Notes
1
Notes
2
In this talk I will concentrate on the legal issues for land owners wanting to allow an energy company to build a wind farm on their land. The principles I outline in relation to wind farms can apply to similar arrangements for solar and biomass developments. CAAV publication 202: Solar Farms a First Guide for Valuers, is a very helpful guide.
Notes
3
The usual arrangement is for the landowner to grant to the energy company a right (option) within a limited period for the energy company to call for the grant of a lease of the wind farm site. The energy company needs the comfort of knowing it can take a lease before it incurs the substantial planning and other costs, associated with wind farm development. If the energy company does call for the lease then the landlord grants the lease on the terms agreed and the energy company builds the wind farm and pays the landowner during the lease period.
Notes
4
The key objectives for the landowner are ,to not only to maximize receipts, but also to minimize and so far as possible protect against the downside liabilities and costs. Guard against landowners being seduced by the potential receipts and ignoring the potential downside costs and liabilities. The best return is found when both are dealt with effectively.
Notes
5
Given the numerous factors that need to be taken into account in identifying a potential wind farm site: proximity to buildings, radio and radar interference, average wind speed bird migration etc., the energy company will have done a lot of preliminary research identifying the wind farm site before approaching the landowner - they will have already decided the site has potential. The first step in negotiations with the energy company will be the signing of Heads of Terms outlining the deal. Whilst the Heads should be non binding and subject to formal contract it is difficult to depart from their basic terms in the binding legal documents. They form the instructions for the legal documentation. Care is needed to ensure the Heads cover the key issues, doing so will help minimize cost and delay and maximize return to the landowner. Given the importance of the Heads of Terms in setting the ground rules for a deal it is helpful if the landowner, his agent, solicitor and tax adviser all have input in negotiating the heads - this potentially involves the landowner in a lot of cost and I will comment on how to deal with that next.
Notes
6
I will comment in more detail on some of the main do’s and don’ts that I think should be covered in the Heads in a moment but first I will say a few words about some things to consider from the start of negotiations.
Landowners professional costs The landowner is likely to incur substantial professional costs with agents and legal advisers in assisting with the negotiation of the heads of terms, the option and the lease. If those negotiations fail then the landowner can be faced with a large bill for professional fees and be out of pocket. The fact that professional costs are mounting up can in itself weaken the landowner’s negotiating position with the energy company. Faced with the prospect of a large bill and no return the landowner can be tempted to settle for less than he should get rather than risk the deal with the energy company falling through completely and him being out of pocket on costs
Notes
7
Two ways to address the cost problem are either: A) Insist from the start of negotiations that the energy company pays the landowners professional fees, and gives a solicitors undertaking to that effect at the start. If given this will normally be limited to a maximum amount. or B) Professionals agree that they work on the basis of no (or limited) charge unless the Heads are agreed. If they are prepared to work on this basis there may be a mark up on the normal fees to cover the risk of not being paid The cheaper option is to have the energy company agree at the start of negotiations that the energy company pays the landowners professional costs whether or not a deal is completed with the energy company.
Notes
8
Before starting to negotiate Heads of Terms check who exactly owns the land affected by the wind farm proposal - is it the landowner, client alone or jointly, a partnership? A company or pension fund? Are there any third parties whose permission is needed? • Mortgagees • Tenants • Restrictive covenant holders • Owner of mineral rights Consider the landowners tax position income and family needs: is it worth transferring the land into a new company to hold the wind farm lease? A company can protect from liability and shelter profits at corporation tax rates.
Notes
9
This is fundamental, perhaps obvious but nevertheless sometimes forgotten It is essential that the developer energy company contracting with the landowner in the option and lease has the funds to carry out its obligations or to pay the landlord compensation if it does not. No matter how well drafted the option and lease are, if the developer energy company has no assets the option and lease documentation gives the landowner little if any protection. Even though the approach for a wind farm will be made by an energy company with substantial assets: EDF, EON, EnergieKontor, RES etc., I think without exception, the energy company will form a shell company that has no assets to contract the option and lease with the landowner. The obligations of that shell company to the landowner must be supported in some way by a company with substantial assets
Notes
10
Tools available for securing the option and lease obligations of the developer energy company Parent company guarantee bond - a company with sufficient assets in the energy company group will commit to the landowner to honour the obligations of the developer energy company - they will want to limit the maximum liability under the bond. Get as high a figure as possible. Also if possible make sure the company giving the guarantee has to maintain assets of a minimum amount or has to offer a bond from a company with assets. This stops the energy company group re arranging its group to strip out assets from companies giving bonds over time. Bank/insurance company bond - this is very expensive for the energy company and is hard to get Cash deposit held on trust - this is becoming more common particularly to cover restoration obligations Insurance - to cover liability to third parties for injury nuisance etc
Most energy companies will offer these options in some combination. If the security offered is less than needed then the landowner should consider taking a bigger return for the additional risk or forming a limited company to hold the wind farm.
