Critical Issues in Joint Development and Joint Ownership Projects: Avoiding Acquisition Pitfalls...
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Transcript of Critical Issues in Joint Development and Joint Ownership Projects: Avoiding Acquisition Pitfalls...
Critical Issues in Joint Development and Joint Ownership Projects:Avoiding Acquisition Pitfalls
Critical Issues in Joint Development and Joint Ownership Projects:Avoiding Acquisition Pitfalls
Lori B. Green
Nixon Peabody LLP1100 Clinton SquareRochester, NY 14604
Recipe for Effective TransactionRecipe for Effective Transaction
• Clear goals – aligned (check regularly)?• Clear strategy – group dynamics/coordination
– Sub-groups (benefit? detriment?)
– Divide and Conquer?
Recipe for Effective TransactionRecipe for Effective Transaction
• Successful execution– Coordinated negotiation
– Ongoing due diligence
– Financing coordination
– Closing coordination
Due Diligence – What Is It and Why Do ItDue Diligence – What Is It and Why Do It
• Physical investigation of project assets/liabilities/status• Understand and evaluate project/assets• Identify legal and operational issues• Draft/negotiate transaction documents• Allocate risks• Understand approval process/timing
Due Diligence – How to ConductDue Diligence – How to Conduct
• Site visits• Real or virtual data room• Independent experts – engineers, attorneys• Operations personnel
Purpose of Asset Purchase AgreementPurpose of Asset Purchase Agreement
• Roadmap to get to financial closing• Identify assets and liabilities• Economic arrangements• Reps and warranties• Covenants between signing and closing• Conditions precedent to closing• Termination/Withdrawal rights and remedies• Indemnification and survival
Assets and LiabilitiesAssets and Liabilities
• Permits• Real property interests• Coal or other fuel• Contracts• Personal Property• Assumed liabilities – known, unknown, contingent?
Economic ArrangementsEconomic Arrangements
• Purchase price• Development fee/success/completion fee?• Reimbursement/sharing of development costs• Timing of payments
Reps and WarrantiesReps and Warranties
• Disclosure of and about what selling/buying• Disclosure about seller/buyer –
authority/consents/litigation• Knowledge and materiality qualifiers• Risk allocation• Relationship to due diligence
CovenantsCovenants
• Exclusivity• Most favored party• Disclosure of changes• Consents, proceedings, cooperation
Conditions Precedent to ClosingConditions Precedent to Closing
• Financing• Authorization to construct
– Full NTP under EPC Contract
• No MAC – project or project documents• Consents/approvals• No litigation• Equity
Termination/Withdrawal Rights Termination/Withdrawal Rights
• Mutual agreement• Law or order• Breach (notice and cure rights)• MAC• No financing• Drop dead date• Sponsor abandonment• Participant convenience
Remedies Upon TerminationRemedies Upon Termination
• Refund of development fees (or loss)
• Liquidated damages– different depending on breach
• Out of pocket costs
• Actual damages
• Equitable remedies
• ROFR
• Limitation of liability
• Exclusive remedy
Indemnification and SurvivalIndemnification and Survival
• Post-closing remedy for breaches
• Reps, warranties and covenants
• Basket and cap
• Who pays and controls defense?
• Exclusive remedy
• Survival – how long?– General – 1-3 years
(from when?)
– Statute of limitations
– No limit (title, authorization, etc.)
GuarantyGuaranty
• If Sponsor/Participant is SPE• APA and development obligations between signing
and closing– Including termination damages
• Indemnification obligations• Alternative: credit-worthy entity as a party
Lori B. GreenNixon Peabody LLP1100 Clinton SquareRochester NY, 14604