Land purchase and site risk

Solar PV Solar PV

Description (What is the Risk)

The risk of acquiring title to the land to be used for a project, the selection of that site and the geophysical conditions of that site.
Planning permission.
Access rights.
Security.
Heritage.
Archaeological.
Pollution.
Latent defects.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears full responsibility for the suitability of the project site, including geological, geotechnical, archaeological conditions.

The Private Partner is obliged to obtain and maintain the peaceful use and possession of the project site, as well as all requisite access rights and servitudes that might be required.

The Private Partner bears full responsibility to procure the construction, operation and maintenance of the facility in accordance with all laws and consents and accordingly, bears full responsibility for obtaining all environmental permits, consents and licenses.

Mitigation Measures (What can be done to minimize the risk)

The Private Partner should, to the greatest extent possible, ensure that it has a complete understanding of the risks involved in securing the site and the site constraints that will impact on the construction and operation of the facility.

The Private Partner may seek to pass the site risk down to the EPC contractor and in terms of the lease agreement (if applicable), to the extent possible.

The Private Partner must ensure that the construction and/or operating contractor complies with any applicable permits and consents by way of the inclusion of corresponding obligations in the construction contracts.

Government Support Arrangements (What other government measures may be needed to be taken)

Generally, neither the Government authority nor the contracting authority has an obligation to facilitate the issuance of the required permits or consents, nor does it have any obligations in relation to assisting with securing the site.

The exemption will be where the project requires new transmission lines to be constructed; construction of transmission lines will be done by the contract authority, but at the costs of the Private Partner. In such case, the contracting authority will be responsible for securing the right of ways required for construction of the transmission lines.

Comparison with Emerging Market

Land rights and ground conditions in developed markets are typically more established and risks can be mitigated with appropriate due diligence with relevant land registries and utility records.

The Private Partner's obligations with regards to indigenous rights are generally well legislated in developed markets. For example, the requirement to enter into indigenous land use agreements under native title legislation in Australia and the equivalent under first nations law in Canada.

On the other hand the rights of private landowners against forced sales or expropriation might be stronger in developed markets, requiring more time to acquire the land and all necessary rights for the development of the project such as easements for the connection corridor.

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Description (What is the Risk)

The risk of acquiring title to the land to be used for a project, the selection of that site and the geophysical conditions of that site.
Planning permission.
Access rights.
Security.
Heritage.
Archaeological.
Pollution.
Latent defects.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears fully responsibility for the suitability of the project site, including geological, geotechnical, archaeological conditions.

The Private Partner is obliged to obtain and maintain the peaceful use and possession of the project site, as well as all requisite access rights and servitudes that might be required.

The Government Authority has the right of access to the project site to verify compliance by the Private Partner with its obligations under the relevant Government agreements.

The Private Partner bears full responsibility to procure the construction, operation and maintenance of the facility in accordance with all laws and consents and accordingly, bears full responsibility for obtaining all environmental permits, consents and licenses.

Mitigation Measures (What can be done to minimize the risk)

The Private Partner should undertake detailed ground, geotechnical, environmental and social assessments/surveys and should disclose such information to the Government Authority as part of the bidding process.

The Private Partner should, to the greatest extent possible, ensure that it has a complete understanding of the risks involved in securing the site and the site constraints that will impact on the construction and operation of the facility.

The Private Partner should also manage any indigenous land rights issues that may impact on the use of the site. The Private Partner must provide evidence to the Government Authority that no land claims have been lodged by interested or affected parties against the proposed site prior to the award of the tender by the Government Authority. These land claims can however be lodged at any time during the construction or operations phase of the project. Therefore, the Private Partner assumes the responsibility of settling any such claims (to the extent such claims are successful).

The Private Partner may seek to pass the site risk down to the EPC contractor and in terms of the lease agreement (if applicable), to the extent possible.

Where a Private Partner is leasing the site from a land owner, the Private Partner may consider including in the lease agreement the right to change the site in case of archaeological discoveries / site contamination.

The Private Partner must ensure that the construction and/or operating contractor complies with any applicable permits and consents by way of the inclusion of corresponding obligations in the construction contracts.

Government Support Arrangements (What other government measures may be needed to be taken)

Neither the Government Authority nor the Contracting Authority has an obligation to facilitate the issuance of the required permits or consents, nor does it have any obligations in relation to assisting with securing the site.



Comparison with Developed Market

Land rights and ground conditions (in particular reliable utilities records, and land charges) in emerging markets may be less certain than in developed markets where established land registries and utility records exist.

In the absence of legislation in emerging markets, indigenous land rights issues and community engagement can be managed by the Contracting Authority through the adoption of IFC Safeguards for the project, particularly in order to ensure international financing options are available to the project.

It is common for the site of the solar PV project to be determined by the Contracting Authority in order to maximise the energy yield, lower connection costs and reduce the risk of negative impact on the electricity network.

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