named in paragraph 29. Payment will be made by AEAT, on behalf of the Secretary of State following his/her authorisation of such payment. Any overpayment of grant, whether disclosed by a report or otherwise, must be refunded forthwith to the Secretary of State on his/her first demand or upon the Company becoming aware that grant has been overpaid, whichever first occurs. 4. Claims for payment, submitted in accordance with the details in Schedule 3, shall be accompanied by the reports specified in Schedule 4, where applicable. 5. In addition, confirmation is required that the Company has expended the sums in respect of which claims are made in the period. For this purpose, an Auditor s Certificate from an independent accountant must be provided with the first, the second and the final claims. Auditor s Certificates must be in the form set out in Schedule 2 and must be made by an independent accountant who is qualified under the terms of Section 25 of the Companies Acts 1989 for appointment as auditor of the Company. A person eligible under Section 34 (1) of the Companies Act 1989 for appointment as auditor of a non-quoted company (as defined in that section) may only report on grant claims made by such a company or by a business not incorporated under the Companies Acts. 6. The Secretary of State may also require a report from an independent accountant to be submitted at times other than that specified above in exceptional circumstances including:- (i) (ii) (iii) (iv) termination of the Project; a claim disclosing expenditure substantially greater than was anticipated for the period in question; a claim being made which covers an unusually long period or relates mainly to monies expended in a previous financial year; a change in the accounting reference date or accounting practice of the Company. 7. In addition to the items referred to in Schedules 3 and 4, all claims must be accompanied by the supplementary claim form at Schedule 5, and any associated evidence of costs incurred. The Secretary of State shall be under no obligation to make any payment on claims received after 30 June 2008 and there will be a general presumption against paying claims received after this date, unless he/she has previously agreed in writing to an extension. 8. Once a fully documented claim has been received, grant will normally be posted, or the claim rejected, within 30 days, unless it is necessary for the Department to seek further information to support the claim. All claims will be paid in pounds sterling. Page 2 of 16

15 Changes affecting the Project 9. While the Department in supporting the Project recognises the inherent technical and financial risks, there may be occasions when the Secretary of State considers that the payment of grant should cease or that grants already paid should be reclaimed. The Secretary of State shall be under no obligation to pay the grant, and any grant already paid may become repayable, in whole or in part, at his/her discretion, if: he/she considers that the future of the Project is in jeopardy; in his/her opinion progress towards completion of the Project, as specified and agreed, is unsatisfactory or if Phase 1 of the Project is not completed by the proposed commissioning date, in the opinion of the Secretary of State there is no longer any reasonable prospect of Phase I of the Project being completed by the date outlined above, unless he/she has previously agreed in writing to an extension; there is a change in the nature or scale of the Project which in his/her opinion is substantial and to which he/she has not given his/her prior written agreement; an asset, the cost of which has been included in the net eligible costs, is not used for the purpose of the Project, except as previously agreed by him/her in writing; within the period commencing on the date specified in paragraph 3 and ending on the date on which the final payment of the grant is made: (a) (b) the Company becomes the subject of a proposal for a voluntary arrangement or has a petition for Administration Order or a petition for a winding-up Order brought against it or passes a resolution for a winding-up or makes any composition, arrangement, conveyance or assignment for the benefit of its creditors, or purports to do so, or if a receiver or any other person is appointed in respect of its undertaking or of all or any of its property or if the Company does or suffers anything substantially equivalent to any of the foregoing. the Company ceases to be a subsidiary (as defined in the Companies Act1985) of any company of which it is a subsidiary at the date of this letter or becomes a subsidiary (as so defined) of a company of which it is not a subsidiary at the date of this letter, and such change of status is likely in the opinion of the Secretary of State to affect adversely the Project or the exploitation in accordance with the provisions of this letter of the results of the Project; the Company does not comply with or observe any condition of this letter; in his/her opinion there has been a breach of, or failure to comply with any condition of the Scheme. 10. The Company shall inform the Department promptly in writing of any cessation of work on the Project and of any event or circumstance likely to affect significantly the satisfactory completion of the Project including any of the events referred to above. General 11. The Company shall be required to nominate a Project Manager whose appointment shall be agreed, in advance, with the project monitoring officer named in paragraph 29. Page 3 of 16

