Annual Report Renewable Energy 2020 - Haavind
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Annual Report Renewable Energy 2020 Advokatfirmaet Haavind
Transcript of Annual Report Renewable Energy 2020 - Haavind
Annual ReportRenewable Energy
2020
Advokatfirmaet Haavind
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Content3 The Year in Energy 2020
5 Transactions
7 Project development and construction
9 Technology, innovation and trends
10 Disputes
11 Haavind’sEnergyPractice
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The Year in Energy 20202020 was an extraordinary year for most, and the energy industry was no exception.
Electricity prices remained low throughout the year and were at times even negative, due to weather conditions during the winter. 2020 was also the year in which changes were made to the European Union Taxonomy that could, according to the first reading of the proposal, potentially exclude Norwegian hydropower from classifying as “green” in the future.
Through 2020, there were several major ongoing construction and development projects within the renewables sector, and new ones began. Hydropower and wind-generated electricity corresponding to 7.1 TWh was added to the energy mix, of which 6.1 TWh was generated from 15 new wind power projects. At year end, the Norwegian Water Resources and Energy Directorate (NVE) listed 104 wind power and hydropower projects under development that will lead to approximately 5.7 TWh of added power production in 2021.
Wind energy faced resistance in 2020, partly in the form of legal actions to stop wind power developments and partly in the form of disputing the validity of concessions as part of expropriation and appraisal processes before the courts. The Norwegian Parliament also ordered a new review of wind power licenses that have already been issued, but so far neither the courts nor the regulatory authorities have found grounds to revoke existing licenses.
On the grid development side, 2020 was characterized by continued construction on the central and lower grid levels, and challenges to the ‘smart metering’ implementation caused by electricity customers reluctant to provide access for metering equipment to be replaced. Several regulations were revised, most notably when the Government decided in December to incorporate four EU Regulations for the electricity market. This may lead to future adjustments to Norway’s regulatory framework as well. The decision is still subject to parliamentary approval, but there is no doubt that changes to the EU framework will affect national legislation over the coming years.
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The Norwegian Parliament also handled a white paper on on-shore wind power in 2020. In its decision, the Parliament largely supported the Government’s proposed adjustments to the current licensing system. Some uncertainty has been triggered, however, by the decision to incorporate the planning and licensing of wind turbines into the scope of the Planning and Building Act. It remains to be seen how the Government will conclude on this issue. As part of its handling of the white paper, the Government will deliver an assessment of changes to wind power taxation and local compensation schemes, a matter also the industry itself has sought more clarity on.
Several notable transactions also took place in 2020, and the collaboration between Hydro and Lyse on the establishment of Lyse Kraft stood out amongst them. This collaboration ensures that the Røldal-Suldal hydropower plants will not revert to the state in 2022 and provides continued power supply for Hydro’s industrial operations. The merger of Hydro’s production in Røldal-Suldal together with Lyse’s production lead to the establishment of Norway’s third largest power producer and is considered an innovative collaboration in which Hydro and Lyse will both add significant contributions to the operations and development of the jointly owned company.
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Transactions2020 was an active year for transactions within the power sector, despite the Covid-19 pandemic. Power companies and their owners in all parts of the country continued to reorganize and consolidate, especially those within grip ownership and operations, where regulatory changes clearly point in this direction. There was continued significant interest presented by foreign players within the power industry segments that hold no legal restrictions on ownership, such as wind power, district heating and small-scale hydropower. Significant positions are already held by such players, especially in wind power and small-scale hydropower, and throughout 2020 we saw some adjustment of ownership ratio among these players. We expect this development to continue.
The interest in “green” investments continued to be strong, supported by the reallocation of funds toward sustainable investments worldwide. The Waterfall Rights Act contains limitations as to how private and foreign players can invest in major Norwegian hydropower activity, but there are opportunities within the power industry nonetheless, and developments are expected to continue. The same applies for companies developing new technology for the power industry.
