Energy and Infrastructure Projects: a Legal Guide from Build to Exit

An SPV that is used to develop an energy or infrastructure project must be structured so that lenders are satisfied that the project's assets, contracts, and cash flows are legally insulated from risks associated with the project sponsors, and project finance counsel advising on SPV structuring for energy and infrastructure projects must evaluate whether the SPV's organizational documents contain adequate separateness covenants and whether the security package creates a first-priority perfected security interest in all of the project's significant assets.

A project developer that is negotiating an EPC contract for an energy or infrastructure project must carefully allocate the risk of construction cost overruns, schedule delays, and performance shortfalls between the contractor and the project company, and energy and construction counsel advising on EPC and O&M contract structuring must evaluate whether the liquidated damages provisions for delay and performance deficiencies are calibrated to the actual losses the project company would suffer and whether the interface risk between the EPC contractor and other project participants is clearly allocated so that no party can evade responsibility by pointing to another.

A project developer that needs to obtain interconnection approvals, generation licenses, land use permits, and environmental clearances before it can begin construction must manage the permitting process with sufficient lead time to satisfy the financing timeline, and energy regulatory counsel advising on the permitting strategy for energy and infrastructure projects must evaluate whether the critical path permits are on track to be obtained before the required financial close date and whether any regulatory challenges to the project's development approvals are likely to succeed.

An environmental impact assessment that fails to adequately address the significant environmental and social effects of an energy or infrastructure project exposes the project to legal challenges by affected communities and environmental organizations, and environmental compliance and litigation counsel advising on the EIA process for energy and infrastructure projects must evaluate whether the assessment process satisfies the legal requirements of the applicable regulatory framework and whether the community consultation process has been conducted in a manner that gives affected parties a genuine opportunity to participate.

A contractor or project company that seeks to excuse its performance obligations based on a force majeure event must demonstrate that the event was genuinely beyond the affected party's reasonable control and that the affected party took all reasonable steps to mitigate its impact on the project schedule, and project development and finance counsel advising on force majeure and delay claims in energy and infrastructure projects must evaluate whether the claimed event satisfies the specific definition of force majeure in the applicable contract and whether any concurrent delays for which the affected party is responsible reduce or eliminate the force majeure relief available.

A dispute between a project company and a government authority or a contractor that involves the interpretation of a concession agreement, a power purchase agreement, or an EPC contract is typically better suited to international arbitration than to litigation in the local courts, and international arbitration counsel advising on dispute resolution strategy for energy and infrastructure projects must evaluate whether the contract's arbitration clause designates a reputable arbitral institution with experience in energy and infrastructure disputes and whether any award rendered in the arbitration will be enforceable against the respondent in the jurisdictions where it holds assets.

A project company that is developing a solar, wind, hydrogen, or other renewable energy project needs a power purchase agreement that provides sufficient revenue certainty to support the project's debt service and equity return requirements over the contract's term, and renewable energy counsel advising on PPA negotiations for energy and infrastructure projects must evaluate whether the contract price is indexed to a benchmark that protects the project's revenue against inflation and whether the performance and availability guarantees that the project company must satisfy are achievable given the project's technical characteristics.

A project sponsor that is selling an operational energy or infrastructure asset must provide the buyer with a complete and accurate picture of the project's legal position, including the status of all material permits and contracts and the existence of any ongoing disputes, and ESG compliance and asset sale counsel advising on the exit from energy and infrastructure projects must evaluate whether the representations and warranties in the sale agreement accurately describe the project's legal position and whether any material deficiencies identified during the buyer's due diligence require pre-closing remediation or price adjustment.