16 12. The Secretary of State and his/her representatives and advisers shall have the right to inspect the Project at any time and from time to time and to require such further information to be supplied as he/she or they see fit. Such further information may include but is not limited to information concerning the financial position of the Company. In addition, the Company shall permit the Secretary of State and his/her representatives, including an independent auditor on request and at all reasonable times to examine all accounts at the offices of the Company or at such other places as the Secretary of State shall direct, and to take copies, and shall provide the Secretary of State or his/her independent auditor with such explanations relating to that expenditure as it may request. 13. The Secretary of State and his/her representatives and advisers shall have the right to call and attend meetings with the Company if necessary. 14. The Secretary of State shall be entitled to withhold payment and/or claim repayment of grant under this letter to the extent of the amount of any grant or other payment which has been received, or is, in the opinion of the Secretary of State, likely to be received, from any public authority and which the Secretary of State considers is payable towards the Project. For the purposes of this paragraph "public authority" includes any of the European Communities or their Institutions, any government department, research council, local authority, or body wholly or partly supported by public funds or charitable contributions. The terms of this paragraph do not apply to grant or other payment whose availability has been disclosed by the Company to the Secretary of State before the date of this letter and which has been taken into account in making this offer. 15. Notwithstanding the provision of paragraph 14 the Secretary of State may: (i) (ii) withhold payment of grant and/or reclaim any grant paid to the extent necessary to ensure that any assistance given under this offer letter taken together with any other assistance which, in the opinion of the Secretary of State, has been or is likely to be received towards the Project is within the aid limits laid down by the European Communities; withhold or reclaim grant if required to do so by a decision of the Commission of the European Communities. 16. In addition to the above, in the event that the Company receives a financial award from the European Union or any award from any other UK state source, (and other Member States), excluding Climate Change Levy exemption and Renewables Obligation, the Secretary of State may reduce the grant payable to the Company in accordance with State Aid rules. 17. No amendment to the terms of this offer will be effective unless and until agreed in writing on behalf of the Secretary of State. 18. The Secretary of State may provide the Commission of the European Communities with information about assistance under the Scheme in compliance with Treaty obligations. Page 4 of 16

17 Publicity and Promotion of the Project 19. The Company must provide full co-operation, at no extra charge to the Department, with any promotional activity, which will include allowing access for the taking of photographs during the lifetime of the Project, noting that up to six site visits between grant award and Project completion, i.e. the date on which the final payment is made, are expected. Probity 20. The Company shall not do (and warrants that in signing the grant offer letter it has not done) any of the following (referred to in this clause as "prohibited acts"): (i) (ii) offer, give or agree to give to any servant of the Crown any gift or consideration of any kind as an inducement or reward for doing or not doing (or having done or not having done) any act in relation to the obtaining or performance of this or any other contract/offer of grant with the Crown, or for showing or not showing favour or disfavour to any Person in relation to this or any other contract/offer of grant with the Crown; enter into this or any other contract/offer of grant with the Crown in connection with which commission has been paid or has been agreed to be paid by it or on its behalf, or to its knowledge, unless before acceptance of the grant offer letter particulars of any such commission and the terms and conditions of any such agreement for the payment of it have been disclosed in writing to the Secretary of State. 21. If the Company, its employees, agents or any sub-contractor, or anyone acting on its or their behalf, does any of the prohibited acts or commits any offence under the Prevention of Corruption Acts 1889 to 1916, with or without the knowledge of the Company, in relation to this or any other contract/grant offer letter with the Crown, the Secretary of State shall be entitled - (i) (ii) to cease payment of the grant and recover from the Company any payment already made; to recover from the Company the amount or value of any such gift consideration or commission; and (iii) to recover from the Company any other loss sustained in consequence of any breach of this clause, whether or not the grant offer ceases. 22. In exercising its rights or remedies under this clause, the Secretary of State shall:- Page 5 of 16

