Senior associate Sébastien Plamondon looks at multi-contract structures in construction contracts, and practical solutions to manage interface risk in such structures. (Read more).

In Trinity News, we are pleased to announce that we continue to grow our team across our offices. In London, we welcome Pravesh Lallah as counsel, who joins us from his own political risk consultancy having also worked for several years at Allen & Overy. We also welcome Kahema Mungili as an associate specialised in projects and construction matters, who joins us from Clyde & Co. In addition, Darren Williams joins us as billing manager.

In Deal News, since the last edition of Focus, we have been delighted to advise our clients in reaching the following milestones:

• Our Paris office has advised Africa REN and Walo Storage SASU in relation to the Walo Storage project which reached financial close in July 2024. The Dutch development bank FMO and the Emerging Africa Infrastructure Fund (EAIF), acting through Ninety-One, fund manager of EAIF will invest up to a total of €32 million in syndicated debt into Walo Storage. Walo storage is the first battery storage project in West Africa dedicated to frequency regulation. In a country challenged by grid constraints due to limited spinning reserves and the ongoing integration of intermittent energy, the Walo storage project will bring much-needed stability to the local grid and reduce power outages. Furthermore, this initiative supports Senegal’s 2030 Universal Access goal by producing 16 MW from green energy sources and is anticipated to reduce carbon dioxide (CO2) emissions by 17 000 to 21 000 tpy. The Trinity team led in Paris by Partners Marianna Sédéfian, Pierre Bernheim, Luke Muchamore (London), with support from Senior Associate Alexis Giroulet. (Read more).

• Our Paris office has advised Scatec ASA and AEOLUS SAS on the successful financial close of the 100MW Sidi Bouzid & Tozeur solar projects in Tunisia. This major milestone marks a significant advancement in Tunisia’s renewable energy landscape. The total project cost, estimated at EUR 79 million, is being financed through a combination of non-recourse project finance debt, concessional loans, and equity contributions from the partners. The senior lenders for the projects include the EBRD and Proparco, with additional concessional financing provided by the Clean Technology Fund and the Global Environment Facility. The Trinity team was led in Paris by Partners Marianna Sédéfian, Pierre Bernheim, Luke Muchamore (London), with support from Senior Associates Yassine Allam and Sébastien Plamondon. (Read more).

• The Government of Malawi and Mkango Resources Ltd announced in July the completion of a Mining Development Agreement for the Songwe Hill Rare Earths Project to be developed in Phalombe, Malawi. The execution of the MDA marks a significant milestone for Malawi’s mining sector and is reflective of Africa’s central role in the supply of rare earths which are critical for the green transition.  Trinity is privileged to have worked closely with the Malawi Government to support the Government and advise on the Mining Development Agreement. Partners Conrad Marais (London) and Lucien Bou Chaaya (Paris) and Senior Associate Anne-Gaëlle Cottenceau (Paris) advised on the transaction.

• Trinity advised the Facility for Energy Inclusion (FEI), on its multi-million USD facility to finance its telecoms transaction in South Sudan, alongside Finnfund, and the asset management company of iEng Group, Communication and Renewable Energy Infrastructure (CREI). The financing will enable CREI to provide “energy as a service” to a telecoms company in South Sudan by developing, building, operating, and maintaining energy assets. The transaction team comprised Rinku Bhadoria (Finance), Luke Muchamore (Projects) and associate Katchenin Kone.  The deal marks Trinity’s closing of an infrastructure transaction in its 50th country in Africa. (Read more).

• A team from Trinity London – Partner Fiona Gulliford together with Associate Rhiannon Lock – have advised the Government of the Maldives and the Asian Development Bank in the design, drafting and tendering of a 12.5MW grid-tied solar PV project to be developed across multiple islands in the Maldives archipelago. The bid deadline closed in September 2024 and the Government is currently evaluating the bid submissions. The scope of the Project will be to design, build, finance, own, operate, maintain, and transfer or decommission 12.5MW solar photovoltaic power facilities across 66 Sites in 11 outer islands in the Maldives. The capacity of sites range from 25kWp to 1.2MWp. The generation facilities will connect to new interconnection facilities and BESS systems, which are currently being constructed and upgraded by the Government on each of the relevant islands under a separate project Accelerating Sustainable System Development Using Renewable Energy Project.

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Welcome to the Summer 2024 edition of Focus.  Trinity is proud to be attending the Africa Energy Form (AEF) in Barcelona from 25 to 28 June 2024. Please come and see us at Stand A114.

