Part I, Renewable Energy Facility M&A in Kazakhstan
Due Diligence Issues for Consideration
What Qualifies As a RE Projects?
Pursuant to paragraphs 1-4 of Article 1 of the RE law, renewable energy sources are energy sources that are continuously renewable through naturally occurring processes and are defined in the law as:
At What Stages Can a RE Projects Be Acquired?
Investing at each stage will attract a different type of investor due to its different emphasis, consideration and risks. In order to acquire a RE project, there are three distinct stages.
Generally, in Kazakhstan, when a company wins a PPA auction, it sells a RE project. This is usually the first stage at which a buyer acquires a RE project. The RE auction mechanism has a special regulation.
According to the RE law, auctions are organised and conducted by the auction organiser (the Kazakhstan Electricity and Power Market Operator JSC) using an electronic platform. The purpose of auctions is to determine the most efficient auction price for electricity from renewable energy sources, taking into account the location plan for renewable energy facilities.
After the auction, a winner concludes a PPA. The winner will usually sell the RE project at this stage. In other words, the project is sold from scratch but with a concluded PPA.
At the second stage, it is common for a RE project to have:
As a rule, construction can already be started at this stage. The RE project will require significant capital investment to complete construction.
At the third stage a RE facility has been constructed and is generating electricity and revenue. Such a RE project is sold at full price to cover all costs to the seller and make a profit. Obviously, this project will be the most expensive for a potential buyer.
Key Contractual Components of the Legal Due Diligence of a RE Facility
The key contractual components of the Legal Due Diligence of a target company to be acquired are:
Corporate Law, Corporate Finance and Corporate Governance
Grid Connections Arrangements