CHECKLIST AREA

CONSIDERED?

Has a suitable width="100%" site been identified?

☐ Yes

☐ No

Have rights for the site been acquired.?

 This should include all land required. Including any land for grid access. Typically the approach may be an option and lease agreement.

☐ Yes

☐ No

Has land due diligence been undertaken?

 This should include usual checks but also a commissioning survey and reports to assess the project’s feasibility.

☐ Yes

☐ No

Has the solar viability of the site been considered?

 For example has a solar resource assessment to assess irradiation levels been done?

☐ Yes

☐ No

Are title reviews of the land available and are any major property red flags identified?

 Eventually a full report should be commissioned on the title or certificate on the title for sites (to establish legal title and assess for whether third party consents or insurance is required).

☐ Yes

☐ No

Environmental Impact Assessments (EIA) – Are they required? Are they undertaken?

☐ Yes

☐ No

Planning application submissions – Have these been made? 

☐ Yes

☐ No

Has planning consent been secured?

 Always check the conditions to any planning consent. Are they appropriate?

☐ Yes

☐ No

Have third party and regulatory consents obtained?

 Third party consents will vary from project to project.

☐ Yes

☐ No

Is a Grid Connection Agreement or Grid Connection Offer in place?

 It is important to look at the exact nature of any Grid Connection Offer or Agreement. This includes timing, cost and constraint risk.

☐ Yes

☐ No

If capital is required for purchase – has an examination been undertaken as to government support schemes and other relevant schemes available?

☐ Yes

☐ No

Have you produced a finance model which reflects provisions made in the key project agreements and which contains assumptions for the cost of financing and revenues.

 It is critical to identify long-term likely revenue streams sufficient to ensure your solar farm can meet its liabilities and likely costs.

☐ Yes

☐ No

Have potential counterparties been identified and are any tendering and negotiation of key project agreements complete?

☐ Yes

☐ No

CHECKLIST AREA

CONSIDERED?

After the purchase, will the local authority be the sole owner of the solar farm?

☐ Yes

☐ No

If the local authority is not to be the sole owner, will ownership be shared with the developer or with a third party? If a third party, will it be another public body?

☐ Yes

☐ No

How will ownership be transferred to the local authority? Will it be a share purchase or an asset purchase?

Typically a share purchase is preferred due to complexity of transferring contracts to a new vehicle however this is not always the case.

☐ Yes

☐ No

Where a share purchase is taking place, has detailed due diligence on the company being acquired been undertaken?

This may include questions in respect of:

• Existing liabilities.
• Sufficiency of contracts (including those above).
• Disclosures regarding any issues or incidents.

☐ Yes

☐ No

Where an asset transfer is taking place, how will assets be transferred and what is the new vehicle in which assets will be held? How will transfer of certain key agreements take place (for example the generation licence)?

☐ Yes

☐ No

Have the procurement implications of an asset or share purchase been contemplated? See further below.

Novation of agreements to local authorities can often count as letting of a new agreement. Similarly a share purchase negotiated with just one developer may raise procurement implications where that developer will be retained in some capacity to continue to provide services. In any event, consideration should be given where bi-lateral negotiations are taking place to make sure the local authority has achieved best value in determining which site to select. 

☐ Yes

☐ No

What corporate vehicle will deliver the solar farm?

Consider the options including a company limited by shares, company limited by guarantee and a limited liability partnership (note there are a number of other options too). Typically such transactions are done by way of a company limited by shares, but LLPs may well present tax and accounting advantages. Notionally the local authority could also hold the assets in house.

☐ Yes

☐ No

How will the local authority fund any purchase price?

Consider cost efficacy and in particular consider:

• Various public grants.
• Reserves and PWLB.
• Bank loans and private finance.
• Capital from a JV partner.
• Municipal Bond Agency.
• Community Bonds.
• UKIB.

Think about tax and legal powers in conjunction with this.

☐ Yes

☐ No

If working with another local authority to fund the transaction, consider structure options.