18 (i) (ii) act in a reasonable and proportionate manner having regard to such matters as the gravity of, and the identity of the person performing the prohibited act; give all due consideration, where appropriate, to action other than ceasing payment of the grant/reclaiming grant already paid, including (without limitation to): (a) requiring the Company to procure the termination of a sub-contract where the prohibited act is that of a sub-contractor; (b) Assignment requiring the Company to procure the dismissal of an employee (whether its own or that of a sub-contractor) where the prohibited act is that of such employee. 23. The Company shall not without the written consent of the Secretary of State assign the benefit or burden of this grant offer or any part thereof. 24. Not withstanding anything to the contrary herein, the Secretary of State shall henceforth be entitled to assign, novate or otherwise transfer any or all of its rights and/or obligations under this grant offer without further payment to: a) Any former department, office or agency of Her Majesty s Government (if such organisation should be privatised) and/or b) Any private sector body which has been engaged by the Secretary of State or any other department, office or agency of her Majesty s Government substantially to perform any of the functions of the Department for Trade and Industry. 25. In the event that the Secretary of State excises his/her right under this clause in favour of a body that is not part of the Department of Trade and Industry, the said body shall only be able to assign, novate, sub-contract or otherwise dispose of any of its rights and obligations under this grant offer or any part thereof with the previous consent in writing of the Company. Acceptance of Offer 26. Acceptance of this offer constitutes agreement in full to the terms and conditions set out in this letter. 27. The offer should be accepted by a Director of the Company signing the duplicate copy of the offer letter on behalf of the Company and returning it to me. 28. This offer letter shall be governed by and construed in accordance with English law in all respects. Page 6 of 16

19 29. If this offer is accepted, the Project will be monitored on behalf of the Secretary of State by AEA Technology plc whose authorised representative shall be Mr X: Telephone XXX Fax XXX Yours faithfully DR JOHN CLARKE For and on behalf of the Secretary of State for Trade and Industry Company X accepts the offer set out above and in the Schedules Signed Director for and on behalf of Company X Date: Page 7 of 16

20 SCHEDULE 1 PROJECT OVERVIEW 1. The provisions of this Schedule are subject to the terms and conditions of the offer letter. 2. The grant will be X.X% of the net eligible costs (as defined in paragraph 5 below) in respect of which monies have been expended (as defined in paragraph 4 below) by the Company on the Project between dd/mmm/yyyy and dd/mmm/yyyy, the estimated costs of which are set out in the Company s Application dated dd/mmm/yyyy (see attached). 3. The grant to be paid will be reduced by the amount of any Selective Assistance received or receivable on any goods or buildings the costs of which are properly included in the net eligible costs. 4. For monies to have been expended liabilities must have been incurred and defrayed. No claim can be accepted for liabilities, which have been incurred but have not yet been defrayed. If the Company is a partnership, its labour costs, at an agreed rate, will be treated as cost defrayed for the purpose of claims relating to time spent in connection with the Project. 5. The net eligible costs shall be the costs which are properly attributable exclusively to the Project excluding and deducting (as may be appropriate) from the amount of such costs:- (i) (ii) (iii) (iv) (v) (vi) input Value Added Tax; any grant under the Industrial Development Act 1982 received or receivable by the Company or any Participant in respect of the Project; any other grant from any public authority (as defined in paragraph 14 of the Offer Letter) received or receivable in respect of the Project; interest, bad debts, advertising, entertainment, service charges and interest arising from hire purchase, leasing and credit arrangements; notional costs, audit fees, purchase cost of any land or water on which the Project is sited; any addition for profit by the Company and profit earned by any company in the Company's group as a result of work relevant to the Project undertaken or sub-contracted to such company by the Company. For the purposes of this sub-paragraph "group" means any holding company of the Company and any subsidiary of such holding company or of the Company, and "holding Page 8 of 16

