The risks related to financing, design and construction and environmental permitting in relation to the transmission lines are generally transferred to the Project Company. The Procuring Authority is responsible for monitoring the construction progress and the Project Company's performance. The Project Company is responsible for the design and construction of the asset according to the specifications set out in the PPP contract. The Procuring Authority approves compliance of the design to the specifications of the contract and the Project Company is then responsible for securing the required construction permits and environmental permits to deliver the transmission lines. The Project Company is also required to comply with the requirements of the national grid operator, Operador Nacional do Sistema Elétrico or "ONS" (Grid Operator).
The construction phase was agreed to be completed in three years, which included the time needed to obtain relevant environmental permits; the PPP contract assumed one year for securing environmental permits. However, the time for obtaining the required environmental permits took longer than anticipated, resulting in 754 days of delay on top of the original contemplated duration of 365 days. 570 days of this delay were due to environmental permitting issues, and 184 days were due to other issues such as environmental conditions, adverse site conditions, tropical weather and protests. These delays and how they were managed is covered in more detail below under the heading "Key Events".
The payment mechanism, as explained further below under the heading "Payment Mechanism", prescribes that the Project Company is not entitled to any revenue until construction has completed. As a result, the Project Company had to take on additional costs due to the construction delays, until the transmission line started operation.
The contract has a term of 30 years. This means, subject to any successful claims brought by the Project Company, delays in the construction "eat into" the operations phase having the effect of automatically reducing the duration of the operations phase. The Project Company has brought claims for economic and financial rebalancing with respect to the delays with the aim of extending the term of the contract (and as a consequence, extending the operations phase) and also seeking additional compensation. These claims are discussed in more detail below under the heading "Key Events".