Build Transfer Agreements: Technical Risk Management for Utilities and Renewable Energy Developers

Incentives for utility ownership of RE projects are changing, and there is new interest in different ownership models, including Build-Transfer Agreements (BTA). DNV GL has seen a number of variants of BTAs being deployed in the marketplace, including one in which utilities sign asset purchase agreements (APA) earlier in the development process (as opposed to at COD). As a part of the APA, Developer stays on to provide remaining development services, and often acts as construction manager. The developer often maintains a “carried interest” to align interests. The APA often includes a “form of”, or even final form of, EPC agreement, which the utility is motivated to negotiate in parallel with the APA, in order to minimize risks (both commercial and technical), as they end up being the EPC counterparty (Owner) once the BTA transaction closes.

Based on its experience supporting a number of utilities in this context, DNV GL will describe the main technical risk elements to consider in negotiation of the APA/EPC, and its recommendations as to what constitutes best practice for each. For a number of these elements, there is a balance to strike between i) defining the project (from a technical perspective) in great enough detail to ensure quality and reliability in the asset that the utility will end up owning, and ii) leaving enough flexibility from a design perspective to ensure a) EPC pricing will be competitive, b) EPC contractors won’t balk at requirements, and c) opportunities for optimization (ie. tracker options, bi-facial, etc) remain.