The most significant transaction was the establishment of Lyse Kraft DA. In October 2020 it was announced that Hydro and Lyse merged their hydro power assets in southwest Norway, where Hydro’s Røldal Suldal Kraft plants (RSK) are located, along with the majority of Lyse’s portfolio. Combined, the new company will produce 9.5 TWh of renewable energy each year, making it the third largest power company in Norway. As part of the deal, Hydro will continue to operate the RSK assets and take over the operation of the hydropower plant which were previously wholly owned by Lyse. Lyse will be responsible for marketing activities and water disposal. Hydro has a 25.6 percent ownership stake and Lyse owns 74.4 percent of the new company. Haavind provided legal and strategic advice to Hydro through the process. The transaction was completed on December 31, 2020.
One example of the shuffling of traditional power operational structures is the transaction that dissolved Nordmøre Energiverk’s (NEAS) cross-ownership with TrønderEnergi and made KLP the new 1/3 owner of NEAS. At the same time, NEAS was restructured into a group of companies, with the network business separated as a subsidiary. The transaction is also interesting due to the fact that a private player (KLP) entered
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the collaboration as owner of the available ‘free third’ in NEAS. This is a development we have observed over some time, and we expect to see more similar deals in the future. Haavind provided legal assistance to NEAS throughout the transaction.
Foreign players have continued to show strong interest in the Norwegian power sector. One example in this respect is the Swiss fund manager Fontavis’ acquisition of OBOS Energi, a company operating and developing small-scale hydro power. The deal included both power plants in operation and plants under planning and construction, and comprises a total expected annual production of 333 GWh. Haavind assisted Fontavis throughout this process.
In 2020, Lundin Energy also completed the acquisition of 50 percent of the Leikanger hydropower plant from Sognekraft. The plant has a production of approximately 208 GWh per year. The acquisition was prompted by i.a. the electrification of Lundin’s operations on the Norwegian continental shelf. Haavind assisted Lundin Energy in the acquisition.
The power industry and offshore sector are becoming ever more closely integrated, following an increase in technological integration. One example from 2020 is the restructuring of Aker Solutions in offshore wind and CCS, and the establishment and listing of the new companies Aker Offshore Wind and Aker Carbon Capture. Haavind assisted Aker Solutions through the process of establishing Aker Offshore Wind and Aker Carbon Capture.
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Like most other industries, the construction industry was affected by the Covid-19 pandemic in 2020. The pandemic undoubtedly led to cost increases and delays in some projects, with mobility restrictions both nationally and internationally, quarantine requirements and adjustments to site facilities, all having a negative impact on productivity. But aside from the most acute and unpredictable phase after the March 12th shutdown, our impression is that owners, contractors and consultants found ways to adapt and, for the most part, to maintain progress. This has helped reducing the negative consequences of the pandemic that was feared in the early phase of the outbreak in Norway.
Upgrading of existing hydropower plants and construction of new facilities will become increasingly important. Adjustments in the tax regime for large hydropower producers are predicted to positively affect the development, and will hopefully contribute to resolving a situation that for several years has limited companies’ financial incentives to carry out upgrades that are deemed necessary and desirable in the public interest. Recent discussions on the role of wind-generated electricity in the energy mix have also led to raising the issue of regulatory changes to optimize the utilization of hydropower resources available.
Project development and construction
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Amongst significant development projects currently under construction is Smibelg and Storåvatn power plants in Nordland. At the time of licensing in 2012, the project was by far the largest planned hydropower project since 2004, with its 210 annual GWh of renewable power. The realization of this project contradicted the 2001 Prime Minister’s prediction that the ‘era of large hydropower developments’ was over. When completed in 2021, the plants will supply about 10,500 households with new renewable energy. Haavind has supported the developer Smisto Kraft AS, owned by SKS Produksjon AS and Helgeland Kraft Vannkraft AS, in the development of the project.
