Key changes to the draft Contracts for Difference for Sørlige nordsjø II

The 20th of September 2023, the Ministry of Petroleum and Energy (the “MPE) issued a revision of the draft Contract for Difference issued the 2nd of June 2023 for Sørlige Nordsjø II, (the “CfD”). The updated CfD contains several amendments to the original proposal. In the following, we will give a summary of certain key elements of the revised CfD draft. 

We note that the MPE has opened for consultation on the updated draft, with a deadline for responses on Friday the 29th of September, 2023. The consultation is limited to the new and altered regulations in the new draft. 

We also note that the revised CfD includes the templates for the five appendices to the CfD.

Read the updated draft, including new appendices

Key Changes in the revised CfD              


One key change in section 10.1 c.f. 10.3 of the CfD, is that the MPE has expanded the number of (parent[1]) company[BH1]  guarantees in favour of the Aid Recipients obligations from one to three. In the `2nd of June CfD`, it was explicitly stated that only one entity could provide a parent company guarantee, whereas in the revised CfD, the total guarantee amount can shared amongst up to three parent company guarantees. The maximum parent company amount is still 1 billion NOK of the total 2 billion NOK of Guarantees to be provided under section 10.1, and the remaining 1 billion NOK still has to be provided in the form of a single bank guarantee issued by a single bank. We consider the possibility to split up the parent company guarantee to be a beneficial amendment, especially considering that most Aid Recipients will have several owners/partners that now can carry a pro rata share of the guarantee obligation.   

The required duration of the parent company guarantee is also reduced in the updated draft. In the 2nd of June version, the parent company guarantee could be reduced to 100 million NOK six months after Completion; however, the remaining amount would have to be guaranteed for another 15 years. The revised CfD states that all guarantees – including the parent company guarantee – shall be released six months after Completion unless the Government have unsettled claims against the Aid Recipient. 

The Government has clarified that the Aid Recipient has the possibility to replace or renew a guarantee with a new guarantee that fulfils the requirements of the CfD, see the updated section 10.5. 

Prequalified Solution

Another noteworthy change to the CfD is to the regulation on the Prequalified Solution pursuant to section 11.2. According to this new provision, any deviations or changes to the underlying premises for 

(i) Plans and measures for sustainability according to Appendix A

(ii) Plans and measures for positive local benefits according to Appendix A

requires prior written consent from the Government. Such consent would only be given if (i) the change according to the Government’s assessment advances social or environmental considerations, or (ii) in exceptional cases. According to the original CfD proposal, such consent would only be necessary in case of substantial changes. The new draft thus appears to be more restrictive on the Aid Recipient’s possibilities to deviate from the plans and measures for sustainability and positive local benefits without prior written consent.

For all other substantial changes to the Prequalified Solution, it is now regulated that consent shall not be refused if the Aid Recipient can provide evidence that the substantial change is factually justified to achieve cost savings or improvements, more efficient project implementation or safeguarding of social or environmental concerns. Minor changes to the Pre-qualified solution can thus be made without prior consent from the Government. The Aid Recipient is also given a duty to notify of any changes requiring consent in accordance with section 11.2.

Final Investment Decision

The Government has also amended the requirement for securing funding prior to the Final Investment Decision (“FID”) pursuant to section 14. The Aid Recipient can secure the funding of at least 20% of the budgeted investment cost through a binding pledge for required share capital contribution to the company from one or more owners or owner’s parent company in addition to paid-up equity capital, giving the owners more flexibility when securing funding prior to FID. 

Legally binding agreements for credit facilities for the remainder of the budgeted investment cost and legally binding agreements for construction and delivery of wind turbines, foundations, cables, transformers and HVDC stations, as well as installation of the mentioned parts of the Production Facility, are still requirements before the FID, however, softened somewhat with the clarification that the agreements can include normal reservations.

Schedule and Liquidated Damages

The Government has furthermore updated the basis for adjustment of the penalty-covered milestones pursuant to section 17. Hearing of a complaint on the license decision or approval of a detailed plan pursuant to the Offshore Energy Act or Energy Act, will allow the Aid Recipient to call for an extension of the relevant deadlines. 

The regulation on maximum liquidated damages in section 30.1.4 has also been altered. Liquidated damages for delayed fulfilment of the FID milestone are now limited to 365 million NOK. Liquidated damages for “other milestones” are removed and replaced with a reference to only the Completion milestone. Hence, it is now clear that there are three penalty milestones in total with a maximum aggregate cap of 1 275 million NOK. The penalty milestones are: (i) filing of license application with project-specific environmental impact assessment, (ii) FID and (iii) Completion. It is now clarified that the Penalty Fine of 2 billion NOK pursuant to section 32.2 second paragraph is to be paid, in lieu of the liquidated damages, if the contract is terminated due to delayed achievement of milestones.