Notes
11
All energy companies will want the right to transfer their rights under the option within their group of companies and to outside third parties. Make sure that the security arrangements put in place for the original developer energy company remain in place on transfer or are replaced by an equivalent security on transfer. It is common for larger energy companies to sell on their option rights to smaller energy companies once planning has been obtained - the landowner should take a fee for allowing the sale
Notes
12
With your notes you have a sample heads of terms which I think cover many of the key issues that are likely to arise. However deals are all different as landowner’s circumstances and needs are not all the same and the Heads need to reflect that.
I will deal with some of the issues to cover in the heads that may be less obvious. Describe the land affected carefully: • What land will be in the option and what land will be in the lease. This is important - there are cases of landowners mistakenly granting options over their whole farm for long periods of time. This can sterilize the farm and make dealings difficult. • In the option minimise the area of land the energy company has rights over. • Make the energy company specify the location and maximum dimensions of turbine bases, crane pads, construction compounds, access roads, substations. The energy company will want some flexibility on location of the bases and other element of the wind farm but limit that to changes agreed with the landowner (not to be unreasonably withheld). Make sure all elements of the wind farm are located so as to minimise the disturbance to the landowner’s farm and to minimise difficulties to farming the land once the wind farm is built. Make sure the contractors have to use specified access roads when constructing the wind farm - stop them driving all over the option site.
13
The energy company and their contractors should agree to do as little damage as possible to the option site during site investigation and the running of the wind farms and agree to indemnify the landowner against loss.
There are a number of practical measure that can help minimize damage: • Make agreed schedules of condition - preferably when the land is not covered with standing crops • Do not forget to consider potential damage to existing roadways and buildings • Make provision for on site supervision during construction by the landowner or agent on his behalf (with his costs paid by the energy company)
Notes
14
The planning consent and related s106 planning agreement will impose obligations to reinstate the wind farm usually after 25 years. Make sure the landowners obligations under s106 are limited: no obligation to pay money or do work; no obligation arises until development has started; no obligation on the landowner once he has disposed of the land affected. Make sure that restoration is the responsibility of the energy company to deal with this. If not the liability falls on the landowner. Make sure there is a bond or fund in place to cover potential liability unless the landowner (for more rent?) is prepared to risk the scrap value of the equipment covering the restoration costs - for this consider whether the equipment should belong to the landowner? The lease should extend for a couple of years after the planning for the wind farm has expired - to ensure the energy company is still liable as tenant. Breaks: any ability for the energy company to end the lease early should be conditional on the energy company having done the restoration works.
Notes
15
The sample Heads list various types of payment the landowner can ask for. Do get a minimum rent whether or not the turbines are operating. If possible require the energy company to operate the wind farm to maximize income. Consider getting the right to share in any warranty claim the energy company makes against suppliers. Rent reviews: most leases rely on index linking rather than market value review there may be too many site specific variables to find market comparables
Notes
16
There have been a number of claims for nuisance arising from wind farm noise and the landowner can be liable - as well as getting an indemnity from the energy company make sure there is a clear obligation in the lease that the energy company tenant must not commit nuisance, this will help avoid successful nuisance claims against the landowner.
Notes
17
Notes
18
CAAV NORTHERN GROUP CONFERENCE 18 SEPTEMBER 2013 YORK
Sample Heads of Terms for a Potential Wind Farm Development THESE HEADS ARE FOR ILLUSTRATION ONLY AND ARE NOT APPLICABLE IN ALL CIRCUMSTANCES EACH CASE IS FACT SPECIFIC AND PROFESSIONAL ADVICE SHOULD BE OBTAINED TO ENSURE ALL RELEVANT ISSUES ARE COVERED IN EACH CASE
1
Landowner’s agent legal and other professional costs
As a first step - ideally before negotiating the Heads of Terms - obtain an undertaking from the Developer’s Solicitors to pay, on demand, the Landowners reasonable professional costs [limited initially to £X] whether or not the option agreement is completed.
2
HEADS OF TERMS NOTE: These heads of terms do not and are not intended to create any legally binding obligations. These heads are subject to contract, completion of formally executed legal documentation and approval of the Landowner and the Developer. The documentation for the proposed letting may contain such further terms as the Landowner and the Developer may require, including additional terms on matters that are or are not covered in this document.
OPTION AGREEMENT 1. The Parties: 1.1 Landowner 1.2 Landowner’s Agent 1.3 Tenant 1.4 Mortgage Lender 1.5 Landowner’s Solicitors 1.6 Developer 1.7 Developer’s Solicitors 1.8 Guarantor/bond 2. Key terms:
2.1 Commencement Date 2.2 Option Fee: 2.3 Initial Option Period:
The earlier of date the Option Agreement is exchanged and six months from the date of these Heads of Terms. A one off payment of [£*****] payable in advance. An initial period of [5] years but subject to clause 2.4.
