BayernLB finance acquisition of wind farm in Northern Ireland

Northern Ireland has some of the best wind resource in the UK, and historically benefitted from a generous ROC regime.

In 2018, we advised Bayerische Landesbank (“BayernLB”) on its acquisition financing for 7 onshore wind turbines in Northern Ireland. BayernLB, a bank owned by the federal state of Bavaria and the Bavarian savings banks, is a leading financial services provider focused on serving its customers, including SMEs and large corporates, savings banks and public authorities as well as customers in the real estate industry. BayernLB is an experienced and committed lender to the renewable energy sector, having for many years provided financing solutions to renewable energy companies focused on solar, wind, hydro, solar thermal and geothermal technologies, all across Europe and North America. One of BayernLB’s special areas of expertise within the renewable energy sector is the UK market where the bank has financed projects with a total capacity of over 2 gigawatts.

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The purchaser (a major UK-based renewable energy fund) acquired the assets from the original Northern Irish developer. The transaction was significant, as it reinforced the fact that good quality assets (even if small in size) if professionally managed and constructed, can be aggregated into portfolios for improved economies of scale, thereby attracting interest from significant financial investors and lenders.

We carried out legal due diligence into the assets, liaised with the technical and insurance advisers and advised the bank (together with local counsel, who we coordinated) on the entire spectrum of finance-related documentation across four jurisdictions.

This instruction was our first for a “high street” bank and a significant achievement for a firm of our size, in a market place where usually only the largest firms are appointed by traditional lenders.

Since financial close, we have continued working with BayernLB, ensuring that the project reflects the investment standing that is required, and assisting with the ongoing maintenance and insurance arrangements.

BayernLB commented:

“We highly appreciated Lux Nova’s efficient way of working as well as their customer-oriented focus and are looking forward to concluding further transactions with them as Legal Advisor in the future.”

First utility scale wind farm in Jordan

A first of kind and a ground breaking project in many respects, the 117MW Tafila wind farm in Jordan was the start of the journey for Lux Nova.

The founding partners, Tom, Louisa and Sandy worked together closely over a number of years on every legal aspect of the project: from power purchase, construction, O&M, equity investment to project finance. It was during journeys back and forth to Jordan that some “blue sky” thinking was done and where the idea of a boutique and dedicated renewable law firm was formed. Learn more about our journey here.

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Tafila Wind Farm was the first wind farm to reach operation in Jordan, in September 2014 (and was inaugurated by King Abdullaj II in December 2015). It was one of the first and largest windfarms in the Middle East when it started generating. A truly global project, it was equity financed by a consortium of Inframed Infrastructure, Masdar and EP Global Energy and debt financed by a consortium of funders including the International Finance Corporation and the European Investment Bank for the sum of $221 million debt.

We negotiated the power off-take, grid connection and Government support agreements developing a template PPA which was subsequently used on the roll out of projects across the country (including the Shamsuna solar farm) and formed templates for PPAs in other countries within the region. We also negotiated a full turnkey integrated Design Build Operate & Maintain contract with Vestas, the construction, operation and management contractor who supplied the Vestas V112-3MW turbines and completed the full suite of project finance documentation with the consortium of primary lenders.

As a dedicated team throughout project development, we worked closely with the project developer to deliver this seminal project and continue to advise through various contract variations and equity sales, an example of joining and continuing with the client on their journey, one of the most rewarding types of projects!

First of a kind incubator for community energy sector

As part of our long-standing partnership with Leapfrog and our shared commitment to scaling the capacity of community energy and the social impact market in the UK, we established in 2018 a first-of-kind incubator for the community energy sector, “Leapfrog Launchpad”. This brings together commercial, legal and financial expertise, in a fully co-ordinated ‘complete package’ approach, designed to develop new and replicable business models in a post-subsidy environment which has seen a deceleration in the growth of community energy sector. Other partners include global technical advisory firm, ITP Energised, and there are a close alliances established with accountants, Johnston Carmichael, as well as PfalzSolar, a co-operatively owned contractor with a track record in the UK and Europe.

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A critical strength of the incubator are the partnerships that are forged. Each model is undertaken with a community energy partner who will pilot the concept and have shared ownership in its design and delivery. We envisage developing 2-3 new models a year. The services delivered under the incubator are provided on an “at risk” basis until the pilot project can be funded.

