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Thread: Connection Agreements and 'Heads of Terms' For Solar Farms - Be Very Aware

  1. #1

    Connection Agreements and 'Heads of Terms' For Solar Farms - Be Very Aware

    Hi Guys

    Since posting the blog 'What Does The Removal of ROCís For Solar Farms(over 5MW) Mean For Farmers and Landowners?' I seem to have hit on a significant issue for a number of farmers.

    If you are considering renting your land for a solar farm (1Mw - 5Mw) or have been approached with a contract to assess your DNO Connection options you may want to read on

    Apologies in advance this will be a long post...

    As predicted the interest is focusing very much around the 5MW developments where typically a Developer will require 25 - 35 Acres of none prime land (Soil Grade 3b and below) which is crossed or close to 11 KV or 33KV overhead lines.

    As per the blog this has come about due to the imminent change in the Financial Instruments used to pay for Solar Farm Generation. Anything below and up to 5MW will remain within the ROC's set up and developments above 5MW will fall into the Contract for Difference (CfD's) which involves bidding for a pot of cash against other existing and cheaper renewables. The Solar Trade Association estimate a cut of 65% - 80% next year in large scale Solar installations. However it's also important to note that the current ROC's mechanism will finish in 2017.

    All of this will lead to a massive increase in both demand and development of 5MW parks. And the main delimiting factor on this will not be cash but the availability of Grid Connections.

    Over the past few months I've encountered several scenarios that I'm sure some of you are familiar with.

    The Developer indicates that the farmer could earn up to £1,000 per acre and offers to approach the DNO to assess Connection costs. The Farmer signs a form which gives the Developer the rights to that Connection - This all seems quite innocent but the Developer is now in a position where he can continually renew that offer before deciding to develop or not. Now whilst this clearly does not negate your ability to farm the land it does stop you developing a solar park either independently or with another Developer.

    A second scenario is that the Developer has approached the farmer to sign a DNO Connection Request form and then presented the resultant offer of connection back to the farmer alongside an initial contract called 'Heads of Terms' (HOT's). There is clearly confusion as to who owns the Connection Offer but without recourse to the DNO you will not know. This has happened several times in the past weeks and each time we have be able to confirm that the Connection Offer is still very much in the farmers name. But how many have gone ahead not knowing.

    A third scenario is that the Developer works in conjunction with a Land Agent who quite legitimately believes he or she has obtained a good deal for you from a Developer and advises you to sign over the Connection Agreement to start the ball rolling.

    In reality there are many more scenarios and no one (I have come across) is breaking any laws and no one has been coerced or forced to give a signature.

    But this highlights the key point that the Connection Agreement is not only the first step but the key to a successful and beneficial contract in your favour. YOU MUST KEEP CONTROL OF THE CONNECTION OFFER.

    I cannot stress this enough and to submit an application in your name will give you a significant advantage. So if yo are approached by a Developer agree to the application but insist it's done in your name. There are many Developers out there who will do this and be happy to build a relationship on that basis. They may make a small charge to cover there costs (£250 - £350) but you will still have control.

    You can of course commission your own Application for a similar fee or work through Consultants like ourselves who offer the service for free and will negotiate with Developers on your behalf to get the best possible deal for you.

    Having established your Connection Offer you will be asked to sign the initial 'Heads of Terms' Agreement with your chosen Developer. This document is pre planning but importantly forms the basis of the final Lease Option Agreement. It will also contain the initial amount of cash the Developer will pay for your legal and professional fees at this and the Lease Option stage. This is clearly very important as it allows you to recruit a team of professionals very early on but at the cost of the Developer.

    In a recent case we were involved in we were approached by a Farmer who by his own admission (and I know he will not mind me mentioning this) was out of his depth and needed advice on what he agreed could be a life changing deal for both himself his parents and his young family. I will not go into details but the contract on offer and the contract he eventually agreed were two very different documents.

    The reality is that the amount of profit available now and well into the future from the generation of electricity is huge and the Developers will be happy to negotiate to ensure the deal goes through. But they are hard nosed commercially astute business people and will not offer unless pushed.

    So please ensure that you keep the Connection Offer and get professionals on board at an early stage.

    Kind Regards
    Mike Smith
    0796 462 9142 50 kW Solar OFFER

  2. #2
    Join Date
    Jun 2013
    north yorkshire

    Re: Connection Agreements and 'Heads of Terms' For Solar Farms - Be Very Aware

    Have fallen in to the dno trap but the developer has pulled out because northan powergrid have asked for 1million to conect and 1 million for sub station it is a 116 ac site with a unused line on site .northern power gid seam not to want solar parks.

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