CURRENT LEGAL ISSUES IN WINDFARM DEVELOPMENT PROJECTS

1
CURRENT LEGAL ISSUES IN WINDFARM DEVELOPMENT
PROJECTS
24 March 2009

• Ross Moore
• Partner
• AL Goodbody

2
Contents

• Planning Permission
• Grid Connection
• Turbine Supply
• Regulatory Support and Offtake Arrangements
• Wind and Capacity Payments
• Wind and Ancillary Services
• Credit Crunch and Wind Projects

3
Planning Permission

• Duration issues
• Extensions substantial works
• Retention Permission ECJ C-215/06 Commission v
  Ireland (Derrybrien)
• Conditions - becoming more onerous?
• National co-ordination - Planning Guidelines for
  Windfarm Development 2006
• Planning and Development (Strategic
  Infrastructure) Act 2006 only gt 100 Mw or gt 50
  Turbines

4
Grid Connection

• Group Processing Approach. Gate 1, Gate 2 and
  Gate 3
• Gate 3 3900 MW. Offers - December 2009 to June
  2011
• Grid Connection Timelines remote connection
  dates and delays
• Interaction with other Project Development
  Contracts
• Interaction with Government support programmes
  (REFIT)
• Interaction with Financing Documents
• Grid Connection Costs/Bonds (EirGrid change in
  bond policy)
• Contestability of Distribution Connections
• Dispute References to CER
• Withdrawal/refusal of other sub-group offers
• Firm/Non-Firm Access constraints

5
Turbine Supply

• Market has eased recently (practically rather
  than contractually)
• Lead times and pressure for production slots
• Suppliers trying to commoditise contracts for
  European market
• Performance security
• Advance payments and performance security
  (Employer)
• Performance security (Contractor)
• Caps on liability (delays, performance/availabilit
  y warranties)
• Grid compliance
• No EPC contracts strong project management for
  interface risks

6
Regulatory Support and Offtake Arrangements

• Revenues from sale of electricity the Project
  life blood
• SEM - Banks not yet comfortable with merchant
  plant for newer projects
• REFIT (Renewable Energy Feed-in Tariff)
• Limited support 1450 MW, operation by 31/12/10
• Gate 3 effectively excluded
• Still some uncertainties about existing REFIT
  rules, state aid and interaction with power
  purchase agreements
• Disputes around transposition of pre-SEM PPAs to
  post SEM PPAs
• Supplier Lite

7
Wind and Capacity Payments

• Wind currently receives capacity payments under
  SEM based on Eligible Availability (essentially
  actual output)
• Valuation of wind capacity within capacity
  payment mechanism contribution to security of
  supply?
• AIP-SEM-08-177 estimate wind being over-paid
  (3.4m) for capacity in first 8 months SEM.
• Increased wind penetration effect more
  pronounced
• Need clarity it is effecting PPA products being
  offered by suppliers and commercial negotiation
  of PPAs

8
Wind and Ancillary Services

• EirGrid Reactive Power Ancillary Service
  Arrangements for Wind Farms 25 January, 2008
• New Wind Grid Code now requires WFs to have a
  degree of voltage control capability reactive
  power
• Two payments
• Capability ability to produce or consume (not
  wind/energy production related)
• Utilisation - actual reactive power production
  and consumption
• Small payments 2009 WF allowance 1.39m
• Essentially only transmission and distribution at
  110KW (under review)
• Black start No
• Operating Reserve still under review
• Not something Banks modelling

9
Credit Crunch and Wind Projects

• Certain banks are open for business
• Club v Syndicate
• Gearing
• Margins
• Tenor in most cases much reduced, almost forced
  refinancing
• Fees (arrangement, agency, work fees)
• Financial Covenants
• Project Monitoring
• Waiver Fees
• Cash Sweeps
• Reserving Maintenance, Debt Service
• Distribution Lock-up

6797190
10
CURRENT LEGAL ISSUES IN WINDFARM DEVELOPMENT
PROJECTS
24 March 2009

• Ross Moore
• Partner
• AL Goodbody