The incubator has had early success in developing three new models for local ownership/ delivery which are being taken forward:

1. Private wire solar for water utilities under a long-term corporate/customer PPA, being championed by Community Energy South and Southern Water.

2. Solar into electrified railways to power our trains (“Riding Sunbeams”), being championed by 10:10, Community Energy South and Network Rail.

3. A solar investment model being pioneered by a licenced supplier to give their retail customers an opportunity to participate in one or more solar parks, with a credit made to their energy bill related to the value of the energy generated by their share of the solar farm.

We look forward to creating more sustainable social impact as our models commercialise.

A link to Leapfrog’s website is here.

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Community Owned Renewable Energy and Environmental Finance acquire portfolio of community solar projects

We are incredibly proud of our common journey with Community Owned Renewable Energy LLP (“CORE”), CORE’s asset manager, Environmental Finance (“EF”) and the community-owned asset management business Bright Renewables (“Bright”), financed by CORE.

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We have acted for CORE and EF since 2017. Initially, we advised on the fund management agreement, and structured the equity investment of Power to Change and Big Society Capital, to capitalise CORE, while also negotiating an arms-length debt facility with Big Society Capital. Together, these financial instruments provide CORE with liquid funds to enable CORE to acquire ground-mounted solar parks in England and Wales from commercial developers and operators (including funds). The strategic aim is to then transition each asset into long term community ownership over time.

The Fund has recently (March 2019) completed a number of additional acquisitions, bringing the total portfolio size to approximately 35MW, with more on the horizon. Our work on each of the acquisitions included full asset due diligence, negotiation of the share purchase agreements, putting in place the financing arrangements and, where necessary, refinancing existing bank debt. Approximately half the portfolio is already in community ownership, and this proportion is set to increase steadily.

CORE and EF are incredibly driven to achieve the best possible outcome for the communities that the assets serve, and we really enjoy being part of this common effort to harness the positive impact of renewable energy. Not only for the environment, but for local people, too.

An article can be found here.

Since early 2019, Bright Renewables have joined this like-minded group, with start-up funding from CORE. Bright offers professional asset management services to CORE’s subsidiaries as well as non-affiliated projects, and it is owned by the communities that it serves. This means that all profits ultimately go back into the community – an excellent way of reinforcing the circular economy and maximising the benefit to the communities.

An article about Bright can be found here.

Most recently, we assisted Bright in its dispute with a construction contractor, thereby helping realise a significant additional amount that will now be available for the benefit of the community.

Our work with CORE, EF and Bright is incredibly satisfying and we look forward to the next part of the journey!

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“The Lux Nova team have been our legal advisers ever since we set out on the journey of creating the CORE fund and acquiring its first assets in 2017. Since then, we have built an excellent working relationship and a joint sense of purpose. Louisa and Nikola fully understand and support our mission to create value for local communities – assisting us with innovative structuring solutions that enhance the deliverability of our projects, fair pricing and quick work of high quality. We look forward to continuing our journey with them.”

— Richard Speak, Founder of Environmental Finance Limited and CORE

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Leapfrog Finance go from strength to strength

We are incredibly proud of our long-standing partnership with Leapfrog. We have provided pro bono advice to the Charity arm of Leapfrog (now Pure Leapfrog) for over 10+ years.  In 2015, shortly after setting up Lux Nova, we advised on the initial structuring (including state aid compliance) setting up and securing £15 million investment from Big Society Capital for a commercially operated finance arm (Leapfrog Finance) to the existing charity division.

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This addition was needed in order to address a market failure, namely lack of affordable debt capital available to social and community enterprises to develop their own utility-scale renewable energy assets. The bridge fund remains the only source of debt capital available to fund 100% of the project development/construction cost or acquisition cost (if already constructed), providing a breathing space and assistance to the community organisation to then raise long-term debt capital and secure equity funding through undertaking a community share or bond offer.

Leapfrog has deployed approximately £40 million loan commitments (including co-funding commitments from a community-oriented energy supply company secured in 2018, which we advised on). The fund supports a range of technologies from ground mounted solar & rooftop in conjunction with battery to heat and energy efficiency that will create long-term social and environmental benefits for local communities, with a specific focus on targeting communities in areas of highest deprivation.

Since setting up the fund, we have acted for Leapfrog on the deployment of all of their loans (including providing due diligence, structuring advice and preparing and negotiating loan and security documentation) covering various construction, acquisition and bridge loans, and underwriting of share offers. To date, this includes an aggregate of 117MW of community- and publicly owned renewable energy projects, and where the initial bridge term is complete the majority of the loans have been refinanced with long-term debt from commercial banks (we have acted for Leapfrog on all of these refinancings).

