Renewable energy projects need land (hence the need for property lawyers!) If it’s a wind turbine, the project needs the site of the turbine, access to the turbine and a wind protection zone. If it is, say, to be a run of river hydro scheme, the project needs land to build the turbine house, intakes and access to the various parts of the river. Do you get the idea?
So why do developers lease the land rather than just buy it outright? There are a few reasons:-
- usually landowners do not want to sell parts of their land if they can avoid it;
- developers do not want to commit to the capital investment of buying land so leasing the land gives them the site they need without the up front commitment; and
- a lease structure can be used by a developer to obtain certain types of commercial funding (which we’ll talk about in general terms in a later blog).
It is all about doing what works best for the landowner and developer so there is nothing to stop the parties agreeing to sell / buy the land or enter into a joint venture (where the landowner provides the land and the developer provides the expertise) if that’s the best solution for them. But the lease structure, for now, is often the preferred route for projects.
So how does the developer go about getting a lease? Well that will be covered in the next blog: “What is an option agreement?”
On March 15, 2012