The importance of Developer Agreements and operating regulations at common evacuation nodes as a result of the current scenario of connecting renewable projects to the electricity grid


Due to the large number of projects of electricity generation facilities from renewable energy sources that have been connected to the transmission grid in recent years and those others that are pending connection today (the "Projects"), Red Eléctrica imposes the criterion of the entry of various promoters through a single position in the node and therefore around this, the need arises to build common evacuation infrastructures (the "ICEs"), among those promoters whose Projects evacuate or must evacuate their energy through these ICEs.

The ICEs are integral elements without which the Projects would not be able to evacuate energy to the connection point.

Faced with this reality, we find that its regulation between the different promoters affected, takes on a fundamental role, which is why the executive power intervened (through article 123. 2 of Royal Decree 1995/2000 of 1 December, which regulates the activities of transmission, distribution, commercialisation, supply and authorisation procedures for electrical energy installations) obliging these developers to establish common and binding guidelines on, among other things, legal, economic and technical aspects regarding the shared use of ECIs, all in parallel to those of their own Projects, which are documented in the so-called developers' agreements (the "Developers' Agreements").

Such is the importance of this document that, without it, developers cannot obtain the Prior Administrative Authorisation (AAP).

On occasions, the interests, times, strategies, resources, etc. of the developers may be different and disparate to the extent that it is necessary to establish minimum guidelines so that each developer does not act independently and the basis for action common to all the developers involved in the same grid connection point can be determined jointly.

From the experience of Vector Renewables' Asset Management and Legal Services lines, some of the aspects that should regulate the Developer Agreements are: (i) List/define each of the developers together with their partner status, capacity and technology of each of the Projects that each developer intends to connect at such connection point; (ii) outline the legal form that the ownership of the common evacuation elements will take (if not previously defined) and/or link certain terms and conditions regulated in the Articles of Association to the Developers' Agreement; (iii) regulate which of the developers will be the representative, before the grid manager, of all of them as a consequence of the disappearance of the figure of the single node interlocutor; (iv) agree on the assignment by this representative, in favour of the common legal vehicle constituted by the promoters, of all the permits and licences that the latter processes and obtains for the ECIs (v) establish the distribution of the costs incurred in the development of the engineering and the provision of other external services, as well as fees and public prices to be assumed in the processing, (vi) establish a liability regime among all the promoters; (vii) set the terms and conditions of accession of new promoters to be connected at a later point in time, at the same point of connection, and; (viii) set economic aspects such as approval of annual budgets, issuance of financial guarantees, contracting of third parties, etc.

Certainly, and in our experience, Promoters' Agreements have to be a living document, which must be modified in case the terms and conditions agreed in origin do not coincide with the current scenario, even more so if when it was originally negotiated, the parties are no longer the same as the current ones, a liability/guarantee matrix was not contemplated and/or any other aspect not included in the first version.

This is closely related to the Developers' Agreement and the operating regulations (the "Operating Regulations"), the former being the agreement that regulates the relations between the developers during the development and construction phase of the common elements, while the Operating Regulations basically establish the guidelines to be followed by the developers during the operating phase and subsequent decommissioning of the ICEs and their interaction with the Projects in the operation of these.

Despite the fact that, in this case, there are no regulations governing the mandatory nature of the Operating Regulations, from the Asset Management and Legal Services Lines of Vector Renewables we are detecting that these agreements are becoming more important, not only to provide the Project and the ICEs with certain security in the daily management, but also that the "Head of Terms" of this type of contract or regulation is beginning to be requested by certain financial institutions when analysing the transaction contracts to provide the owners of the Projects with external resources to finance them.

The main aspects that are usually regulated in this type of regulations are: (i) description of the common evacuation infrastructures from a technical point of view and their coexistence with the private elements of each developer, (ii) the linking of certain terms and conditions of these documents with the Developers' Agreement, (iii) the establishment of certain compensation mechanisms relating to the loss of profits that may arise as a result of the connection to the ECIs of the different Projects, (iv) approval mechanisms and majority regimes for various activities with a technical, economic and legal component between the different promoters, such as the operation for the performance of corrective, preventive and predictive maintenance; (v) the possible consequences and regulation of these in the event of abandonment, whether voluntary or not, of the Project and the consequences that this may have for the other promoters, (vi) definition of mechanisms for the connection/disconnection of the Projects and, where appropriate, of the ECIs at different times in time.

For all of the above reasons, we believe that it is essential to have an expert advisor in the renewable energy market, who is capable of providing hybrid "technical-legal" services that can provide all developers with individual comfort and create an atmosphere in which all developers have the necessary advice regarding the common elements of evacuation that are so important in today's world, even more so when the negotiation of this type of documents is usually prolonged in time and is somewhat tedious due to the sometimes disparate interests of the promoters, as well as the different temporal evolution of each of the Projects in terms of their processing in the development and construction phase.

In this context, Vector Renewables' Legal Services and Asset Management Departments have the resources, knowledge and experience necessary to draft, negotiate and support developers in the formalisation of both the Developers' Agreement and the Operating Regulations.

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