3
2.4 Right to Extend the 2.4.1 The Initial Period can be extended if: Initial Period a planning decision or Court decision is pending; or a planning decision was issued/handed down not more than 6 (six) months before the end of the Initial Period the developer gives at least one month’s prior written notice expiring on the last day of the Initial Period and when giving the notice makes the payment detailed in clause 2.5.
2.5 Extension Fee 2.6 Proposed Scheme Size 2.7 Option Site 2.8 Exercise of Option:
2.4.2 Under no circumstances shall the total Option Period exceed [7] years. An annual payment of [£**] payable in advance. [Potentially **-**MW or **-**Turbines.] The Option Site will be the area of land identified (excluding all dwellings and buildings) and outlined on the plan attached. 2.8.1 Notice to be served within the earlier of: The Option Period (the Initial Period and any extension); and 12 (Twelve) months after the expiration of the legal challenge period or the determination of any legal challenge lodged following the grant of planning consent 2.8.2 The Developer may only exercise the Option when they have: Planning Permission for the proposed scheme, All other necessary consents based on the original application or any variation thereto approved by the Landowner and Adequate finance available to complete the construction, commissioning and operation of the consented scheme; 2.8.3 The Lease is to be completed within 2 (Two) months after the notice.
2.9 Planning Gain Fee:
A one off payment once an acceptable planning consent has been granted the payment to be made one month after the expiration of the legal challenge period or any legal challenge lodged following the grant of planning consent equivalent to [£***] per MW. 4
2.10 Development Fee:
2.11 Lease Signing Fee 2.12 Anemometer Fee 2.13 Payment Reviews: 3. Developer’s Rights 3.1 Developers Rights
A one off payment upon entry to the site following the Exercise of the Option to commence construction equal to [£****per MW ] (50% on entering site to construct, 50% on first generation) A one off payment upon signing the Lease equal to [£****.] Anemometer Fee [£**] per year or part year All payments to be increased annually in line with the RPI from the date these Heads of Terms are agreed.
Subject to the Developer complying with its obligations: during the Option Period, and after giving reasonable notice to the Landowner, so far as is reasonably required for the Proposed Scheme, the Developer may enter onto the Option Site with or without vehicles, plant, machinery and equipment as follows: 3.1.1 Vehicular access on tracks; 3.1.2 Pedestrian access on fields; 3.1.3 Dig boreholes and sink trial pits subject to the location and access routes being agreed with the Landowner beforehand; 3.1.4 To install and use noise monitoring and/or anemometry equipment (with a maximum [80]m height) subject to the location and access routes being agreed with the Landowner beforehand; 3.1.5 Carry out tests and surveys (including without limitation environmental and geotechnical surveys) in connection with the proposed planning application.
3.2 Assignment:
4. Developer’s Obligations 4.1 Anemometer Data:
3.2.1 The Option can only be exercised and the Lease taken by the Developer; 3.2.2 Any Assignment or Change of Control is prohibited during the Option Period except where such assignment is to a [Group Company] subject to the Developer providing a Parent Company Guarantee Bond (“PCG”) in a form and amount and from a Group Company acceptable to the Landowner.
On a quarterly basis, the Developer will confirm to the Landowner or his Agent the estimated average wind speed based on the data collected.
5
4.2 Access, Damage Reinstatement and Drainage
4.3 Promotion of Scheme:
4.2.1 The Developer not to enter the Option Site without notifying the Landowner prior to entry; 4.2.2 The Developer to take and agree a schedule of condition (at their cost) of any areas where they are proposing to carry out investigations and will reinstate where possible or pay compensation to the Landowner if not possible for any damage including crop loss and any associated agricultural and environmental subsidy or similar payments; 4.2.3 The Developer agrees not to exceed 5mph while on Option Site; 4.2.4 Prior to any construction works the Developer shall appoint a qualified drainage consultant who will design and implement any required drainage works at the Developers cost having first agreed such works with the Landowners drainage consultant whose costs will be paid by the Developer. 4.2.5 The Developer will obtain the Landowner's prior consent (not to be unreasonably withheld or delayed) to any works involving the breaking of ground and will make good any damage caused by the exercise of the rights set out in this clause. 4.2.6 The Developer will ensure all works are safe and fenced where required to make safe. 4.3.1 Developer undertakes to use all reasonable endeavours to promote the scheme through the Planning process; 4.3.2 To submit the Planning Application within 18 months of the Option date and to use all reasonable endeavours to pursue the planning application; 4.3.3 If the Planning Application is not determined within 12 months following submission the Developer [is to] submit an appeal for nondetermination; 4.3.4 Once the Planning Application has been determined the Developer is to either: appeal against refusal or conditions attached to planning decision within statutory period; or to resubmit the scheme within twelve months of the planning decision; or to confirm the planning is an acceptable consent and pay the Planning Gain Fee 4.3.5 If the Developer fails to take any of the above actions the Option Agreement will terminate.