The beginning of June saw the Asia Clean Energy Forum, hosted by the Asian Development Bank in Manila. The theme of the forum was “Accelerating the Clean Energy Transition and ensuring Energy Security and Affordability – Time for Urgent Action Now”, focusing on how to improve access to clean energy amongst some of the most disadvantaged communities in the Asia-Pacific and Central Asian region. Over five days, the conference looked at green energy transition, energy efficient policies, the role of the carbon markets, ocean technologies and financing solutions – with varied sessions focusing on specific sectors and jurisdictions. Trinity London Partner, Fiona Gulliford, joined the panel for an ADB led session on “Structuring and Financing Pathfinder Climate Projects in New Sectors”. The session looked at diverse and complex pathfinder projects supported by ADB in the region, including structuring bankable green hydrogen projects and promoting and subsidizing clean cooking fuel projects in South East Asia to district heating projects in Uzbekistan, and the first in jurisdiction floating and ground mounted solar IPP being developed in the Maldives. With her fellow panelists, Fiona looked at the key challenges to developing climate friendly projects in new sectors, often utilizing new technologies, and how to address or mitigate the key risks to the private sector, in order to catalyze project development and procure financing support.

In recent times clear signs are showing of a growing secondary market for African infrastructure assets. Many of our readers will have been involved in primary market transactions over the years, and partner Conrad Marais and associate Adekanmi Lawson provide their observations here on the growing maturity of the sector on the African continent.

Partner Natasha Peter and associate Maksym Kodunov take a look at approaches to excluding liability for wilful default, looking at recent English case law and comparing with principles of French law. You can read their article here.

In an OHADA law update, partner Marianna Sédéfian summarises the entry into force of the new uniform act on organisation of simplified procedures for debt recovery and enforcement procedures here.

We are again pleased to announce that we continue to grow our team across our offices.  In London, we welcome Katchenin Kone as an associate, who joins us from a large UK firm having also worked for several years in-house at a major investment bank. Yusuf Olalere joins as a paralegal, and he has previously worked at one of the largest Nigerian law firms. We also welcome Lydia Morgan as a legal secretary.  In Paris, we are very pleased to announce that Alexis Giroulet has been promoted from associate to senior associate, and Mama-Sahale Souare will be promoted from intern (stagiaire) to associate this month. In addition, Yolande Lopez joins the Paris office as Office Manager and Personal Assistant.

In Deal News, since the last edition of Focus, we have been delighted to advise our clients in reaching the following milestones:

• Our Paris Office has advised Groupe Qair (“Qair”), an independent renewable energy company, in the context of the financing of a greenfield solar photovoltaic plant with a total capacity of 10-megawatt to be located in Feriana town, Kasserine Governorate, Tunisia. The project, developed under Tunisia’s authorisation regime, will enable the country to reduce its CO2 emissions by 8,560 tonnes a year and to decrease its reliance on fossil energy. The project is in line with Tunisia’s goal of achieving 30% renewable energy production by 2030. Trinity’s team was led from Paris by Marianna Sédéfian (Partner) and Yassine Allam (Senior Associate) acting as international legal advisers, with the support of Meziou Knani & Khlif on Tunisian law aspects. https://www.qair.energy/tunisia-qair-secures-financing-for-two-10-mw-photovoltaic-power-plants/

• We are delighted to have advised Meridiam on the pivotal loan from British International Investment to Rift Valley Energy, its wholly owned subsidiary, to finance projects that will expand access to sustainable electricity in rural areas in Tanzania. The wind and hydropower projects supported by the financing will provide energy to about 170,000 people per year and connect 4,000 businesses and households to the grid for the first time. The deal highlights Trinity’s continued commitment to supporting rural electrification and our expertise in portfolio-based financing. The Trinity team was led by partner Rinku Bhadoria with corporate input from partner Conrad Marais and support from senior associate Elizabeth Handley. https://www.bii.co.uk/en/news-insight/news/bii-signs-agreement-with-meridiam-to-provide-15m-to-rift-valley-energy-to-expand-access-to-sustainable-energy-in-tanzania/

• Trinity International’s Paris Office has advised the Facility for Energy Inclusion (FEI), a fund managed by Cygnum Capital, on all aspects of a financing granted to NuRAN Wireless (Africa) Holding, a wholly owned subsidiary of NuRAN Wireless Inc. (NuRAN). NuRAN is a rural telecommunications company that meets the growing demand for wireless network coverage in remote and rural regions, especially in Africa. The financing will enhance the implementation of renewable energy assets for mobile network infrastructure in respect of existing and new Network as a Service agreements in Cameroon and DRC. The funding from FEI will allow NuRAN to connect a population of over 3 million, bringing connectivity to undeserved communities. We are proud to have assisted the FEI team. Trinity’s team was led from Paris by Marianna Sédéfian (Partner), Yassine Allam (Senior Associate) and Yalda Khalife (Associate) acting as international legal advisers, with the support of Benoit Chambers on Mauritian law aspects, Amadagana & Partners on Cameroonian law aspects and OVK Law Firm on Congolese law aspects.