Multi-authority roles on projects could entail joint ownership, leasing structures, one authority as offtaker or lender to another. If working together, consider how to bid together and consider:

• Inter-authority agreements (s.101 LGA 1972)
• Joint committees (s.102 LGA 1972)
• Power to make staff available (s.113 LGA 1972)
• Power to provide goods, services and works to another public body (s.1 Local Authorities (Goods and Services) Act 1970)

☐ Yes

☐ No

At what point in time will you purchase the solar farm? Is it at the end of the Contracting Phase or the end of the Commissioning and Testing Phase? Have you undertaken appropriate due diligence in each case.

This effectively boils down to two options (although variants are possible) for a share purchase transaction as follows:

• Option 1 – Share Transfer Pre-Construction and Completion: The local authority purchases shares in the SPV that owns the project rights from a developer (i.e. land, planning consent and grid connection offer) at the end of the Project Development/Contracting Phase. They then proceed to construct and operate the solar farm within that SPV.
• Option 2 – Share Transfer Post-Construction: The local authority purchases the shares in the SPV that owns project rights and constructed and commissioned assets from a developer (i.e. land, planning consent and grid connection offer). They then proceed to operate the solar farm within that SPV.

☐ Yes

☐ No

CHECKLIST AREA

CONSIDERED?

When does payment occur? Is it all in one lump sum? Typically it may be better to ensure completion has occurred. However in some cases payment in advance can be made subject to appropriate security arrangements.

A particular challenge with entering into a share purchase post-completion can be that developers struggle to raise sufficient finance to build out the project. In this respect, it is not uncommon for developers to seek some payment under an SPA in advance. These funds are used to secure grid connections and undertake other activities (again depending on the advance this can increasingly raise procurement risk – as it can make a share purchase agreement seem more like a works contract). Where any advance payments are made appropriate security would need to be taken (e.g. charges on developer assets). Such securities are not (of themselves) a solution for issues with the project and any advance should be considered in detail.

☐ Yes

☐ No

Does your share purchase arrangement include some or more of the following:

Deductions from the purchase price where the plant capacity is lower than expected.

☐ Yes

☐ No

Provision of warranties (including regarding information disclosed).

☐ Yes

☐ No

Provision for certain lease and s.106 payments to be deducted if not discharged.

☐ Yes

☐ No

Provisions about releasing any security from the site.

☐ Yes

☐ No

Provisions about payment flows for payment amounts (i.e. monies to funders first).

☐ Yes

☐ No

Performance warranties.

☐ Yes

☐ No

Limitations on actions of the SPV pre-completion.

☐ Yes

☐ No

CHECKLIST AREA

CONSIDERED?

Have you considered the Public Contracts Regulations 2015 in respect of your manner of purchase i.e. asset or share sale? Have you created an audit trail?

☐ Yes

☐ No

If an asset sale, have you conducted an analysis of contracts being transferred for procurement purposes?

☐ Yes

☐ No

If a share purchase, have you considered to what extent the developer has been retained?

If the developer is providing services to the SPV being purchased, consider risk of procurement challenge arising. i.e. can the share purchase be construed as being a services arrangement.

☐ Yes

☐ No

Following purchase, consider the extent to which the solar generator is subject to the Public Contracts Regulations 2015 (for example if it is wholly owned by a public body, it is likely to be caught).

☐ Yes

☐ No

Even if the Public Contracts Regulations 2015 apply in a scenario have you explored the extent to which any exceptions to the obligation to procure might apply?

Have you considered application of thresholds, option to use the negotiated procedure without a prior call for competition, exemptions to the application of the procurement regime (including in respect of regulation 12 of the Public Contracts Regulations 2015)?

☐ Yes

☐ No

Private Wire PPA

A direct supply by way of a constructed and purpose-built distribution connection.

• This requires a local offtaker with an appropriate demand. Namely, whether this is available depends entirely on geography.
• A private wire solution would likely involve the offtaker seeking REGO benefits.
• Reliance on a single large customer(s).
• Electricity licensing exemptions will likely need to be applied if supply and distribution arises.
• Avoidance of embedded costs and network charges (however this could change over time if the regulatory regime changes).
• Back up generation/grid connection could be required due to the intermittent nature of solar generation. This will have a level of capacity charge.
• The benefit that can be achieved through a private wire approach is largely dependent on the cost of the private wire. If infrastructure is required, this may make the private wire approach uneconomic.
• Competition laws may require other generators to be permitted to connect.