6
4.4 Planning Process:
4.5 Indemnity:
4.6 Insurance:
4.4.1 The Developer to obtain Landowners consent to the proposed development or any variations thereto including any planning agreements or Habitat Management Plans, such consent not to be unreasonably withheld or delayed; 4.4.2 Wherever possible the development is to minimise the impact on the remaining land, for example, turbines to be located adjacent to existing access tracks or field boundaries so as not to leave areas cut off and uneconomic to farm. 4.4.3 The Developer will provide a bi-monthly written report on project progress to the Landowner and their Professional advisors to include as appropriate the Minutes of all meetings with any Local Authorities, Statutory Consultees and Stakeholders. 4.5.1 To indemnify the Landowner against all third party claims resulting from the Developer's actions, inactions or use of the property or breach of the rights granted under this agreement subject to a limit of [ÂŁ10m] per incident. Any claims by the Landowner will also be subject to the above limit and will exclude indirect consequential and economic losses. 4.5.2 For the avoidance of doubt the initial figure will be increased in line with RPI in accordance with [Clause 4.4] of the Lease terms below. The Developer will carry and maintain an insurance certificate of at least [ÂŁ10m (Ten Million Pounds)] per incident which will be produced on demand.
7
4.7 Landowner’s Costs: 4.7.1 The Developer will be responsible for meeting all the Landowner’s reasonable professional fees including both Legal Advisor and Agents costs; 4.7.2 The Developer will also be responsible for paying the costs of obtaining vacant possession of the land, if it is subject to any tenancies, or negotiating any other third party rights. If necessary, the Developer will be responsible for all costs incurred in negotiating any agreements with the tenants or other third parties to facilitate that wind farm and the Developer will also pay any compensation or other sums that are due to the tenants (whether under statute or by agreement) in connection with the wind farm; 4.7.3 Fees will be charged:a) On agreement of Heads of Terms (the Landowner’s Agent reserves the right to claim an interim fee if Heads of Terms have not been agreed within 6 (six) months of appointment); b) On a 3 (Three) monthly basis up to completion of all documentation if requested; c) If necessary on completion of any Section 106 agreement; d) On the signing of the Option agreement; e) As necessary in respect of any further negotiations, notices or the completion of further legal paperwork in respect of the wind farm and any general matters arising from the Developers occupation of the site; 4.7.4 For the avoidance of doubt the Developer will settle such fees that are due and provide an undertaking from the Developer’s Solicitors to meet costs which will remain due even if the paperwork is not concluded. 4.8 Exclusivity: Neither the Developer nor the Landowner will submit an application for an alternative wind energy site proposing wind turbine(s) with a [50] metre tip-height or more, within the same Local Authority area or within 10km from this site until this Option has been exercised and the Lease taken or this Option has been terminated unless otherwise agreed by the Landowner or Developer, as appropriate, acting reasonably. 5. Landowner’s Rights 5.1Continued Use of Site:
5.2 Small Scale Turbines:
The Landowner to enjoy full use of the Option Land for all other purposes other than wind farm development save that the Landowner covenants not to build new buildings and/or plant new vegetation with an actual or expected eventual height of 10 (ten) metres or more within 600 metres of wind turbine locations proposed on the Option Land from time to time except with the Developer’s prior approval, not to be unreasonably withheld or delayed. The Landowner reserves the right to install small scale turbines on the Site (up to 50m tip-height) with the Developer’s prior approval on location, such approval not to be unreasonably withheld or delayed. [Any application made by the Landowner cannot be made before the Developer’s turbines have been consented and the legal challenge period has expired.] 8
6. Landowner’s Obligations: 6.1 Planning and Promotion:
6.2 Developer Exclusivity:
6.1.1 The Landowner will assist in any planning application for the site where requested by the Developer, subject to any additional costs, losses or expenses incurred in this process being met by the Developer; 6.1.2 The Landowner will support the planning submission for the development, including any planning conditions or associated agreements with 3rd party regulatory authorities, so long as the Landowner is fully indemnified by the Developer 6.1.3 Provided that any conditions imposed as part of the Planning process only affect the Option Site, are directly related to the use of the property as a wind farm, are proportionate to the scale of the scheme and only become binding after the Lease is completed and the Developer covers all the costs, losses and expenses incurred in association with meeting said conditions the Landowner will not unduly withhold consent; 6.1.4 At least 30 days prior to submission of a planning application and at any subsequent point when material changes to layout are proposed, the Developer will submit a plan for the Landowners approval which shall not be unreasonably withheld or delayed; 6.1.5 As soon as reasonably practicable after completion of the Option, the Landowner shall provide the Developer with any such information they have relating to the ground condition of the Option Site (including any information relating to contamination) and details of all previous uses of the Option Site of which the Landowner is aware; 6.1.6 During the Option Period the Landowner agrees not to use the Option Site for a purpose or activity which would adversely affect, the Developer’s proposed use of the Option Site as a wind farm or, the prospect of securing planning permission for a wind farm. 6.1.7 Planning Agreements: Landowner is not obliged to enter into any Planning Agreement unless obligations imposed are conditional on commencement of development, Landowner not liable unless it holds an interest in the land on which the breach occurs, the Landowner is released from liability on disposal of his land interest, the Landowner is not obliged to carry out works or make payments or if the Landowner is required to restrict land outside the option area. [Possibly get Developer to limit the effect of the Planning Agreement to its leasehold interest]. Exclusive agreement for the Developer to promote wind developments on the Option Site during the Option Period.