• Trinity is proud to have advised AgDevCo on its recent investment in Cashew Coast – a fast-growing cashew nut processing business in Cote d’Ivoire. AgDevCo’s mezzanine loan of €9.0 million (5.9 billion FCFA) will finance the expansion of the company’s processing capacity and the construction of new warehouses, alongside farmer productivity programmes. The investment is a huge step in the right direction for African agribusiness. Partner Lucy Johnson led the team with assistance from counsel Kanmi Lawson and associate Demilade Banjoko. Further details are provided in AgDevCo’s press release here: https://agdevco.com/site/assets/files/2079/press_release_cashew_coast_june_2024_-_english.pdf

• Our Paris Office has advised STOA, an impact fund created in 2017 by the Caisse des Dépôts and the Agence Française de Développement (AFD) investing in infrastructure and energy in emerging and developing countries, in relation with its investment in NetZero, the French company pioneering the long-term sequestration of atmospheric carbon in soils. This marks STOA’s first investment in carbon removal. The transaction relates to a total proposed investment of €18 million and should allow NetZero to industrialize its technology and to deploy its sites on a large scale in tropical countries, with a view to sequester more than 5 million tonnes of CO2 in aggregate, from now and until 2030. The Trinity team was led by Giuliano Lastrucci (Counsel), supported by Pierre Bernheim (Partner) and by Francesca Ngahane (Associate) and Mama Sahale Souare (Trainee).

The post Focus – June 2024 appeared first on Trinity International LLP.

Trinity News

Since the last edition, the Trinity team has been busy advising on ground-breaking and pathfinder renewables deals across the African continent, from Zambia’s first green bond to Togo’s largest IPP, as well as a swathe of other corporate M&A deals in a burgeoning infrastructure market, bolstered by a growing Trinity corporate team.  We have also been busy in Asia, with new mandates in Uzbekistan, India, Timor-Leste, Mongolia, Laos, Cambodia, Vietnam, Papua New Guinea and the Philippines.    

Our global team continues to grow and we are delighted to announce the following promotions:

• Sébastien Plamondon, based in our Paris office, to Senior Associate;
• Giuliano Lastrucci, also based in Paris, to Counsel;
• Adekanmi Lawson, based in the London office, to Counsel; and
• Lucy Johnson, based in the London office, to Partner. 

The London promotions take effect from the start of April 2024 and the Paris promotions take effect from 1^st January 2024. Congratulations to our rising stars, and the future of emerging markets transactional advice.

We are recruiting in our Singapore and DC offices too – watch out for LinkedIn announcements in due course!

Whilst much of the activity centred around COP28 in Dubai, our team was busy globally in executing on its promises.  Partner, and newly appointed Head of Global Strategy, Kaushik Ray was in Washington D.C. discussed COP28 outcomes at the Atlantic Council and our disputes partner Natasha Peter has considered how this rapid growth in the clean energy sector affects dispute resolution in a special article for Focus. (Read more)

Deal News

During COP28, we were pleased to announce that:

• Our clients Meridiam and EDF signed a concession agreement and a PPA for a 64 MWp photovoltaic power plant in the Republic of Togo. For 25 years, the plant will supply more than 700,000 people with clean, renewable energy and avoid the emission of 1.4 million tons of CO2.
• Our clients Emerging Africa Infrastructure Fund and African Trade & Investment Development Insurance signed agreements with AMEA Power in respect of a 20MW solar PV project in the West Nile region of Uganda.
• Our client Scatec signed a US$100m loan facility with IFC in respect of the Release by Scatec platform.

We continue to advise our clients on these transactions to take them to anticipated financial close this year.

Already in 2024, we have advised our clients on the following transactions which have reached close:

• Copperbelt Energy Corporation PLC (CEC) on the listing and issuance of the first ever green bond in Zambia. (Read more)
• In a separate deal, advising Norfund, the Norwegian development finance institution, along with Kommunal Landspensjonskasse, a Norwegian pension fund, in respect of the financing of a continuation vehicle established by CEC’s existing shareholder Affirma Capital which will hold Affirma’s existing  36.34% stake in CEC (Read more).  Standard Bank also provided a large acquisition finance facility in relation to the transaction.
• Scatec on the signing of a US$100m facility agreement with IFC to fund Release by Scatec programme (containerised solar solutions for quick deployment) with utilities across African jurisdictions. (Read more)
• Meridiam on the closing of the acquisition of the 100MW Kipeto Wind Farm in Kenya.

Deal Teams

The Trinity team advising CEC on the green bond was led by Senior Partner Paul Biggs, alongside corporate lead partner Conrad Marais, finance partner Rinku Bhadoria, project documents partner Luke Muchamore and associate Rhiannon Lock. 