☐ Yes

☐ No

PPA with a Supplier

Enter into a power purchase agreement with a licensed supplier. The supplier pays the generator for its output but will include some allowance for the services it provides.

• Terms depend on supplier. Most have their own standard form. Price is normally the only material point to move. Though potentially some sharing of residual embedded benefits.
• This may be temporary as a holding arrangement.
• Contact with suppliers would need to be made. Can seek different offerings.
• Premium for longer term arrangement.
• Pricing and timing of pricing is key. There are a range of options, but typically solar plants receive time of day / seasonal tariffs. There is inherent market risk with this – in particular going forwards – where there is no storage capacity at the plant there is a cannibalisation risk (namely this means that solar plants will all often be generating at similar times and prices will be low). Fixed prices can be possible but come at considerable market chip. SPV will normally take Change in Law risk.

☐ Yes

☐ No

Sleeved PPA (Assumed to Self but could be to Third Party)

This is where a generator agrees to supply a customer. The agreements are then implemented via a supplier as the party that registers the meters, pays network charges (which it will typically pass through to the counterparties), and a fee for providing the service.

• Third party supplier needed.
• Usually long and complex negotiation.
• Still attract network charges.
• Greater access to end users or self-supply.
• Supplier to provide top-up services.
• Usually reliant on supplier arrangements.
• Complex interaction with existing wider supply agreements.
• Sleeving contracts are often extended offtaker agreements, with price negotiations between the generator(s) and end consumer(s) generally creating a fixed price arrangement. Agreements are typically subject to re-negotiation on power price arrangements as well as change in law.
• A supplier is usually procured to provide top-up and spill arrangements. For their services, a supplier will usually charge a “tolling fee” to cover network charges, imbalance payments, top-up and spill and a service fee.

☐ Yes

☐ No

Contract for Difference

A CfD results in a payment to the generator if the strike price (a pre-set price reflecting the costs of generating using low-carbon technology) is higher than the reference price (a measure of the average wholesale price of electricity in the GB market). The generator’s income is ‘topped-up’ to the strike price. If the reference price exceeds the strike price, the generator will pay back the difference.

• Guaranteed revenue stream to SPV.
• Counterparty with LCCC.
• Protection for Change in Law.
• Requires an auction round – last solar round was in 2022 and auction rounds are now annual. Solar has secured more than 2.2GW at a price of £45.99/MWh in the latest Contracts for Difference (CfD) auction.
• Auction must yield an efficient strike price. Auction is competitive. Term is typically 15 years.
• PPA still required and SPV would have to obtain market price.
• Subsidy but an accepted one.
• No hedge for local authority’s own power prices. As such local authority is disadvantaged in periods where market price exceeds Strike Price.

☐ Yes

☐ No

Synthetic PPA

A Synthetic PPA is an agreement between a generator and end customer that hedges the wholesale price element of the electricity bill using a contract for difference approach. A PPA will still be required to allocate the generator’s export to a supplier within national settlements.

• Local authority can obtain Renewable Energy Guarantees of Origin (REGOs) (although this could be done by retirement).
• Guaranteed revenue stream to SPV.
• Limited efficacy where local authority wholly own SPV (though cash extraction may still be a benefit in periods of high market price). Greater benefit where SPV is not wholly owned.
• Local authority can extract upside in the event of high market price. Local authority is exposed on low market price.
• Both parties still require PPAs – these must identify wholesale price.
• Enhanced procurement risk (though arguably a financial instrument). Enhanced subsidy risk although this can be mitigated. Critical to set Strike Price at a defensible level.

☐ Yes

☐ No

Traded Asset with route to market agreements (RTMA)

Mixed and optimised trading. This can take place via several routes to market – including the capacity market, balancing mechanism, power exchanges, dynamic response and other ancillary service. This is typically done via an aggregator.

• Higher risk.
• Shifting market – i.e. changes to ancillary services.
• Back up of revenue stack.
• Solar can bid in capacity market.
• May be more efficient alongside battery storage.
• Local authority to procure an aggregator – typically done on a tolling or profit share basis.
•  

☐ Yes

☐ No

CHECKLIST AREA

CONSIDERED?

Land Agreements for the Main Site – This may include