9
6.3 Title:
7. General: 7.1: VAT:
7.2: Confidentiality:
7.3: Termination:
6.3.1 The Landowner’s Solicitors will provide replies to enquiries in standard form and copies of the Landowner’s Titles. The Developer’s Solicitors will then investigate and carry out any necessary searches in relation to Title to ensure it is satisfied. Once title has been disclosed the Developer shall be deemed to have full knowledge of the matters disclosed and the Landowner will have no further liability to the Developer in respect of title issues disclosed. 6.3.2 If the title identifies that the consent of any third parties including Tenants mortgagees, covenant owners or mineral rights owners is required the Landowner’s and the Developer’s Legal Advisors will jointly use all reasonable endeavours, at the Developer’s cost, to obtain these necessary consents. 6.3.3 The Option will be noted against the Landowner’s title at the Land Registry or the Land Charges Department (as appropriate).
All figures are exclusive of any VAT payable and the Landowner reserves the right to exercise their option to tax VAT if they have not already done so. Unless required to do so for statutory or regulatory purposes, neither party will discuss / divulge to any third party any information, unless authorised by the other or where such information is clearly in the public domain with the exception of the Professional advisors of the Landowner. Except that the rental figures may be disclosed to any bona fide prospective lending institution for the purposes of security, or to any bona fide prospective purchaser of that party’s interest in the property. 7.3.1 The Developer can terminate the Option in writing, subject to payment of all outstanding fees and expenses, at any time on giving 6 months notice; 7.3.2 For the avoidance of doubt there will be no reimbursement of any Option fees already paid; 7.3.3 The Landowner may terminate the Option if the Developer is in material breach of the terms or has not met the maximum time scales for submission and subsequent appeal of the scheme; 7.3.4 If the Developer terminates the Option prior to the submission of a planning application for a wind farm then all information, survey results, and data collected by the Developer or their contractors is to be passed to the Landowner without charge and free of confidentiality provisions who can then use such information and disclose it to third parties.
10
7.4: Turbine layout and selection:
7.5: Lease (LTA 1954 excluded)
7.4.1 The layout of wind turbines will be consummate with engineering, design, technical wind and environmental requirements and construction feasibility; 7.4.2 The Developer will use reasonable endeavours to locate turbines so as to minimise disturbance to the Landowners property in accordance; 7.4.3 The Developer provide details of the proposed turbines including peak output, hub height, blade length etc prior to submitting planning and confirming turbine choice and estimated energy yield (P50 and P90) prior to exercise of the option; 7.4.4 The Developer undertakes to either install the turbine with the highest estimated energy yield (P50) as detailed under clause 7.4.3 above (subject to reasonable exceptions including for the avoidance of doubt the unavailability of the stated turbine, whereupon the second highest turbine details will be used) or to pay an increased Variable Rent to reflect the percentage difference in the P50 performance between the installed turbine and the highest P50 turbine. The agreed form Lease will be attached to the Option and the Developer will cooperate with the Landowner to ensure the necessary procedures are complied with to exclude the Lease from the security of tenure provisions of the Landlord and Tenant Act 1954
11
LEASE TERMS 1. The Parties: 1.1 Landowner: 1.2 Developer: 1.3 Developer’s Guarantor 2. Key points 2.1 Leased Area:
2.2 Access:
2.3 Lease Term: 2.4 Landlord and Tenant Act 1954
1.1.1 The Leased Area will be those areas of the Option necessary to operate and maintain the approved wind farm to include, towers, anemometer masts, hard standings, sub station, control and metering stations; 1.1.2 It is anticipated that these areas should be no larger than: a) Individual turbine sites will be no more than [2,500]m2; b) The substation will be no more than [600]m2; c) The Anemometer sites will be no more than [50]m2; d) Construction Compound; e) 1.1.3 Any requirement for a larger area than the proposed measurements will be consented where the Developer can demonstrate a requirement to the Landowner’s reasonable satisfaction and will be subject to a further one off payment of £[*]/m2 for the additional land taken including land rendered uneconomic contrary to Clause 4.4.2 of the Option terms; 1.1.4 Access Roads will be as near to field boundaries as possible so as to minimise land rendered uneconomic. 