BESS reinstatement bond

[barleyboy]

Been approached for a battery energy storage system. Who knows if grid connection will be available, so not getting too excited yet, although right next door to mahoossive substation.

Anyway, 100MW and big rental figure.

Will be getting an agent to look at it, but any friendly advice gratefully received.

Developer has sent their standard Heads of Terms. One thing which is of concern is the reinstatement bond. Held in ESCROW account, but they only want to put 10% of estimated cash into account at beginning of agreement, then nothing until year 11 when they'll put 10%/annum in there after.

Worried this leaves us at risk of them going bankrupt anywhere from year 1 to year 19, and land reinstatement bond not covering that eventuality for many years.

Anyone had similar. Is there a negotiation to be had?

Also, if anyone can explain how it all works? Presume similar for solar. Letter of authority? Heads of terms? Signing the lease option? All a bit overwhelming.

 

[Doing it for the kids]

Is that 2 x 49 mw sites? If not that’s a v different planning game.

Get agent to cover all this off. Lot of value in setup in first few years so if they went bust you may be quids in!

 

[barleyboy]

Is that 2 x 49 mw sites? If not that’s a v different planning game.

Get agent to cover all this off. Lot of value in setup in first few years so if they went bust you may be quids in!

They just want a single site/field. Not certain, but get impression planning might be £100k+.

So if a whole load of value in kit, then suppose need to read up who it belongs to if project went belly up. i.e. maybe say they can't take any kit away until reinstatement bond is topped up. Will ask agent.

There is a clause which says they have a break option at year 10, but can't exercise it unless they've topped up bond to 100%, but that's not much comfort of they've gone bankrupt in meantime.

 

[barleyboy]

Don't suppose they're intending to go bankrupt with all that investment. £30 million??

 

[Doing it for the kids]

Suspect you’re£100k will be closer to 400

Solar here is pushing 6 now

 

[MrNoo]

Seems common, they did that here with our solar/storage but reviewed every 5 years.
They argued that the hardware value alone would be more than enough to cover reinstatement, which I worked out to well covered several times over 89,000 panels x £100 a pop or even if you moved them on at £50/pop you'd be quids in.
Storage is no different, lithium ion batteries, they won't have an internal BMS but there is a ready market for them for householders who DIY and I would bet another project/farm would take them off your hands. A lot of people are building their own power walls DIY. I was flogging off 11kw Li-ions for £1500/each, shame they scrapped 50 others!

 

[barleyboy]

Seems common, they did that here with our solar/storage but reviewed every 5 years.
They argued that the hardware value alone would be more than enough to cover reinstatement, which I worked out to well covered several times over 89,000 panels x £100 a pop or even if you moved them on at £50/pop you'd be quids in.
Storage is no different, lithium ion batteries, they won't have an internal BMS but there is a ready market for them for householders who DIY and I would bet another project/farm would take them off your hands. A lot of people are building their own power walls DIY. I was flogging off 11kw Li-ions for £1500/each, shame they scrapped 50 others!

Thanks for those thoughts.

I was speaking to someone today and they had similar advice. Equipment and site has a value. There is a clause saying they can't give notice at 10 year break clause unless they've topped up reinstatement to 100%, will check fine print.

Note to self though. Clearing up battery storage site bigger job than removing solar panels!!!

I recon we don't get too hung up about it. Ltd company reduces risk as well.

 

[Exfarmer]

cleaning up a battery storage area would be a complete nightmare if the company does a runner!
Having had experience of the value of these long term warranties I am highly sceptical that they will automatically come up trumps
20 acres of dead highly toxic batteries would scare me!
Solar panels I would come and take away for nothing complete with the infrastructure, or better still pay you to leave it in place to keep generating

 

[barleyboy]

cleaning up a battery storage area would be a complete nightmare if the company does a runner!
Having had experience of the value of these long term warranties I am highly sceptical that they will automatically come up trumps
20 acres of dead highly toxic batteries would scare me!
Solar panels I would come and take away for nothing complete with the infrastructure, or better still pay you to leave it in place to keep generating

Yes a nightmare to clean it up. Solar panels would be no worry at all.

