Atome Energy (AIM:ATOM) has given notice to terminate the 2022 power purchase agreement (PPA) that underpins its Villeta green fertiliser project in Paraguay, with termination effective at the end of 2026.
The AIM-listed company said efforts to agree a standstill on the deal with state utility ANDE had failed to progress, and it acted to avoid potential liability from remaining bound by the agreement.
Villeta is Atome's flagship low-carbon fertiliser project, targeting 260,000 tonnes a year of calcium ammonium nitrate using 110MW of alkaline electrolysers and a renewable power supply, with a 10-year offtake agreement in place with Yara and US$665m of project finance completed earlier this year.
The termination notice follows a Notice of Dispute and Intent to Submit a Claim to Arbitration that Atome served on Paraguay on 17 September, alleging the state violated the UK-Paraguay bilateral investment treaty by revoking presidential decrees that had guaranteed long-term, fixed-price power supply to the project and by withdrawing its agreement to sign a superseding power deal.
Atome said the 2022 PPA, originally signed at 145MW of committed supply, had become the subject of prolonged dispute after Paraguay revoked the decrees underpinning its terms.
The company said the termination notice should not hinder ongoing discussions with the government and ANDE over a new power agreement, nor prejudice its rights under the bilateral investment treaty.
Atome said it continues to work towards a resolution that would allow the project to proceed, adding that success "would demonstrate and reassure the international community that Paraguay remains a reliable and investable country for large foreign investments".
Under the treaty, Atome has said that if no amicable resolution is reached within three months of its arbitration notice, it must pursue the claim through the International Centre for Settlement of Investment Disputes in Washington DC.