Cogeneration - Legal Considerations

摘要

Capital investment programmes involve an assessment of future markets and values. They are risky and complex when they involve one asset and one market. Cogeneration projects involve two investors, two assets and two markets, each with different dynamics and risks. By definition they are complex and risky. Many project sponsors do not realise this until it is too late. Generally a Cogeneration development will begin with a tendering process. This process needs to be carefully considered as the approach taken can impact significantly on project viability. From the generators view point the decision of whether to balance sheet or project finance will impact heavily on the methodology adopted. Cogeneration requires the host and generator to operate in close proximity. Given this high level of integration a carefully considered programme must be put in place. One that is capable of withstanding and adapting to foreseen and unforeseen developments. Issues such as environmental risks, new taxes, price fluctuations and the possible failure of one or both of the parties must be addressed. As part of the development the parties need to consider what will occur at the end of the life of the project and potentially the place of Build, Own, Operate, Transfer (BOOT), Build, Operate, Transfer (BOT) or Build, Own, Operate (BOO) agreements. Also considered are the component parts of Cogeneration agreements including issues related to development, consents and host responsibility. General issues such as liability of the parties, assignment and the place of force majeure provisions are all addressed within the course of the paper. A well thought out development and Cogeneration agreement should ensure a beneficial long-term relationship. All too often hastily constructed long term agreements end, instead, in court. The purpose of this paper is to raise the issues and discuss alternatives to ensure a successful development.