The Norfund / Affirma deal was led by Senior Partner Paul Biggs, Head of Private Equity Hugh Naylor, corporate partner Conrad Marais, finance and project documents lead partner Rinku Bhadoria, with assistance from consultant Patrick Leece, newly appointed Counsel Adekanmi Lawson, Counsel Eric Filipink and associate Rhiannon Lock. 

On the Scatec/IFC financing transaction, partner Simon Norris and associate Demilade Banjoko advised the Scatec Release team. Simon Norris, partner Conrad Marais, Counsel Adekanmi Lawson and associate Demilade Banjoko advised Meridiam on acquisition of the Kipeto wind project in Kenya.

Indaba

Stéphane Brabant and Lucien Bou Chaaya (from our Paris mining team) and Conrad Marais (from our London team) will be attending the Mining Indaba being held in Cape Town from 5 – 8 February.  We are working on a number of mining and related infrastructure projects across the continent from Sierra Leone, Ghana, Mali, Ivory Coast to Malawi, the DRC and Zambia and looking forward to catching up with our clients at the conference.  We continue to see strong growth in the mining sector with a broad range of engagements including working with government and mining companies on their mining development agreements, investments into exploration/mining projects and M&A.  Ancillary infrastructure, particular in relation to renewable power, has also become a significant part of Indaba and added to the significance of the conference. Many of the projects we have advised on recently, such as the CEC Green Bond, are driven by growth and confidence in the mining sector.  Please reach out to Stéphane, Lucien and Conrad if you have time to meet.

The post Focus – January 2024 appeared first on Trinity International LLP.

An increasing volume of platform transactions has been a dominant theme in the energy and infrastructure M&A space in recent months, and in this edition, Senior Associate, Adekanmi Lawson, explores some of the main features of such structures and issues for parties investing in platform transactions.  The corporate team also considers the commercial approach taken by English courts in a recent case on the interpretation of exclusion clauses in respect of the removal of a defaulting member from a limited liability partnership.

In addition, our disputes and arbitration team has written about expedited procedures in international arbitration and their key features. On the topic of dispute resolution, partners Poupak Anjomshoaa and Natasha Peter, recently hosted a client breakfast seminar in London on “What to do when your long-term offtaker stops performing” which included an insightful exchange on the advantages and drawbacks of options such as alternative offtake, termination and arbitration/litigation.

News

Since the last edition of Focus, we have been delighted to advise our clients in reaching the following milestones:

• Norfund on closing its investment in Nouvelle Mici-Embaci, setting the precedent for one of the largest leveraged buyouts ever in West Africa;
• Africa REN on the successful financing of its Walo Storage project, in Senegal;
• Eni on signing the sale and purchase agreement in relation to its oil assets sale in Congo to Perenco for approx. USD 300m;
• Meridiam on the signing of the transaction documents for Meridiam to acquire the 100 MW Kipeto Wind Farm, located south of Nairobi; which also includes the 50 MW Siruai greenfield wind project with storage under development;
• Meridiam on closing its acquisition of Rift Valley Energy Tanzania (RVE), a renewable energy infrastructure platform that owns a portfolio of 30MW of renewable energy generation assets in operation, construction and development stages and has developed two rural distribution networks, 460 km long, in southern Tanzania serving a population of more than 75,000 living in 38 villages.

Platforms are back in vogue

The Trinity M&A team has seen an uptick in, and advised on an increasing volume of, African energy and infrastructure M&A platform transactions (Platform Transactions). These structures come with specific peculiarities in the context of M&A transactions, several of which we will be exploring in this short article. Read more

Interpreting an expulsion clause in an LLP: commercial approach rejects unanimous decision in THJ Systems v Sheridan

The recent case of THJ Systems and another v Sheridan and another [2023] EWHC 927 (Ch) offers valuable insights in respect of the decision to remove a defaulting member from a limited liability partnership (an “LLP”). The court’s decision to adopt a commercial approach in interpreting an expulsion clause, ensuring that a member cannot vote on his / her own expulsion, is worth highlighting. Read more

“Efficiency, Speed and Cost-Effectiveness: Expedited Procedures in International Arbitration”

While international arbitration has become the favoured method for resolving disputes across borders, concerns about delays and costs are common. In response, several arbitral institutions have introduced expedited procedures. Below, we delve into those procedures, explore their key elements, and consider if they could be right for you. Read more

The post Focus – September 2023 appeared first on Trinity International LLP.

With many countries’ ambitious clean energy targets looming on the horizon, it is notable that we are working on both green hydrogen transactions (in Africa and the Middle East) and numerous projects (in Africa and Asia) that incorporate battery storage systems as a key component. The Trinity team recently hosted a series of insightful seminars on this topic, and in this edition of Focus Lucy Johnson, Senior Associate, has turned her attention to certain key issues when developing and financing battery storage projects in emerging markets.