One power plant project now close to completion is the Jølstra hydro power plant, developed in collaboration between Sunnfjord Energi and SFE. The plant will contribute an annual production of about 250 GWh, equaling the electricity supply of approximately 12,500 households. The project involves a significantly improved overall utilization of the power resources in the Jølster watercourse. Even though the project will reduce production from the existing Stakaldefossen power plant, it will provide approximately 220 GWh net new renewable power. Haavind has assisted Jølstra Kraft DA in the development of the project.
Several significant wind power projects are in the development and construction phase, including Eolus / Øyfjellet Wind AS’ project Øyfjellet (400 MW) in Nordland, to be completed in 2021. Another of several projects still underway is Bremangerlandet (86 MW), owned by SFE Produksjon AS, in Vestland county. A common factor among these projects is that, in parallel to the regular project development processes, there has been an increasing need to handle frequent litigation triggered by the growing political opposition to wind power. In our experience, however, there have been few actual delays to wind power developments caused by legal action; projects have mostly continued through the development phases more or less according to schedule. Haavind provides support to companies working with wind power throughout all phases of a project, including transactions and funding, regulatory advise and facilitation, during construction, and in disputes.
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Technology, innovation and trendsIn 2020, the European Union adopted the “Green Deal for Europe” and with it, an EU taxonomy establishing a new framework for sustainable investments. The new targets and requirements will have an effect on the power industry as a whole, but have caused specific uncertainty whether Norwegian hydropower will be classified as sustainable. It is too soon to tell what the conclusion will be right now, as the discussion on classification is far from over.
We had expected that the regulatory framework would provide final clarification regarding the unbundling that will force affected grid companies to undergo significant reorganization and in February 2021, it was made clear that this will apply to grid companies with more than 10,000 customers. The corporate and functional division is expected to lead to further consolidation within the power industry.
In May 2020, the Government granted a “green crisis package” of NOK 3.6 billion, in order to contribute to the restructuring of Norwegian businesses, with a focus on offshore wind, battery technology, hydrogen and environmentally friendly shipping. It will be interesting to see what the effects will be, especially on technology development and value creation.
Offshore wind was a main subject of attention in 2020, even aside from the “green crisis package”. The new regulations to the Ocean Energy Act, effective from January 1, 2021, allows companies to apply for a license to develop projects in appointed areas Utsira North and Southern North Sea II. It remains unclear how market players will position themselves as the economic terms are not yet laid out. But a number of collaborative structures have already been formed, and are expected to be put in place, so that this capital-intensive technology will be realized.
New digital solutions for the power industry are also contributing to more efficient operations and system maintenance, assured power supply and better preparedness. Increased digitalization and the collection of higher quality data will also provide a more precise evidential basis for investment decisions and allow for the automation of a number of decision-making processes. This also creates a need for new regulations, business models and customer adaption. We see this exemplified by the ‘smart metering’ implementation, where new equipment has been installed inn 97 per cent of all metering points, but where a smaller group of network customers have also summoned up significant opposition.
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DisputesThere were a significant number of disputes within the power industry in 2020, in particular related to the Covid-19 pandemic and the validity of wind power licenses. Most Covid-19 disagreements have been resolved amicably.
The battle over the validity of wind power licenses has made its way into the courtroom. It’s possible that we are seeing the same growing tendency for rights and validity issues handled in court in Norway as we also see in other countries. Added to the increased opposition to wind power, there was a sharp increase in the number of validity disputes in 2019 and 2020.
One law suit dealing with the validity of licenses is related to the Fosen wind park. The wind farms established by Fosen Vind will constitute the largest onshore wind power plant cluster in Europe, with an installed capacity of over 1000 MW. Haavind has assisted Fosen Vind for several years. In 2020 the Frostating Court of Appeal concluded that the licenses are valid. The case has now been appealed to the Supreme Court, which will hear the case in 2021.
Norway’s largest stand-alone wind farm, the Øyfjellet wind farm, was also subject to court hearings in 2020. Supported by resistance organization Motvind Norway, the local reindeer grazing district demanded a temporary injunction to stop the construction of the power plant, as it would allegedly affect the reindeer negatively. The claim was not accepted, neither before the Oslo City Court nor before the Borgarting Court of Appeal, and the construction work continues. Haavind provides legal support to Eolus, the company responsible for the establishment of the wind power plant.