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As a most recent example of our work with Leapfrog, we advised them on their £11 million mezzanine revolving construction bridge funding to GRIDSERVE, as developer, undertaking the UK’s largest subsidy-free integrated solar and battery farm developments (circa 60.4MW solar, 27MW battery storage) across two sites in the North of England. Once commissioned the two parks will be acquired by Warrington Borough Council, which will make Warrington the first local authority to produce all of its own electricity from clean sources. Leapfrog funded these projects alongside Investec Bank (as senior lender in a common bridge financing structure), playing an active role (with our support) in the structuring of both the contractual and acquisition documentation as well as the financing documentation (including intercreditor arrangements). The panels and tracking system are a new design for the UK. The projects are expected to generate over £2.25 million of community benefit over their life.

It has been incredibly satisfying to drive such a critical element of the community solar market, making projects happen that otherwise may not have materialised. We are already focussed on further and even bolder innovation, together with the Leapfrog team – watch this space!

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“The knowledge and professionalism that Louisa brought to the deal was second-to-none, addressing project financing risks, the complexities of a commercial & local authority transaction and enabling Leapfrog to secure £2.25m in community benefit funds to help local people in the Warrington area. We are enormously proud to partner with Lux Nova.”

— Claire Hanratty, CEO, Leapfrog

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Further reading here.

Largest publicly owned ESCO from India acquires CHP market leader EDINA

Acting on this project has been a very rewarding journey for us and our clients. We were retained in 2017 to act for EPAL (the joint venture vehicle between English developer EnergyPro and EESL, established in 2009 and currently the world’s largest publicly owned super ESCO and one of the most highly regarded innovative finance companies).

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Given India’s extensive need for energy efficient power generation, EESL expanded its business model to include an earmarked £150 million investment programme of strategic acquisitions in Europe and beyond, to help diversify its portfolio. EPAL’s first UK acquisition was a portfolio of energy efficiency performance contracts developed by Anesco. They then went on to acquire a battery storage project in Ontario, Canada. The £55 million acquisition of Edina (the market leading provider of energy efficient CHP engines in the UK, with a presence in Dublin, Lisburn and Stockport) followed in 2018.

The aim was to grow the Edina business into a global leader and creating a platform to scale up the combined heat and power market (and adoption of tri-generation technology) in India, further transforming the energy landscape in India, enhancing its energy security and achieving significant reductions in its current carbon footprint. An interview with EESL’s Managing Director, Saurabh Kumar, is here, explaining EESL’s impressive progress and transformative agenda even prior to the Edina acquisition, with another interview here, following the acquisition.

The Edina acquisition is the largest and strategically most significant international direct investment by EESL to date.

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The transaction involved creating the JV and investment arrangements between EESL and EneryPro, followed by full due diligence of the Edina business – a journey that took us from Colorado all the way to New Zealand, via Dublin, Lisburn, Stockport, London, Switzerland, Germany and India – unfortunately only from the safety of our desks.

We negotiated the share purchase agreement, as well as the full suite of acquisition financing arrangements with the senior and mezzanine funders, including all intercreditor arrangements between the numerous existing and new funders to Edina. And when a change in India’s investment legislation was introduced half-way through the transaction, we took the lead in restructuring the financing accordingly.

We supported EPAL and its shareholders every step of the way, with strategic board-level advice as well as all day-to-day negotiations, to ensure the success of the transaction. But when the documents were signed in 2018, the real journey of Edina, now under new ownership, had only begun. Since then, we continue to advise Edina and EPAL on their legal needs, as well as offering a sounding board to management, on their continued journey to leveraging their investments, including making Edina the global market leader.

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Neelima jain, ceo, epal, and a Director at Edina

“The acquisition is an important development in bringing together the efforts of two companies that have achieved distinguishing competencies in their respective energy efficiency markets. This partnership has far-reaching implications on the global energy sustainability scenario, and for promoting low-carbon growth by industries in Europe and Asia. With CHP technology’s contribution to the UK energy portfolio expected to double between 2015 and 2020, UK is a promising market for EESL to grow its own capabilities in the trigeneration sector.”

— Neelima Jain, CEO, EPAL, and a Director at Edina

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