We also note that in the updated CfD section 30.2, the support period will, under all circumstances, end at the latest the 1st of January, 2050. 

Reduction of aid

The Government’s unilateral right to decrease the size of the monthly settled support paid by the Government under the CfD in cases of the Company’s breach of contract during the support period pursuant to section 31.1 has also been amended. In the updated draft, the maximum reduction of the aid is limited to 25 %, unless the breach of contract is caused by intentional, grossly negligent or disloyal circumstances. In the original draft, the Aid could theoretically be withdrawn entirely for any breach.

Transfer of the Grid Connection

The Government’s right to transfer the Grid Connection for the wind farm to Statnett SF (the Norwegian TSO) pursuant to section 38.1 is clarified. A transfer requires that it, according to the Government’s assessment, is necessary or suitable due to statutory requirements, including but not limited to compliance with Norway’s international obligations. This change appears to limit the Government’s right to transfer according to section 38.1. However, the Aid Recipient still is to remain without any form of compensation beyond coverage of direct costs associated with the transfer, as the no compensation provision has remained unchanged from the original draft. 

Changes in ownership / transfer regulations

The regulation on change of control in the Aid Recipient, according to section 41.2 is amended. The term “Change of Control” is deleted and replaced with “Underlying Change of Ownership”.

Any transfer qualifying under 41.2.1 a), b) or c), still requires prior written consent from the Government.[2]  However, the Government shall not refuse such consent without reasonable cause. The criterion “reasonable cause” is always considered met if the change in ownership results in increased risk of the Aid Recipient not meeting the commitments under the CfD. The main update from the 2nd of June CfD, is the deletion of the phrase “consent cannot be relied upon to be given except in exceptional circumstances”.

The CfD of the 20th of September makes notable amendments to section 41.2.2. In the period up until Completion, any Underlying Change of Ownership up to the ultimate parent, meaning that any direct or indirect ownership or any change in influence in the Aid Recipient, requires consent from the Government. This appears to apply regardless of any threshold at any level. In situations where the Underlying Change of Ownership qualifies as a Control change in the Aid Recipient or an Owner, the Government maintains its original position that the Aid Recipient shall not expect such consent to be given beyond in exceptional cases. This position is somewhat relieved in a situation where the Underlying Change of Ownership does not entail a Control change. In the latter case, the Government shall not refuse such consent without reasonable cause; however reasonable cause in section b) is very broadly defined.  [BH2] [Haavind3] 

We note that the revised definition of “Owner” is somewhat peculiar as regards to indirect owners, and only includes any person or legal entity holding a direct ownership interest in an entity that directly or indirectly owns all shares in the Aid Recipient. This means that an indirect owner in the Aid Recipient is only an “Owner” according to the CfD’s definition if the indirect owner owns all shares or interests in the Aid Recipient. 

The consequences of the changes are that the Government, to a certain extent, has removed uncertainties related to the interpretation of the previous term “Change of Control”. However, the Government has strengthened their discretionary rights to refuse any changes at any level in the entire chain of companies all the way to the ultimate parent company.

New appendices in the updated CfD draft

We note that the five appendices to the CfD are now published. The appendices are as follows: 

(i) Appendix A – description of production facility and grid facilities

(ii) Appendix B – Price addition and price reduction – formulas and numerical examples

(iii) Appendix C – Timelines and deadlines

(iv) Appendix D – formula for parent company guarantee

(v) Appendix E – formula for bank guarantee

We note that the deadline for comments to the updated draft (Friday the 29th of September) also seems to apply to the appendices. We recommend that potential applicants review the appendices and submit any comments to the appendices within the Government’s deadline. 


The MPE has, in our opinion, not made large concessions towards the industry. Although consultations related to the 2nd of June CfD were not open to the public, one might suspect that the potential applicants requested more substantial changes than what is found in the 20th of September revision.

By providing a second deadline for consultations, the MPE is signalling that there is a possibility for further updates and revisions, however, only insofar as related to the new, amended or revised items in the CfD and submitted within the nine-day window. We note that the window is quite short, taken into account that any comments to the parent company and bank guarantee templates (seemingly) are included in this deadline. 

Since only the revised items in the CFD appear to be open for further consultation, substantial parts of the CfD can now be assumed to be finalised. 


[1] The use of the phrase parent company guarantee can be somewhat misleading as there is no requirement that the guarantor is formally a parent entity.

[2] Letter a) covers any transfer of shares, partnership interest or other ownership interests in the Aid Recipient. 

Letter b) covers any direct or indirect transfer of shares, partnership interests or other ownership interest that involves change of control of an Owner. 

Letter c) covers any issue or redemption of shares, partnership interest or other ownership interests covered by letter a) or b).

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