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That said, it is 1.2 compatible.
That said, when I put through the update, there were some issues with connecting to Steam Community, so I'll put it up again just in case.
You can replace those buildings, but it seemed more intuitive to me to be able to 'upgrade' your new subjects' infrastructure with your technology. Being able to improve the output of a tile for the same resource with 'replace' would probably be overlooked, and one could make the assumption that you can only switch to outputting a different resource. I felt it was an omission that you can't incorporate what's already there and improve it. Having that upgrade arrow is also a more obvious indicator that 'I can improve what's on this tile'.
For RP reasons, it appears better to say 'We're going to use our technology to improve what you already have' rather than 'we're going to tear down all your productive buildings and put new ones there.'
Basically: Yes, but I felt being able to upgrade was more intuitive, makes more sense, and is more obvious an option.