Norwegian aluminium producer Norsk Hydro ASA announced its entitlement to compensation of up to €248 million (approximately USD 268 million) related to a failed power purchase agreement (PPA) with Markbygden Ett AB in Sweden.
This potential compensation is part of the reorganisation plan for Markbygden Ett AB, which has been approved by the Umee District Court and is expected to take effect next month.
Hydro Energi AS signed a long-term PPA with Markbygden Ett AB in 2017, securing an annual baseload supply of 1.65 TWh from the 653-MW Markbygden wind park over the period from 2021 to 2039.
Despite the wind farm's estimated annual output of 2.2 TWh, actual generation fell significantly short, leading to financial difficulties for Markbygden Ett AB. The company entered reorganisation in November 2023, and power deliveries to Hydro ceased on February 6, 2023.
The compensation is intended to resolve the dispute concerning non-performance under the PPA and the voluntary cancellation of the agreement by Hydro. The final amount will depend on the future sale of the wind park, with proceeds being shared according to an agreed-upon value-sharing mechanism.
Markbygden Ett AB is owned by China General Nuclear Power Group Europe Energy (CGNEE) and BNR Infrastructure, which is backed by GE Capital and China's Silk Road Fund.
This situation highlights the complexities and risks associated with renewable energy projects and the importance of reliable power generation in sustaining long-term agreements.