In addition to considering the rapid increase in the development of battery storage projects in recent years, our team have explored the various foreign exchange challenges faced in the projects we work on across frontier markets and the protections available against potential financial instability, as well as the latest case law emerging from the English courts with respect to fixed and floating charges.

As mentioned in the previous edition, we launched our disputes and arbitration practice across the London and Paris offices and the team has hit the ground running. Recently, Natasha Peter, Partner, joined a panel at Paris Arbitration Week to discuss recent case law developments and Poupak Anjomshoaa, Partner, moderated a panel discussing the impacts of and fallout from the Covid-19 pandemic in the mining industry at the World Association of Mining Lawyers 2023 Conference in Germany. The Trinity team also enjoyed meeting many of our clients at London International Disputes Week and joining the conversation about international arbitration and dispute resolution in emerging markets.

On the topic of conferences, we are pleased to be sponsoring the Africa Energy Forum in Nairobi and are looking forward to hosting our annual Trinity party. We hope to see you there!

The Trinity Team

Financing Battery Storage in Emerging Markets

With countries across the globe facing ambitious clean energy targets, and the proliferation of intermittent renewable power generation, it is no surprise that energy storage systems are fast becoming an essential component in the development of energy markets worldwide. In this article, we consider the reasons why this is the case, as well as certain key issues when developing and financing battery storage projects in emerging markets. Read more.

FX Challenges in Power and Infrastructure Projects in Africa: Contractual and Non-Contractual Protections

Foreign exchange (FX) challenges pose significant risks to the viability and financial stability of the projects we work on across frontier markets. In this article, we explore the various FX challenges faced in those projects and discuss both contractual and non-contractual protections available to mitigate these risks. Read more.

The Spectrum of a Fixed Charge: Re Avanti Communications Limited (In Administration)

In the first major case since the seminal House of Lords decision in Re Spectrum Plus, the court analysed the existing case law and academic commentary on fixed and floating charges and held that the chargee’s security was fixed, despite the chargor having some limited rights to dispose of some of the assets without the chargee’s consent. We consider the impact of this decision and whether it provides any further clarity on this vital charging instrument. Read more.

The post Focus – June 2023 appeared first on Trinity International LLP.

Fixed charge or floating charge does it matter? 

Whether a charge over an asset is characterised as fixed or floating can impact the priority of the security against other proprietary claims in such asset, for example, claims by a subsequent purchaser or fixed charge holder. In an insolvency, the characterisation of a charge will also determine the recoveries from the asset, even where there is no contesting proprietary claim. Generally, if a charge is fixed, all the proceeds from such asset will be applied towards the secured obligations once only the costs of realisation have been deducted. Conversely, other rights, apart from a fixed charge will rank ahead of a floating charge; for instance, moratorium-related debts, the costs and expenses of the insolvency procedure (which can be substantial), HMRC as a preferential creditor in respect of certain tax liabilities, employee and pension claims, and the “prescribed part” which is a statutorily ring-fenced amount of up to £800,000 (£600,000 before 6 April 2020) can be deducted from the floating charge recoveries to be distributed amongst unsecured creditors. Additionally, an insolvency practitioner cannot dispose of assets subject to a fixed charge without the consent of the fixed charge holder or a court order, in certain circumstances.

Avanti: the background

In this case, Avanti Communications Limited (the “Company”) whose primary business was the operation of satellites and the sale of wholesale satellite broadband and satellite connectivity services to internet providers, mobile network operators, enterprises, governments, and other satellite operators, executed two debentures (though we only speak to one of those in this article) granting fixed charges over certain assets to its secured lenders. These assets included a satellite payload, certain equipment used in the operation of network and ground station facilities, certain network filings required by regulators for the operation of the satellite network and certain ground station licences issued by Ofcom which enabled the Company to operate the ground stations (together, the “Relevant Assets”). The Company went into administration and the administrators sold the Relevant Assets.  The question for the court was whether the Relevant Assets were subject to a fixed charge or a floating charge, in which case, HMRC as a preferential creditor would have priority and the “prescribed part” would be engaged.

Avanti: the decision

In reaching its decision, the court held that it is necessary to apply a two-stage test to determine whether security is fixed or floating.

The First Stage – construe the instrument of charge

The court must construe the charging instrument (in this case, the debenture) to ascertain the nature of the rights and obligations which the parties intended to grant to each other in respect of the charged assets. Factors to consider include (i) ascertaining that the said assets fall within the scope of the charging clause in the charging instrument; (ii) the labels used by the parties to denote their rights and obligations; (iii) the nature of the charged assets – a distinction should be drawn between the chargor’s circulating capital and non-circulating capital because “compliance with the terms of a fixed charge on the company’s circulating capital would paralyse its business”. The critical question is whether the chargor needs to sell the assets, deal with them or substitute them as part of its ordinary course of business, if so, this will constitute circulating capital; (iv) the nature of the chargor’s business, which will also be useful in answering the question in (iii); and (v) the nature of the contractual restrictions and permissions on the disposal of the charged assets.