21 company" and "subsidiary" have the respective meanings assigned to them in Section 736 of the Companies Act In addition, it is understood that eligible costs comprise the additional cost of building the project, over and above that of building a conventional power station of comparable output 2. Hence, total eligible cost = eligible cost comparative cost 1 Where comparative cost = MW x 0.43 x 400k 1 The comparative cost of conventional generation is based on that for gas fired combined cycle gas turbine (CCGT) plant with a capital cost of 400,000 per MW adjusted by a factor of 0.43 to allow for differences in output. Page 9 of 16

22 Schedule 2 Pro forma for preparation of the Auditor s Certificate I/We have examined the enclosed claim and previous claims submitted by Company X (the Company). I/We have also examined the records of the Company as necessary and have obtained such explanations and carried out such tests as I/we consider necessary. I/We report that in my/our opinion subject to any reservations set out in my/our accompanying letter dated: (i) the claim and previously submitted claims for payment are in accordance with the Department of Trade and Industry offer letter dated under the Capital Grant Scheme for Offshore Wind Development including the Schedules thereto; (ii) the Company has expended (as defined in Schedule 1 to the offer letter including the associated Appendix showing estimated total Project costs) monies to cover those eligible costs incurred and defrayed during the period from to related to the Project described in the offer letter amounting to.. ; (iii) (iv) none of the costs were incurred before dd/mm/yyyy; overheads included in the expenditure are:- (a) in respect of the Company s own labour; (b) not calculated to include any profit (c) appropriate to the Project; (d) not in excess of overhead rates applicable to similar work carried out by the Company; (v) the amount claimed has been reduced by the amount of any Regional Development Grant received or receivable on any goods or buildings the costs of which are included in the net eligible costs; (vi) the total at (ii) above excludes any grant under the Industrial Development Act 1982 received or receivable by the Company in respect of the Project; (vii) the total at (ii) above excludes input Value Added Tax and interest and service charges arising from hire purchase, leasing and credit arrangements; (viii) the total at (ii) above excludes any addition for profit by the Company and profit earned by any company in the Company s group (as defined in Schedule 1) as a result of work relevant to the Project undertaken by the Company or sub-contracted to such company by the Company. (ix) the Company has maintained adequate records to enable me/us to report on this claim for payment of grant. Page 10 of 16

23 I/We certify that except for the grants mentioned above or specified in my/our accompanying letter dated no grants from any public authority as defined in paragraph 14 of the Offer Letter have been received or are receivable by the Company in respect of the Project. Name for enquiries Page 11 of 16

24 Schedule 3 Payments GENERAL POINTS 1. WHERE THE ELIGIBLE COSTS OF A COMPLETED INSTALLLATION EXCEEDS 100k The Company shall be required to appoint a suitably qualified Independent Consultant to review the progress of the Project and to prepare and submit reports/certificates to the Department which confirm construction, capacity, and commissioning, output, etc. The Independent Consultant must be agreed, in advance, with the project monitoring officer must be paid for entirely at the Company s expense and must submit reports/certificates to accompany all claims for payment. 2. Independent Auditors will be appointed at the Company s expense. Auditor s Certificates will accompany claims as outlined in the Grant Offer Letter (paragraph 5 refers). 3. All claims must be made within 3 months of invoice due date, as listed overleaf. 4. Correct claims are expected to be paid within 30 days of receipt or the due date, whichever is the latest. 5. The Grant payable will be reduced by an amount of any financial award provided by the European Union and any award from any other UK state source, (and other Member State), excluding Climate Change Levy exemption and Renewables Obligation, in accordance with State Aid rules. The following expressions shall have the following meanings: Construction date means the date when all wind turbine towers have been mounted on their foundations, all nacelles and generating plant fixed to the tower tops, all blades fixed to their hubs, all cabling, switchgear, transformers and other electrical equipment is in place from turbines to grid. It is not necessary for the electrical system to have been tested nor the grid connection to have been certified for operation by the Distribution Network Operator and/or National Grid Company; Commissioning date means the date when all equipment necessary to allow all the wind turbines to generate is in a state whereby it is ready to generate under automatic control and is set in that mode unless safety, planned or unplanned maintenance requires other wise; Operational Year means the period of 12 months starting from the Commissioning Date and thereafter in subsequent years commencing at the anniversary of the said date; Project means wind turbines up to the name plate capacity and location specified in the Proposal; Revised for actual capacity means the reduction in total /MW grant award to be reduced by a pro rata amount for any reduction in the nameplate capacity specified in the Proposal; Page 12 of 16