1.1.5 The anticipated position of the turbine bases, crane pads hardstandings, access roads, construction compound, cable runs are shown on the plan and will not be changed except with the consent of the Landowner (not to be unreasonably withheld or delayed). Reasonalbe compensation will be paid is respect of any change. 1.2.1 Right to construct access roads to the Leased Areas of no more than 5m running width subject to the payment below, with appropriate passing places and corners subject to Developer maintaining these roads; 1.2.2 There will be no payment for the first [****]m2 of land taken on average per turbine over and above the running area of the existing access tracks (where these are used); 1.2.3 Any requirement for a larger area than the proposed measurements will be consented where the Developer can demonstrate a requirement to the Landowner’s reasonable satisfaction and will be subject to a one off payment of £[5]/m2 for the additional land taken including land rendered uneconomic contrary to Clause 4.4.2 of the Option terms. A period of [27] years to include construction period and reinstatement period but subject to Clause 7.2 below. The Lease is to be contracted out of the Security of Tenure provisions of the Landlord and Tenant Act 1954. 12
Exclusion: 3. Developer’s Rights 3.1 Developer’s Rights
Subject to the Developer complying with its obligations under the Lease the Developer has the following rights: 3.1.1 Construction of wind turbines and associated substation, control building, works compound and anemometer in accordance with the Proposed Scheme; 3.1.2 Right to construct access roads within a [10] metre wide working strip, and to maintain, repair, renew, replace, use and remove these access roads as agreed in the option/planning subject to damage reinstatement/compensation including compensation for crop loss and any agricultural and environmental subsidy or similar payments and damage to drainage; 3.1.3 Additional Construction areas for the period of construction and refitting subject to damage reinstatement/compensation including compensation for crop loss and any agricultural and environmental subsidy or similar payments and damage to drainage: The construction area will be no more than [3,000]m2 round each turbine; The construction area will be no more than [1,500]m2 for the anemometry mast; An area of no more than [2,500]m2 will be allowed for a temporary construction compound and; The construction area will be no more than [1,000]m2 for the substation; 3.1.4 Rights to lay and maintain, repair, renew, replace, use and remove associated underground power and telemetry cables within a [5]m easement corridor subject to damage reinstatement/compensation including compensation for crop loss and any agricultural and environmental subsidy or similar payments and damage to drainage. Wherever possible these are to follow access roads; 3.1.5 Right to oversail the Landowners adjoining property; 3.1.6 Subject to payment of compensation and to obtaining all necessary consents and approvals, the right to fell, lop or cut trees on the Landowners adjoining area within [300]m of the turbines that interfere with the operation of the wind farm, such right being subject to any legislation or environmental stewardship schemes; 3.1.7 Any land permanently taken out of agricultural production over and above the areas outlined above for the purposes of planting schemes, dead areas of fields due to layout constraints etc to be compensated by a one off payment following the commissioning of the wind farm at the rate of £[*]/m2.
13
3.2 Assignment:
4. Developer’s Obligations 4.1 Rent:
3.2.1 No underletting of the whole or any part of the Leased Area (except as provided for in 3.2.3); 3.2.2 Any Assignment or Change of Control is prohibited during the Lease Period except an assignment of the whole of the Leased Area in the following circumstances:(a) Where such assignment is to a Group Company subject to a Parent Company Guarantee Bond (“PCG”) in a form and from a Group Company acceptable to the Landowner; (b) Assignment to third parties shall be subject to Landlords consent (acting reasonably and promptly) (c) On any assignment to a third party the Tenant shall be obliged to provide a payment to the Landlord, the greater of £[****] per MW of installed capacity defined in MW or £[***] per wind turbine with planning permission; 3.2.3 Underletting of part or all of the substation and associated equipment to the Regional Distribution Company (RDC) or sharing occupation with the RDC for use in connection with the wind farm does not require consent but the Tenant shall notify the Landlord of the subletting or sharing occupation within one month of it taking place.
4.1.1 Initial Payments During Construction
£[****] payable on the signing of the Lease in accordance with Clause 2.11 of the Option above and a Development Fee of £[****]/MW in accordance with Clause 2.10 above, 50% on entering the site and 50% on first generation plus crop loss including any agricultural and environmental subsidy or similar payments.
