Build-Transfer Agreements for Renewable Energy Projects: Deal Structures, Key Challenges, and Risk Considerations

Description

Build-transfer transactions are creating new opportunities for the development and construction of renewable energy projects. As a hybrid between an acquisition agreement and a construction contract, BTAs allow for the direct ownership of a new renewable energy project as an alternative to power purchase agreements (PPAs) and provide incentives to utility or corporate owners and potential tax equity investors.

In a build-transfer arrangement, a third party develops and constructs a renewable energy project and transfers it to the utility upon completion, assuming regulatory approval and other customary closing conditions for the transaction. The developer secures the land rights, permits, project contracts, and other rights necessary to build the project for the utility. The utility then takes ownership under the terms of the BTA.

Parties to this type of deal structure must consider features of both M&A purchase and sale agreements and EPC agreements. Counsel must negotiate and accurately tailor essential provisions such as development-stage and construction-stage covenants, closing conditions, warranties, limitations of liability, and project oversight.

Listen as our panel discusses structuring techniques for renewable energy project development using BTAs, provisions to reduce risk, implications for construction financing, the potential advantages of tax equity investments, and overcoming regulatory obstacles for build-transfer transactions.