The Second Stage – categorisation and characterisation

The critical question in the second stage is whether as a matter of law, the rights and obligations in respect of the charged assets are consistent with fixed charge security or floating charge security. This does not depend on the intention of the relevant parties or the label which the parties have attached to the charging instrument. The critical question at the second stage is the question of control. The court found that it is helpful to consider the range of possibilities of control as a spectrum, with total freedom of management of the charged assets at one end of the spectrum and a total prohibition on dealings of any kind at the other end of the spectrum.

The court held that it is not the case that a charge will only be fixed if it is located at the total prohibition end of the spectrum. Whilst the court considered that it would not be sensible or feasible to try to identify the location of the point on the spectrum where a floating charge gives way to a fixed charge or vice versa, it held that a nuanced approach which takes into account the factors discussed above is what is required.

In Avanti, the debenture did not impose a total restriction on the Company dealing with the Relevant Assets. However, the Company’s ability to deal with the Relevant Assets was strictly limited as the exceptions in the debenture only provided limited opportunities to dispose of the Relevant Assets, and only in particular sets of circumstances. Importantly, the exceptions in the debenture did not provide the Company with the opportunity to dispose of the Relevant Assets in the ordinary course of its business. Beyond the restrictions in the debenture, the court also considered that the Relevant Assets did not constitute the circulating capital or fluctuating assets of the Company. They were inherently difficult to transfer and did not need to be sold to generate the Company’s business income, instead the Relevant Assets were “tangible and non-tangible infrastructure owned by the Company, which was used to generate the sources of the Company’s business income”.

There is a distinction between a charge over an income generating asset and a charge over the income generated by that asset. The court therefore held that the Relevant Assets were subject to a fixed charge rather than a floating charge.

Much ado about nothing – what happens next?

Secured creditors will welcome this positive interpretation of the law as it provides reassurance that a fixed charge does not require the chargee to have absolute control over the charged assets and a complete prohibition on disposal is not always required where the charged assets are not part of the company’s circulating capital; some flexibility to deal with such assets might be considered consistent with a fixed charge. This decision will also impact preferential and unsecured creditors as the characterisation of a charge as floating instead of fixed may result in better recovery in an insolvency. Insolvency practitioners will also consider this decision when taking a view as to whether to seek directions from the court in the administration of charged assets.

Whilst this decision envisages a “spectrum of possibilities” and advocates for a more nuanced approach, it can also lead to uncertainty. Therefore, parties must ensure that charging instruments are well drafted to ensure that the nature and extent of any restrictions on the chargor’s ability and approvals required from the chargee are well outlined and adhered to.

A departure from Re Spectrum Plus?

Following the decision in Re Spectrum Plus, prominent academic commentators interpreted the decision to mean that any right to dispose of a charged asset without the chargee’s consent was inconsistent with a fixed charge. However, the judge in Avanti disagreed with this view, stating that it was not supported by the House of Lords’ decision or any existing case law.  

It is also important to state that the Relevant Assets in Avanti constituted non-fluctuating assets whereas Re Spectrum Plus considered the question in respect of book debts. Therefore, one could consider that Re Spectrum Plus remains the authority for this category of assets. Where the charged assets are “naturally fluctuating assets” such as book debts or stock, the ability of the chargor to deal with such assets is inconsistent with a fixed charge.

Finally, as this is a first instance decision at the High Court, it remains to be seen whether Avanti will be followed in future cases, if HMRC and any other preferred creditor will be incentivised to institute or participate in insolvency proceedings, if insolvency practitioners will seek direction from courts more frequently and if there will be any changes to current practice. Watch this space and whilst at it, ensure your charging instruments are drafted well!

The post THE SPECTRUM OF A FIXED CHARGE: RE AVANTI COMMUNICATIONS LIMITED (IN ADMINISTRATION) [2023] EWHC 940 (CH) appeared first on Trinity International LLP.

Power and infrastructure projects often involve multiple offshore stakeholders, funding sources, and currencies, making them susceptible to FX challenges. These challenges include exchange rate fluctuations, capital controls, repatriation restrictions, and liquidity risks. Currency volatility can affect project costs, revenues, debt servicing, and profitability, potentially jeopardising the financial viability of the venture. These issues are particularly prevalent in a number of African jurisdictions in which we work, including Nigeria, Ethiopia, Kenya and Mozambique.