14
4.1.2 Rent During Lease to be the higher of:Guaranteed Fixed Rent: Fixed Rent will be payable at the following rates: A) From the start of the Lease to the 10th anniversary of Commissioning = £[*******]/MW installed/to be installed; B) 10th anniversary to 15th anniversary of Commissioning = £[****]/MW installed; C) 15th anniversary to end of generation = £[******]/MW installed All Index Linked and:Variable Rent: Variable rent to be the higher of : Period in Years from Commissioning/ 12 months after the date if the lease (4.1.10) 1-10 11-15 16-end of generation
Output Rent (£/MWh)
Turnover Rent (%)
£[***] £[***] £[***]
[*] [*] [*]
4.1.3 For the avoidance of doubt the Turnover Rent is based on the Gross Income derived from the wind farm including any subsidy or trading payments and including the payments from the sale of ROC’s and redemptions, LEC sales and redemptions, Triad benefits and any other income derived from the wind farm, including but not limited to, any future value arising from the sale or redemption of Carbon Credits or REGO’s and so forth. Furthermore, any Power Purchase Agreement is to reflect the full market rate available on the basis of an arms length transaction; 4.1.4 The Variable Rent will be inclusive of any insurance receipts, warranties or similar where these are in respect of loss of earnings rather than capital payments; 4.1.5 Substation Rent of £*** per annum; 4.1.6 Works/Construction Compound Rent of £**** per annum; 15
4.1.7 Anemometry Mast Rent of £*** per annum;
4.1.8 Rent will continue to be due during the Decommissioning Period and will be payable on a monthly pro-rata basis; 4.1.9 No turbines to be located on third party land. 4.1.10 The Variable Rent and Fixed Rent review dates will start from the “Commissioning Date” or 12 months from the Lease start date, whichever is the earlier. 4.2 Rent Start Date: 4.3 Rent Payment Dates:
4.4 Rent Reviews: 4.5 Planning Consents, and other legal obligations: 4.6 Maintenance:
4.7 Livestock/crop protection: 4.8 Crop Compensation:
4.9 Indemnification:
Rent shall be payable from the start of the Lease. Fixed Rents (Guaranteed Fixed Rent, Substation Rent, Anemometry Mast, Minimum Payments etc) to be paid quarterly in advance, with Output Rent and Variable Rent paid quarterly in arrears within 1 (one) month of the end of each payment period save that Rent payable during the Decommissioning Period will be paid monthly in advance. All rents and payments to be increased annually in line with the RPI from [**********] except the Turnover Rent. 4.5.1 The Developer will comply with all Planning, S106 and other legal conditions; 4.5.2 No further applications without Landowner’s prior consent at his absolute discretion. 4.6.1 To keep the Lease areas and structures thereon in a good and tenantable condition; 4.6.2 To maintain the Access Roads; 4.6.3 To maintain any drainage schemes affected by the project and affect any repairs or replacements thereto. The Developer will observe any regulations reasonably stipulated by the Landowner for the protection of any livestock or crops on the Landowner’s adjoining land. 4.8.1 To include crop loss, on any crop taken, including loss of any agricultural and environmental subsidy or similar payments or repayment of Woodland Grants; 4.8.2 Any such compensation will be payable on all land take areas whether temporary or permanent; 4.8.3 This payment is a one off payment in respect of claims arising during initial construction phase. Subsequent payments may be made in respect claims arising as a result of works carried out by the Developer outside the Leased Property after the completion of the initial construction phase. 4.9.1 To indemnify the Landowner against all third party claims resulting from the Developer's actions, inactions or use of the property or breach of the rights granted under this agreement subject to a limit of £[20]m per incident. Any claims by the Landowner will also be subject to the above limit and will exclude indirect consequential and economic 16
4.9 Insurance:
4.10 Rates and VAT: 4.11 Interest Rate: 4.12 Reinstatement:
4.13 Restoration Fund:
4.14 Landowners Fees:
losses. 4.9.2 For the avoidance of doubt the initial figure will be increased in line with RPI in accordance with Clause 4.4 above. 4.9.3 The Landowner may at any time during the Lease, acting reasonably, require the Developer to increase the level of indemnity to a level equivalent to that being provided in the market for wind farm schemes of a similar size, subject to the Landowner being able to provide evidence demonstrating the level of cover being provided elsewhere. The Developer will carry and maintain an insurance certificate for Public liability of at least £20m (Twenty Million Pounds) per incident; index linked which will be produced on demand. Cover to include but not be limited to construction and operational risks. To pay all outgoings including Rates and any VAT. To be charged where necessary at 5% above the Landowner’s Bank’s stated base rate. 4.12.1 Prior to taking entry to the site the Developer will produce at their cost a Schedule of Condition of the Landowners property; 4.12.2 On termination to reinstate the site, returning it to the previous state, and removing all objects to a depth of at least 1.2m (unless a lesser depth is agreed by the Landowner at his absolute discretion) including the removal of all access roads, electric cables, hardstandings and equipment and replacing topsoil to a depth of not less than 300mm; 4.12.3 The Developer will fund a contamination report by a suitably qualified independent expert including carrying out any recommended remedial work resulting from the presence of the wind farm (not preexisting contamination) identified therein. 4.13.1 The Developer will put in place a restoration fund or bond adequate to cover the cost of de-commissioning, dismantling and removing from site all the Developer’s equipment and restoring the site; 4.13.2 In the event of the Planning Authority requiring a restoration fund or bond as part of a s.106 agreement or as part of the Planning consent, the Developer may use the same fund or bond to cover both parties; 4.13.3 The initial sum deposited will be no less than £*** (** Thousand Pounds) per MW of proposed capacity; 4.13.4 The sum deposited shall be reviewed on the 5th, 10th, 15th and 20th anniversaries and thereafter will be reviewed every 2 (Two) years; 4.13.5 Interest will be credited to the account; 4.13.6 The revision of value is to be in accordance with the estimated reinstatement cost of removing all of the Developer’s equipment and reinstating the site. The resale value of any equipment removed may only be defrayed against the removal of that piece of equipment. Developer to be responsible for all the Landowners legal and surveyor’s fees incurred in dealing with the Lease and the occupation by the Developer.