We have also seen cases where organized resistance against wind power is contributing to a larger number of law suits being raised regarding the validity of licenses. Normally, such cases would be focused around compensation to landowners and other affected interests. In Buheii and Bremangerlandet, the validity of the licenses issued by MPE was brought to the court, which however did not find in favour of the opponents. Haavind assisted the project developers in both of these cases.
The largest power line-related law suit ever in Norwegian history continues. The dispute regards 300 kilometers of 420 kV power line from Balsfjord to Skaidi in Northern Norway, and was divided into a number of separate cases over several years, due to the complex scope of affected parties and legal issues. A total claim for compensation of more than NOK 1 billion has been put forward as part of the case.
Despite an apparent increase in the willingness to fight energy projects in court, the vast majority of disputes are resolved amicably.
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Haavind’s EnergyPracticeHaavind is a full-service law firm with a history dating back to 1893. The firm is today made up of approximately 130 lawyers, with one of the country’s largest and most recognized specialized practices for the renewables sector. Haavind has a long history and extensive experience working with clients in the field of renewable energy. Our energy practice is top ranked internationally by Chambers & Partners, Legal 500 and IFLR1000, as well as in the Norwegian financial news daily Finansavisen’s annual rating of law firms.
Due to our extensive work with clients in the power industry, we have in-depth understanding of industry issues and the legal framework that companies within the energy sector are subject to in Norway. We offer general legal advice, support on transactions, structural changes within the sector, building and developing projects for energy production, networks, and the like. We also assist in dispute resolution, including expropriation and appraisal relating to grid development projects, hydropower plants and wind power projects. Our long history with renewable energy has allowed us to build a significant network among key stakeholders in the industry. Several of our attorneys also have experience from public administrative bodies such as the Ministry of Petroleum and Energy, the Norwegian Water Resources and Energy Directorate and the Office of the Attorney General.
Haavind’s portfolio includes a number of key players in the power industry, including electricity producers (hydropower and wind), traders, power-intensive industry, district heating suppliers, grid owners and operators, and foreign utilities. Haavind also assists an increasing number of clients on innovative development projects such as data centers, new digital power services, battery technology, offshore wind and electric charging.
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Contact
Aksel S. TannumPartner - Energy+47 900 22 765
Håkon BlekenPartner - Dispute Resolution
+47 924 49 [email protected]
Kaja KapstadLawyer - Corporate+47 932 51 913
Herman BondesonAssociate Partner - Corporate
+34 681 237 [email protected]
Jøran SandvikPartner - Energy+47 400 66 700
Johan Fredrik RemmenPartner - Energy+47 913 99 187
Sarah-Ann KvamSenior Lawyer - Construction
and Energy +47 402 31 559
Mari Reitzel BjerkePartner - Energy+47 455 14 020
Pål Martin AbellPartner - Energy+47 402 18 273
Herman StiengAssociate - Corporate+47 902 25 508
Fredrik RødAssociate - Energy+47 906 32 [email protected]
Kjetil HardengPartner - Corporate+47 480 12 274
Hans-Christian DonjemPartner - Banking and finance
+47 950 54 [email protected]
Bjørn Olav TorppPartner - Corporate+47 905 07 090
Bård SandstadPartner - Corporate – Energy & Offshore +47 932 81 796
Jarle W. HolstrømPartner - Real Estate+47 952 82 532
Ivana FilipovicLawyer - Energy+47 907 27 080
Martine Linge JohnsenLawyer - Construction
and Energy+47 482 33 087
Erik Bergfall BrovoldLawyer - Energy+47 458 52 491
Pauline Sommerfelt HelleAssociate - Energy+47 953 66 906
13Advokatfirmaet Haavind AS Bygdøy allé 2 PB 359 Sentrum 0101 Oslo T: (+47) 22 43 30 00 www.haavind.no