Contractual protections and other safeguards and mitigants are essential in managing FX risks. Below we have set out some key protections to consider to help parties allocate and mitigate risks appropriately and some thoughts on their practicability:

1. Currency Hedging: Parties can employ various hedging techniques, such as forward contracts, options, and swaps, to minimise exposure to exchange rate fluctuations. Hedging instruments can provide stability by fixing the FX rate at a pre-determined level or within a range, protecting project revenues, costs, and debt service obligations. The downside is the overall cost to the project of paying for additional hedging products particularly on a long-term basis. This is one area that is ripe for support from the World Bank and other multilaterals and we expect to see further initiatives in this space. 
2. Currency Escalation Clauses or “True-Ups”: Including currency escalation clauses in contracts allows for adjustments in contract prices or tariff rates based on changes in the exchange rate. Alternatively, where the tariff is denominated in ‘hard currency’ but payable in local currency there may be a reconciliation or “true-up” payment to reflect changes in the exchange rate between the date of invoicing and the date of exchange. These mechanisms help mitigate the impact of currency depreciation on project economics. However, these provisions often result in more local currency being paid to the project company which does not address the underlying unavailability of the required hard currency. We are also increasingly seeing governments and offtakers reject such provisions or seek to challenge or limit their exact application on existing transactions due to the volatility of FX rates.
3. Indexation Mechanisms: Inflation-indexed tariffs or contracts linked to a stable foreign currency, such as the US dollar or Euro, can provide a hedge against local currency volatility. Indexation mechanisms help maintain the purchasing power and revenue streams of projects, particularly in high inflationary environments.
4. Force Majeure and Change in Law: Contractual provisions addressing force majeure events can provide relief in extreme currency fluctuations or unforeseen economic crises. It is very unlikely that a force majeure provision will excuse non-payment but we have seen specific “force majeure” categories negotiated in relation to a power producer’s ability to continue operations when its access to relevant foreign currencies is hindered. We have seen instances in which a government implements restrictions or changes in regulations – typically through the country’s central bank – that have an impact on the availability and pricing of hard currency in the country. Depending on how those restrictions or changes are put in place, it may be that a change in law or economic stabilisation provision may provide some protection. However, as with true-up provisions above, if the result is that the project company receives more local currency – as opposed to hard currency – this is an imperfect resolution.
5. Government Contractual Support: In many power and infrastructure projects, the host government provides contractual protection in relation to the occurrence of certain risks, particularly political risks, through a contract of some sort, which might include a guarantee, implementation agreement, concession agreement, put and call option agreement, development agreement or support letter. That protection may extend to risks associated with the availability of hard currency in the relevant jurisdiction, the ability to convert local currency into hard currency, the ability to transfer hard currency offshore and to hold hard currency reserves offshore. The nature and robustness of the contractual protection in relation to these matters tends to vary between jurisdictions, from a relatively soft obligation to assist in sourcing hard currency to guaranteeing that hard currency will be paid or made available at a certain rate, including an obligation to pay that hard currency directly offshore to shareholders and/or lenders. The ultimate contractual protection, though it is one that sponsors and lenders will not want to contemplate lightly, is the payment of compensation should there be a termination event. That compensation is typically, though not always, denominated in hard currency.
6. Political Risk Insurance: Acquiring political risk insurance from reputable providers can help mitigate the risk of capital transfer restrictions, currency inconvertibility, and expropriation. This coverage provides financial protection for macro events of political or economic instability affecting the project. If there is an underlying obligation, particularly in the relevant government support contract (as described in 5 above), the political risk insurance can also cover breach of contract which would pay out should the government (or relevant state-owned enterprise) default on the relevant obligation. It should be noted, however, that political risk insurers are unlikely to be willing to offer cover in relation to FX risks in jurisdictions in which there is an existing shortage of FX, or where the law does not permit payments in, conversion into, or transfer offshore of, hard currency.
7. Multilateral Guarantees and Development Finance: Partnering with multilateral institutions and development finance organisations can provide additional protection against FX risks. This may be directly, through the provision of debt, credit enhancements, guarantees, political risk insurance or currency swap facilities offered by those institutions or, indirectly, through the “halo effect” of using their unique positions to lobby governments and central banks to resolve FX issues facing the projects they are funding.
8. Local Currency Financing: Exploring opportunities for local currency financing can reduce exposure to FX risks. Raising funds in local currency can align revenues and costs, minimising the impact of exchange rate fluctuations. However local currency lending can be prohibitively expensive and is unlikely to be available for sufficiently long tenors. To date we have seen limited impact on large scale projects. “Synthetic currency” loans are another tool deployed to try to relieve FX pressure from borrowers but they ultimately rely on a hedging product to be in place to equalise the lender whose lending is still based on hard currency – their true potential can therefore only be unlocked once the first point above is resolved.
9. Diversification of Revenue Streams: Projects can also explore revenue diversification strategies, such as selling power to multiple offtakers or exploring export opportunities. By diversifying revenue streams across different currencies, the project’s overall FX risk can be mitigated. For example, as the energy sector on the African continent matures we are seeing power producers diversifying away from selling to a single offtaker and seeking cross-border customers including selling to regional power pools that permit payment in hard currency. 

