SCOPE OF THIS NOTE

This note sets out some of the key energy sector specifi c issues for consideration by a buyer (and its prospective lenders) in a due diligence process for a proposed renewable power project acquisition in the UK. It also describes the key development stages for a renewable power project, and highlights those at which mergers and acquisitions (M&A) activity is likely.

This note sets out some of the key energy sector specifi c issues for consideration by a buyer (and its prospective lenders) in a due diligence process for a proposed renewable power project acquisition in the UK. It also describes the key development stages for a renewable power project, and highlights those at which mergers and acquisitions (M&A) activity is likely. This note is applicable to both share and business acquisitions of a renewable power project, since the energy specifi c issues will be broadly similar.

This note assumes that the proposed acquisition relates to a project which is either at the consented or operational stage. It does not apply to pre-consented stage acquisitions which, being highly speculative, do not generally attract many conventional investors, nor benefi t from the developed contractual arrangements existing in later staged projects. For more information on the key stages of an M&A activity in the context of a renewable power project, see Key project stages for M&A activity in renewable power projects.

This note assumes that the project may benefi t from existing project fi nance arrangements, or that the buyer intends to structure the acquisition with the intention of obtaining project fi nancing.

Nuclear power projects, which are highly specialised and not "renewable", are outside the scope of this note.

WHAT ARE RENEWABLE POWER PROJECTS?

Renewable power projects deliver energy that is generated naturally and continuously in the environment, as opposed to energy generated using oil, coal, gas or nuclear power.

Renewables generate with low or zero net carbon dioxide emissions and play an important role in combating climate change. They also play an important role in ensuring security of energy supplies since they reduce dependence on imported fossil fuels.

The UK government has traditionally supported or subsidised renewable generation, which can make it attractive to investors. Support schemes in the UK include contracts for difference (CFDs) which are currently available to eligible new projects, and the Renewables Obligation (RO), which is now closed to new projects but still supports a large number of existing projects (see Overview diagram of key project stages for M&A activity). Renewable technologies include:

  • Wind power.
  • Solar power.
  • Wave and tidal power.
  • Hydroelectric power.
  • Biomass.
  • Biofuels

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