Lot of rent to pass on if I'm not prepared to take the risk though. Unlike solar panels, not even sure I'd want it writing into agreement that I keep the equipment if they default on rent. Maybe insurance is the way forward, or at least for the first 15 years. Or just sell the whole site. Various options. Selling the site might be attractive, and give us a lump of crash.

Also found a clause which says we've to enter into any agreement required by project's financiers. Can't sign that, it's completely open ended. Theoretically, worst case scenario, they could put a charge on our land, then if developer defaults on loan they could take our field. If developer has a watertight lease agreement, then that's all they need. I'd have thought that's all financier needs to know, any other relationship is solely between developer and financier.

 

[pappuller]

Yes a nightmare to clean it up. Solar panels would be no worry at all.

Lot of rent to pass on if I'm not prepared to take the risk though. Unlike solar panels, not even sure I'd want it writing into agreement that I keep the equipment if they default on rent. Maybe insurance is the way forward, or at least for the first 15 years. Or just sell the whole site. Various options. Selling the site might be attractive, and give us a lump of crash.

Also found a clause which says we've to enter into any agreement required by project's financiers. Can't sign that, it's completely open ended. Theoretically, worst case scenario, they could put a charge on our land, then if developer defaults on loan they could take our field. If developer has a watertight lease agreement, then that's all they need. I'd have thought that's all financier needs to know, any other relationship is solely between developer and financier.

We have been towards 3 yrs negotiating an option/lease for a battery storage setup 48mw.
Its been a bloody hard slog and cost me a few quid over their agreed professional fees figure.
We received planning consent in nov and hoping to break ground early summer.
We have a very good ag solicitor and have used an experienced agent for advice.
Stand your ground but also be prepared to deal.

 

[EssJayRuss]

We have been towards 3 yrs negotiating an option/lease for a battery storage setup 48mw.
Its been a bloody hard slog and cost me a few quid over their agreed professional fees figure.
We received planning consent in nov and hoping to break ground early summer.
We have a very good ag solicitor and have used an experienced agent for advice.
Stand your ground but also be prepared to deal.

Is this something you actively seeked out yourself or did a company approach you at all?

We were approached about 4 years ago, but the company (Suncredit) mentioned embargoes on BESS.

 

[steveR]

Been approached for a battery energy storage system. Who knows if grid connection will be available, so not getting too excited yet, although right next door to mahoossive substation.

Anyway, 100MW and big rental figure.

Will be getting an agent to look at it, but any friendly advice gratefully received.

Developer has sent their standard Heads of Terms. One thing which is of concern is the reinstatement bond. Held in ESCROW account, but they only want to put 10% of estimated cash into account at beginning of agreement, then nothing until year 11 when they'll put 10%/annum in there after.

Worried this leaves us at risk of them going bankrupt anywhere from year 1 to year 19, and land reinstatement bond not covering that eventuality for many years.

Anyone had similar. Is there a negotiation to be had?

Also, if anyone can explain how it all works? Presume similar for solar. Letter of authority? Heads of terms? Signing the lease option? All a bit overwhelming.

Check where the funds are being held in escrow.

Experienced Agent is a must for this sort of project... not the local auctioneers He will do the negotiating for you.

Same goes for the legals, a good solicitor...

The bond here is topped up at 5yr intervals.

I have a clause that states if the rent is not paid on time, the site reverts to me. This was a particularly useful argument when the first Solar farm Owners (and builders) omitted to pay up the one time... I pointed out the error of their ways.... the money was in my account within 6hrs

 

[MrNoo]

Check where the funds are being held in escrow.

Experienced Agent is a must for this sort of project... not the local auctioneers He will do the negotiating for you.

Same goes for the legals, a good solicitor...

The bond here is topped up at 5yr intervals.

I have a clause that states if the rent is not paid on time, the site reverts to me. This was a particularly useful argument when the first Solar farm Owners (and builders) omitted to pay up the one time... I pointed out the error of their ways.... the money was in my account within 6hrs

I just lock the access gates on the track, they paid within the hour after I informed them!! Also said if late again it'll be locked, they seem to pay up on time now.

 

[barleyboy]

Check where the funds are being held in escrow.

Experienced Agent is a must for this sort of project... not the local auctioneers He will do the negotiating for you.

Same goes for the legals, a good solicitor...

