Energy transition and infrastructure

In an energy or infrastructure acquisition, the corporate due diligence is the smaller half of the work. What determines whether the asset performs is the environmental and planning permission position, the grid connection and transport agreement with the network operator, the land rights, whether they are freehold, leasehold, a right of superficies or a contractual arrangement, the subsidy decision and its conditions, and the offtake or PPA. Each has its own transfer mechanics and its own consent requirement, and each is capable of being the item that sets the closing date.

Grid congestion is now the dominant commercial risk in the Dutch market. A project with a signed connection agreement and a firm transport capacity date is a different asset from one holding a queue position, and the transaction documents have to reflect which one is being bought: through conditions, price adjustment, deferred consideration or an earn-out tied to the connection milestone.

Land rights repay separate attention, because the Dutch options are not interchangeable. A right of superficies, an opstalrecht, separates ownership of the installation from ownership of the ground and is registered against the land. A long lease, an erfpacht, carries its own ground rent and revision mechanics. A purely contractual right of use granted by a landowner, other than a lease, generally binds that landowner alone and does not survive a sale of the land unless it has been secured. Duration is the first test, since a right that expires before the end of the subsidy period or of the offtake is a value problem rather than a drafting problem. The second is whether the arrangement permits repowering, extension or the addition of storage, which is frequently what a buyer is paying for.

The offtake determines what the revenue actually is. A corporate power purchase agreement, a route-to-market arrangement with an intermediary and a merchant position each produce a different risk profile, and the terms that decide value are the tenor, the pricing mechanism and any floor or collar, the volume commitment and its treatment of curtailment, the credit support and the change-of-control provisions, and the allocation of imbalance and negative-price risk, which has become a live commercial issue as the number of negative-price hours in the Dutch market has grown. Where guarantees of origin form part of the revenue, whether they have been contracted away or retained is established rather than assumed.

Most energy joint ventures are formed long before the project is bankable, which means the partners are committing to a structure whose capital requirements are not yet known. The recurring gaps tend to be the same from one venture to the next: no agreed mechanism for a partner that cannot follow on at financial close, no valuation method for a partner that wants out during development, development costs that were never properly defined, and IP or development rights that revert unclearly on termination. Each of these is inexpensive to resolve at formation and considerably more expensive to resolve afterwards.

The exit assumptions deserve the same treatment. Development ventures generally end in one of three ways: a sale of the project or the project company to an infrastructure buyer at or shortly after financial close, a sale by one venture partner of its interest to the other, or a hold by one or both of the venture partners into operation. Each carries a different valuation moment and a different tax and consent position, so the pre-emption rights, the drag and tag mechanics, the valuation method and the treatment of development costs already incurred are drafted against the outcome actually intended rather than against a generic exit clause. Where one venture partner contributes the pipeline and the other contributes capital, the documentation also records what the pipeline contribution consists of, whether it is exclusive, and what becomes of it if the venture is wound up before financial close.

• The Energy Act (Energiewet) replaced the Electricity Act 1998 and the Gas Act and recast the framework for market roles, data access, energy communities and connection rights. Arrangements entered into under the previous regime continue to operate, and the transitional provisions determine what has to be renewed, renotified or amended, which is a diligence question on anything long-dated.
• The Environment and Planning Act framework governs permitting; most environmental permits attach to the activity and transfer on notification to the competent authority before the transfer takes effect, but sector permits, water permits and nature permissions vary and need individual assessment, and a permission held by a group entity that is not being acquired has to be dealt with separately.
• Grid capacity is managed as well as queued. Network operators publish congestion areas and capacity maps, and the alternative transport products available in the Dutch market, including capacity limitation contracts and time-block and group transport arrangements, can make a connection available on terms that constrain when the asset may run. What the project holds, firm contracted capacity, a flexible or time-limited product, or a place in a queue, is a separate question from whether a connection agreement exists.
• SDE++ and other subsidy decisions carry conditions on realisation deadlines, ownership and change of control, and a transfer can require the granting authority's cooperation. An award sets a maximum subsidy over a fixed operating period against a correction for market revenue, so its value depends on the price assumption as much as on the award itself.
• FDI screening under the Vifo Act may apply where the target qualifies as a vital provider and no sector-specific national-security review displaces that regime. A notification may therefore hold up closing, because the transaction cannot complete until the assessment is finished.
• Merger control at ACM or EU level applies on the usual turnover thresholds, and full-function development joint ventures can themselves be notifiable concentrations, which is a point settled when the venture is structured rather than when it is funded.
• Real estate transfer tax can arise on the acquisition of immovable property and rights in it, such as land, buildings and a right of superficies, and on shares in real estate entities, which frequently drives the choice between asset and share structures and is tested against the statutory requirements rather than assumed.
• Share transfers in BVs require a notarial deed (art. 2:196 DCC), and works council advice can be required at the target, the seller, the buyer or the contributing partner, wherever a works council has been established, which has to be sequenced before a binding commitment rather than after the term sheet.