5. Landowner’s Rights: 17
5.1 Standard Legal Rights:
5.2 Landowner’s Reservation:
5.3 Shooting:
5.1.1 Right of free running water including drainage; 5.1.2 Right of existing power, gas oil and other lines as now cross the Leased areas; 5.1.3 Right of support for neighbouring land; 5.1.4 Mineral rights, but may only be exercised so far as they do not materially effect the operation of the wind farm. 5.2.1 Any parts of the Leased area, which are not occupied by the Developer’s equipment can be used by the Landowner as long as his activities are secondary to the Developer’s requirements, do not interfere with the Developer’s interest and any agreed habitat management requirements, other planning obligations and the terms of Landowner’s reservations are complied with at all times; 5.2.2 Landowner specifically reserves the right to use all the access ways and if necessary relocate any access ways subject to the Developer's consent, such consent not to be unreasonably withheld or delayed; 5.2.3 Landowner reserves the right to install small scale turbines. Shooting rights to be retained by the Landowner subject to an agreed code of conduct.
6. Landowner’s Obligations: 5.1.1 Not to damage electric / communication cables but to be allowed to request a relocation of any cables required for the wind farm; 5.1.2 Not to erect any new buildings or structures that exceed 10 metres in height within 600m of the nearest wind turbine at ground level without the Developer's consent, such consent not to be unreasonably withheld or delayed; 5.1.3 Not to plant new trees within 300m of turbines, with the exception of replacing existing trees, which may affect the wind flow to the turbines without the Developer’s consent, such consent not to be unreasonably withheld or delayed; 5.1.4 To grant wayleave agreements to the DNO or National Grid in respect of agreed conducting media routes on an annual basis; 5.1.5 For the avoidance of doubt the Landowner will be able to continue to farm and peaceably enjoy the adjoining agricultural land. 7. General: 7.1 Confidentiality:
7.2 Break Clauses:
Unless required to do so for statutory or regulatory purposes, neither party will discuss / divulge to any third party any information, unless authorised by the other or where such information is clearly in the public domain with the exception of the Professional advisors of the Landowner. Except that the rental figures may be disclosed to any bona fide prospective lending institution for the purposes of security, or to any bona fide prospective purchaser of that party’s interest in the property. 5.2.1 Developer to have the right to terminate after the 10th, anniversary of the Lease subject to a payment of two years rent (based on average rent paid for the previous two years) and subject to the Developer not 18
7.3 Disputes:
7.4 Applicable Law:
being in breach of any other terms of the Lease and subject to the Developer having discharged all restoration obligations; 5.2.2 The Landowner to have the right to terminate the Lease at any time when the Developer is in breach of the agreement unless such breaches are remedied within 90 (ninety) days of the breach; 5.2.3 The Landowner to have the right to terminate the Lease on or after the expiry of the original planning consent for the wind farm subject to a reasonable decommissioning period. Both parties agree that any dispute or difference that cannot be resolved by the parties in connection with this Lease will in the first instance be referred to mediation in an attempt to settle it through alternative dispute resolution methods. [Thereafter the dispute will be referred to arbitration in accordance with the Arbitration Act 1996], however, neither party may commence any court proceedings or arbitration in relation to any dispute until it has attempted to settle by mediation and either the mediation has terminated or the other party has failed to participate in the mediation, provided that the right to issue proceedings or seek arbitration is not prejudiced by a delay. English.
LANDOWNER
DEVELOPER
Signed:
Signed:
Print Name:
Print Name:
Position:
Position:
Date:
Date:
19