The bond here is topped up at 5yr intervals.

I have a clause that states if the rent is not paid on time, the site reverts to me. This was a particularly useful argument when the first Solar farm Owners (and builders) omitted to pay up the one time... I pointed out the error of their ways.... the money was in my account within 6hrs

Good point about where escrow account is held.

Solar or BESS for your project?

I think a clause if rent not paid site reverts to me, a good idea. Unless it's fired itself, then, do I want it? Maybe I keep a ransom strip as per @MrNoo 's locking the gates.

 

[steveR]

Good point about where escrow account is held.

Solar or BESS for your project?

I think a clause if rent not paid site reverts to me, a good idea. Unless it's fired itself, then, do I want it? Maybe I keep a ransom strip as per @MrNoo 's locking the gates.

Solar.

Came close to a Battery system, but it failed as DNO changed the goalposts...

 

[MrNoo]

Get it so it's paid DD, for some reason Gridserve won't do this, I have to invoice each quarter, which is a ball ache as wait until they feel like paying.

 

[steveR]

Get it so it's paid DD, for some reason Gridserve won't do this, I have to invoice each quarter, which is a ball ache as wait until they feel like paying.

My rent used to be paid quarterly, but about 4 years ago the new Owners asked could they go to annual payments, in advance. Then the "top ups" at the end of their tax year. Once I squared it with my accountant, it has been going fine. I did have to remind them I have to have a Statement, which they now email at the same time as payment is made.

 

[pappuller]

My rent used to be paid quarterly, but about 4 years ago the new Owners asked could they go to annual payments, in advance. Then the "top ups" at the end of their tax year. Once I squared it with my accountant, it has been going fine. I did have to remind them I have to have a Statement, which they now email at the same time as payment is made.

Rent and reinstatement paid monthly 1 month in advance, if you rent any property that's the usual route.

 

[pappuller]

Is this something you actively seeked out yourself or did a company approach you at all?

We were approached about 4 years ago, but the company (Suncredit) mentioned embargoes on BESS.

Its been ongoing for 5 or 6 yrs, originally was a diesel generation emergency generation but this was cancelled due to govnt policy so we then had a meeting with agent who suggested batt storage, our big plus was a very under capacity line that had originally powered a very large food manufacturing facility which is now no more.

 

[warksfarmer]

Been approached for a battery energy storage system. Who knows if grid connection will be available, so not getting too excited yet, although right next door to mahoossive substation.

Anyway, 100MW and big rental figure.

Will be getting an agent to look at it, but any friendly advice gratefully received.

Developer has sent their standard Heads of Terms. One thing which is of concern is the reinstatement bond. Held in ESCROW account, but they only want to put 10% of estimated cash into account at beginning of agreement, then nothing until year 11 when they'll put 10%/annum in there after.

Worried this leaves us at risk of them going bankrupt anywhere from year 1 to year 19, and land reinstatement bond not covering that eventuality for many years.

Anyone had similar. Is there a negotiation to be had?

Also, if anyone can explain how it all works? Presume similar for solar. Letter of authority? Heads of terms? Signing the lease option? All a bit overwhelming.

I’d get this clarified because a recent change in regulatory body rules means that your solicitor cannot hold these kind of monies on your behalf. You’ll need a ‘decommissioning account’ set up and an agreement in place that the tenant pays the running costs of that account, but the account will be basically yours. They’ll be a separate agreement in place covering this money detailing when/if you can access it. All legal costs should be paid by the tenant.

The actual amount should be the current cost to reinstate and then it gets index linked every 5 years.

As for how things work you’ll want to get the grid connection in your name. When you’ve got that then find the prospective tenant and when you sign the HOT’s you’ll want one years rent paid at that point as a signing on bonus. Then you’ll sign the lease and at that point the rent starts a quarter in advance. Make sure you get paid to reinstate the site after the construction such as levelling the ground or planting grass. Then you’ll want the ongoing maintenance contract for the ground such as grass mowing etc. finally make sure the agreement allows you to buy the infrastructure off them in the final year for £1. You’ll then have the last 12 months to get the site assessed as to whether you want to run it and take on all the costs but also all the income.

The other thing you should do is get the rent paid into different business’s to give you the best tax position.