Overview of Legal Issues in Renewable Energy Projects

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Overview of Legal Issues in Renewable Energy
Projects Renewable Energy Summit Ainsley
HeffernanPartner, Beauchamps Solicitors. Dundalk
, 21st January 2009
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Wind Farm Contracts Matrix
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Lease Option

• Purpose legal right to call for a Lease within
  a specified period.
• Term long enough to obtain planning and grid
  connection offer.
• Description of Lands retain flexibility to
  alter location of turbines and access road.
• Assignment proviso allowing assignment to group
  company.
• Landowners obligations restrictions on use of
  retained lands and objecting to planning.
• (vi) Wayleaves from landowner and/or any third
  party for grid connection route.

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Lease Agreement

• Rent minimum annual rent plus uplift calculated
  as a percentage of gross income.
• Term - 20 to 25 years with option to renew
  (minimum gt PPA term).
• Assignment proviso re group companies and
  security assignments.
• Landlords obligations possible limited use of
  demised lands and certain restrictions on use of
  retained lands (buffer zone).
• Break option if PPA terminated.

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Turbine Supply Agreement

1. Turnkey versus separate contracts (FIDIC).
2. Price check scope of work and stage payments
   schedule.
3. Assignment security assignment and step-in
   rights for bank.
4. Financing letter of credit from developers
   bank.
5. Completion timetable and penalties for delay
   (excluding Force Majeure).
6. Defects Liability Period typically 2 to 5
   years.
7. Tests on completion and taking over pre
   commissioning test / commissioning test / trial
   operation test / Taking-Over Cert.
8. Insurance and guarantee evidence of insurance
   before commencement of works and requirement for
   a performance bond or parent guarantee.

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Service and Warranty Agreement

• Availability warranty minimum 95 availability
  and 5 downtime in any operational year
  (excluding force majeure and maintenance).
• (ii) Performance warranty each turbine will
  produce X amount of power at Y wind speed based
  on power curve.
• (iii) Compensation if these warranties are
  breached but subject to cap based on contract
  price.
• (iv) Scheduled and unscheduled maintenance by
  turbine supplier for annual fee.

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Operation and Maintenance Agreement

• Developer as operator versus third party
  operator.
• Performance standards based on results of
  commissioning and trial operation tests.
• Right to replace operator for under-performance.
• Bonus and penalty provisions.
• (v) Step-in rights for bank.

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Civil/Electrical Works Contracts

• (i) Clear scope of work and duty to co-operate
  with other contractors on site.
• (ii) Defects liability period for the works and
  warranties in relation to the quality of work and
  materials used.
• (iii) Time for completion of works and the
  payment terms.
• (iv) Responsibility for putting all necessary
  insurances in place.
• (v) Collateral Warranties to be provided to the
  bank.

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Power Purchase Agreement

• Price fixed for term of PPA therefore providing
  cashflow guarantee to developer and REFIT hedging
  for supplier.
• Term usually 15 years with option to extend.
• Green rights split of any future green
  certificates?
• Assignment beware of overly restrictive
  assignment clauses which effectively amount to a
  veto.
• Pre-emption rights right of first refusal.
  Formula for calculation of sale price.
• Termination - if developer commits a material
  breach or REFIT payments stopped.
• Step-in rights for bank.

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Grid Connection Agreement

• Connection Agreement, ESB General Conditions and
  Quotation letter.
• Cost based on assumptions in quotation letter,
  subject to change.
• Capacity bond refunded provided customer
  reaches 90 of agreed MEC within one year.

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CER Authorisation to Construct and Licence to
Generate

• Non negotiable.
• Apply to the CER with correct information.
• Application forms and related guidance are
  available from the CER website.
• Subject to compliance with Trading and Settlement
  Code.

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Bank Documentation

• Full due diligence and approval of all project
  documentation.
• Facility Agreement.
• Debenture over companys assets, undertakings,
  contracts and warranties.
• Charge over the land Lease and all wayleaves /
  rights of way.
• Charge over the shares in the development
  company.
• A charge over the debt service reserve account.
  
• Collateral Warranties from turbine supplier and
  all professionals involved in the design,
  construction and maintenance of the project.

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Overview of legal issues in renewable energy
projects Renewable Energy Summit
Contact Ainsley Heffernan Head of Renewable
Energy Group Beauchamps Solicitors Tel 353
(1) 4180600 Email a.heffernan_at_beauchamps.ie