25 Claims for payment will be submitted as follows, noting that Claims a), b) and e) will have to be accompanied by the requisite Auditor s Certificate: (a) Up to 50% of the total grant, revised as necessary to account for the actual capacity installed at the final location at the Construction date, (b) Up to 25% of the revised total grant at the Commissioning date; (c) The balance of the revised total grant, less 200,000, one year after commissioning similarly scaled, on acceptance of the first annual report; (d) Up to 100,000 on acceptance of the second annual report; (e) Up to 100,000 on acceptance of the third annual report. The payment schedule will be as follows: Summary Invoice Milestone Due Date Estimated Value Invoice 1 Construction dd/mm/yy x million Invoice 2 Commissioning dd/mm/yy x million Invoice 3 Annual Report dd/mm/yy x million Invoice 4 Annual Report dd/mm/yy x million Invoice 5 Annual Report dd/mm/yy x million Total Grant Award x million The following are required for each claim: All previous reports owing must have been provided and accepted by the project monitoring officer; Claim Form (at Schedule 5); Deliverable (e.g. annual report) if applicable; Independent Consultant s Report verifying milestone reached/confirm annual report contents are fair and reasonable (as applicable). Page 13 of 16

26 Schedule 4 Reports The Company shall prepare and submit to the project monitoring officer (paragraph 29 of the Grant Offer Letter refers) the following: DRAFTS for APPROVAL: quarterly progress reports containing revised schedule, progress statements and cost and claim estimates, by end of April, July, October, January of each year until the Project is commissioned; thereafter, for a period of 3 years, an annual report shall be supplied no later than one month following the operational year end (to contain information specified by the Department of Trade and Industry (the Department) such as efficiency, availability, output, input, load factor, operating costs etc.). The content and format of the reports detailed above shall be determined by the project monitoring officer, and shall be in accordance with the Department s requirements. The Company agrees to publication by the Department of information provided in these reports, and of information based on the information provided in the reports detailed above, and the Independent Consultant s reports detailed in Schedule 3. Reporting Schedule Deliverable Milestone Due Date Quarterly Report 1 N/A dd/mm/yy Quarterly Report 2 N/A dd/mm/yy Quarterly Report 3 etc N/A dd/mm/yy Annual Report 1 After first operational year dd/mm/yy Annual Report 2 After second operational dd/mm/yy year Annual Report 3 (final report) After third operational year dd/mm/yy Page 14 of 16

27 Schedule 5 Supplementary Claim Form SUPPLEMENTARY CLAIM FORM BREAKDOWN OF COSTS RELATING TO ATTACHED INVOICE The breakdown should detail costs under the headings given in Schedule 1 (Section 5- Capital Costs) to the Grant Offer letter. Costs must have been incurred and defrayed. No claim can be accepted for liabilities, which have been incurred but have not yet been defrayed. Grant Offer Reference Number: WI0X/00/0000X/00/00. Project Title: XXXXXX Claimant Claim No.... Period of Claim Contact Name/Telephone No. for Queries: Heading e.g. capital, subcontracts Total Net Eligible Costs to date 100% Total Net Eligible Costs for Period of Claim 100% Costs Claimed Grant % of Net Eligible Costs for Period Total We certify that this claim for payment is in accordance with the Department of Trade and Industry offer letter dated.. including the schedules thereto. Page 15 of 16