During the course of any acquisition of a renewable energy project, the parties may be required to obtain consents from certain of the counterparties to the project contracts. This will be the case if a project contract includes a clause that requires the consent of the counterparty for (i) the assignment of such project contract, and/or (ii) the direct or indirect change of control of a party to the contract. The procurement of such consents can be time intensive, cause delays to a project sale, and expose a project to additional obligations if not addressed from the outset. For renewable energy projects, often times, major project contracts (e.g., revenue agreements, interconnection agreements, equipment supply agreements, etc.) include anti-assignment and/or change of control clauses.

A contract with an anti-assignment clause would restrict a party to the contract from transferring its interest in the contract to another party without first obtaining the consent of the other party to the contract. Often, these clauses include some exceptions to the prohibition on assignment without consent. If a counterparty to a project contract is requiring an anti-assignment clause, there are a number of things that a developer or sponsor can do to avoid consent requirements upon the sale of the project. For example, the contract should be in the name of the project company that will ultimately own all of the project assets so that the contract will not need to be transferred to the project company prior to the completion of the sale of the project company.  A developer can also negotiate an exception to the anti-assignment clause that allows the party to the contract to assign the contract without consent to (i) an affiliate (to allow for internal restructurings) or (ii) a third party that is acquiring all (or substantially all) of the assets of the transferring party (to allow for an asset sale for the project).

A change of control clause typically would, upon the occurrence of a change of control of a party to the contract, require written consent of the other party. The failure to obtain a consent prior to a change of control could, in addition to causing a breach of the agreement and among other things, (i) result in a termination right for the other party, or (ii) require compensation to be paid to the other party. The definition of “change of control” varies from contract to contract but would typically cover (a) any direct transfer of a controlling interest in the equity of the party to the contract, and/or (b) any indirect change in the ultimate ownership and control of the party to the contract.  It is important for a developer to carefully consider potential future ownership changes when negotiating a change of control clause. For example, a developer should limit any termination right or right to receive compensation upon the occurrence of a change of control. As is the case for an anti-assignment clause, a developer can also attempt to negotiate exceptions from the consent requirement, such as for transfers to a new owner with a certain minimum credit rating or level of development experience.

An understanding of anti-assignment and change of control clauses when negotiating a project contract can help renewable energy developers avoid unnecessary restrictions and time delays when selling a project. One issue that we have commonly ran into is when early-stage developers use the developer’s name (instead of the project company’s name) when signing a services agreement with a third-party service provider who prepares an initial site assessment or feasibility report. In this case, the project company will not be a party to the services agreement, and the report will not be issued in the name of the project company. When the developer decides to sell the project and when the potential buyer discovers that the report and its underlying services agreement are in the name of the developer and not the project company, the potential buyer will likely request a reliance letter from the service provider allowing the project company to rely on the report, and potentially will request an assignment of the underlying services agreement if the service provider has any ongoing obligations (usually indemnification) under that agreement. While an assignment of a single agreement or a reliance letter for a report is not a major undertaking, negotiating those documents with service providers can take up precious time and cause additional expenditures, especially when there are a number of them to be negotiated.

For any questions on third-party consents, reach out to Mary Sprouse, Tyler Saenz, or Drew Bergman, or another member of our Wind Energy or Solar Energy teams.

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Photo of Mary Sprouse Mary Sprouse

Mary focuses her practice on mergers and acquisitions and general corporate law matters in the energy industry. She has experience drafting purchase-related agreements, corporate governance documents, and project-related agreements including engineering, procurement, and construction contracts. Prior to her legal career, Mary worked as

Mary focuses her practice on mergers and acquisitions and general corporate law matters in the energy industry. She has experience drafting purchase-related agreements, corporate governance documents, and project-related agreements including engineering, procurement, and construction contracts. Prior to her legal career, Mary worked as an engineer in the renewable energy division of a global engineering firm. She specialized in solar photovoltaics and performed technical due diligence on solar projects for investors, drafted and negotiated construction contracts and performance guarantees, and monitored onsite construction.

Photo of Tyler Saenz Tyler Saenz

As a corporate attorney, Tyler’s practice focuses on detail-oriented transactional legal guidance to public and private companies.

As a member of the firm’s Mergers & Acquisitions team, Tyler helps public and private companies develop, protect and grow their business. Tyler drafts, reviews and

As a corporate attorney, Tyler’s practice focuses on detail-oriented transactional legal guidance to public and private companies.

As a member of the firm’s Mergers & Acquisitions team, Tyler helps public and private companies develop, protect and grow their business. Tyler drafts, reviews and negotiates purchases and leases, nondisclosure agreements, supply agreements and consulting agreements, among other critical corporate contracts. Tyler assists with:

  • Dispositions
  • Joint ventures
  • Restructuring
  • Financing
  • Due diligence
  • Compliance
Photo of Drew Bergman Drew Bergman

Drew helps clients creatively solve problems and capture opportunities. Drew has experience representing clients in mergers and acquisitions, restructuring transactions, negotiating joint ventures and partnerships, and financing transactions. With a focus on the energy industry, he helps clients in the acquisition, development, and

Drew helps clients creatively solve problems and capture opportunities. Drew has experience representing clients in mergers and acquisitions, restructuring transactions, negotiating joint ventures and partnerships, and financing transactions. With a focus on the energy industry, he helps clients in the acquisition, development, and financing of wind and solar projects as well as other energy assets. In addition, Drew has advised private equity firms in structuring, negotiating and managing investments in companies across a broad range of industries. Drew’s ability to analyze and strategize transactions creatively and pragmatically is appreciated by clients of all sizes and stages of growth. He works closely with each client to provide transactions that not only meet legal requirements but foresee future growth and individual business goals.