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TERRAFORM GLOBAL, INC. filed this Form 10-K on 06/15/2017
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operations and management expertise, price (including predictability of price), green attributes of power and the ease by which customers can switch to electricity generated by our solar and wind power plants.
Environmental Matters
We are subject to environmental laws and regulations in the jurisdictions in which we own and operate solar and wind power plants. These laws and regulations generally require that governmental permits and approvals be obtained and maintained both before construction and during operation of these power generation assets. We incur costs in the ordinary course of business to comply with these laws, regulations and permit requirements. While we do not expect that the costs of compliance would generally have a material impact on our business, financial condition or results of operations, it is possible that we may become subject to new or modified regulatory regimes that may impose unanticipated requirements on our business as a whole that were not anticipated with respect to any individual power plant. We also do not anticipate material capital expenditures for environmental controls for our solar and wind power plants in the next several years. These laws and regulations frequently change and often become more stringent, or subject to more stringent interpretation or enforcement, and therefore future changes could require us to incur materially higher costs which could have a material adverse impact on our financial performance or results of operations.
Regulatory Matters
None of the power plants included in our portfolio are located in the United States. As a result, all of these power plants are generally exempt from U.S.-based federal and state regulation of electric utilities, including most provisions of the U.S. Public Utility Holding Company Act of 2005 and the Federal Power Act. Our solar and wind power plants are subject to various laws and regulations in the countries in which they operate. Some of these countries, such as Uruguay, have deregulated electric generation markets that require governmental approval before becoming an eligible power generator while others, such as Malaysia, have more robust regulatory regimes governing the production, purchase and sale of electric generation. Set forth below is a brief overview of the principal laws and regulations that are applicable to the markets in which a significant portion of our power plants are located.
Solar and wind energy policies in China are formulated and carried out by various government entities and agencies and also are integrated into the country’s broader regulatory framework for electricity generation and transmission. Additionally, in the case of foreign owners of solar and wind energy assets, the government entities involved in regulating foreign investment in China will also play a key oversight role in certain instances.
The National Energy Administration (“NEA”) a government entity under the regulation and supervision of the National Development and Reform Commission (“NDRC”) formulates solar and wind energy policies. The implementation and enforcement of these policies is overseen by provincial, regional and municipal offices of the NDRC and NEA. These local offices are responsible for, among other things, issuing electricity business licenses, overseeing the construction of solar and wind power plants within their jurisdictions and (subject to variation in practice among different types of facilities and different localities) approving changes of ownership of solar or wind power plants. For instance, pursuant to guidance issued by the NDRC in October 2014 and May 2016, a solar power plant which has been filed with the local NEA counterpart cannot be transferred before the solar power plant begins production without the consent of the applicable NEA counterpart. Any material change made to a solar power plant, including the change of construction site and construction content, must be submitted to the local counterpart of the NEA for re-filing.
Solar and wind power plants are also subject to standards and regulations affecting the electricity industry in general, as set out in legislation or otherwise formulated by the NEA, as well as the standards and business practices of China’s state-owned grid companies, State Grid Corporation and the smaller China Southern Power Grid Corporation. These grid companies, through their provincial subsidiaries, play a de facto regulatory role by issuing approvals for the interconnection with the power grids and executing interconnection and dispatch agreements as well as PPAs with the project companies. Power purchase agreements with the grid companies are usually short term in duration, typically one year subject to annual extensions. Under China’s Renewable Energy Law, the grid companies are obligated to accept all energy produced by duly licensed and operating solar and wind power plants. In practice, however, solar and wind power plants have been subject to curtailment by grid companies due to transmission capacity and other infrastructure constraints.
Solar and wind power plants owned in whole or in part by foreign entities are also subject to the general foreign investment regulatory regime administered by the Ministry of Commerce (“MOFCOM”) and State Administration of Foreign Exchange. Foreign investment in the solar and wind power industry is currently listed by MOFCOM as an “encouraged”