By utilising a combination of contractual protections and non-contractual safeguards, project stakeholders can navigate challenges more effectively. It is therefore important that mitigation of FX challenges is considered in the round when structuring a project.

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The agreement reached in respect of the “High Seas Treaty” (after more than ten years of negotiation) comes on the coat tails of a request issued in December 2022 by the Co-Chairs of the Commission of Small Island States on Climate and International Law, for an advisory opinion from the International Tribunal for the Law of the Sea, in respect of the obligations of State Parties to the United Nations Convention on the Law of the Sea, to help reduce and control marine pollution and to protect and preserve oceans. With the focus now on protecting our ocean environments and mitigating marine pollution, the spotlight is firmly on efforts to address the impact of climate change on both our oceans and developing island nations.

The Trinity team have been very active over the last 18 months in helping to structure renewable energy procurement programs in island nations, so to coincide with this international treaty milestone for those nations vulnerable to the effects of climate change, we are turning our attention in this edition of Focus, to the challenges of island nation renewable energy initiatives.

In addition to considering some of the key challenges and issues when structuring, developing and financing island nation independent power projects, our team have looked at some of the legal and structural issues in the expanding carbon credit markets, as well as provided updates on the current climate change claims being brought in the courts against European lenders and Governments, which are aiming to hold investors and financiers accountable for failing to take into account climate change information when making investment decisions.

Our corporate team have also summarised a recent High Court decision in respect of warranty claim, which was proved invalid, as it did not properly meet the requirements for a warranty claim set out in the underlying Share Purchase Agreement – a potential cautionary tale for managing contractual claims.

Here at Trinity, we are very pleased to welcome Rita Doureradjam, as an associate in our London team. Prior to joining Trinity, Rita trained in the litigation and arbitration departments of leading international law firms in Paris, such as Herbert Smith Freehills and Gide Loyrette Nouel.

Our Paris office is also delighted to announce that Giuliano Lastrucci has joined the team, as senior associate. Before joining Trinity, Giuliano was a senior associate at Herbert Smith Freehills in the Corporate, Mergers & Acquisitions team based in Paris.

We are also very pleased to find out that we have (again) been ranked in Band 1 in Chambers and Partners’ Global Guide 2023 for our Projects & Energy work across Africa. Global Senior Partner, Paul Biggs, Paris office Senior Partner, Stéphane Brabant, Global Managing Partner, Simon Norris, and Global Strategic Partner, Kaushik Ray, are all highly ranked as notable practitioners in the field. The rankings accompany those in Chambers’ UK and European guides with Paris Managing Partner, Pierre Bernheim, also ranked for his international Projects & Energy work.

Combined with a number of successful closings (see below ‘News’ section), it has been a busy start to 2023 for the Trinity team. We thank you for your continued support, and look forward to what will hopefully be an equally busy spring, 2023!

The Trinity Team

Developing and Financing Island Nation IPPs

Trinity’s London team is currently advising on three renewable power programmes in three developing island nations – the Seychelles, the Maldives and Papua New Guinea. In this article, written by Partner, Fiona Gulliford, we consider some of the challenges and considerations for developers, lenders and host governments, in terms of structuring, developing and financing island nation IPPs. Read more.

Carbon Credits and Climate Change

At Trinity, we are increasingly advising clients on regulatory and structural issues across the carbon credits value chain. In this article, written by Partner, Rinku Bhadoria, and Associate, Demilade Banjoko, we will take a brief look at the carbon credits markets (both regulatory and voluntary), discuss the roles of major stakeholders within the voluntary carbon market and analyse the implications of the growth in the voluntary carbon market from a business and legal perspective. Read more.

The Rise of Climate Change Litigation – Part 2

In our December 2022 issue of Focus, we commented on the rapid increase in climate change- related litigation across the globe (the article is available here). Following on from that article, Partners, Natasha Peter and Rinku Bhadoria, report here on two recent cases concerning the role of finance flows in the energy transition, which throw into sharp relief the importance of taking into account climate change information when making investment decisions.

Warranty Claims – A Cautionary Tale

The recent case of Drax Smart Generation Holdco Limited v Scottish Power Retail Holdings Limited [2023] EWHC 412 (Comm), highlights the need to ensure that buyers carefully follow the requirements of the underlying Share Purchase Agreement when making warranty claims. Head of Private Equity, Hugh Naylor, and associate Rita Doureradjam, consider this in detail here.

NEWS

C&I Financing by FEI in Burkina Faso, Mali and Senegal – Trinity has advised Facility for Energy Inclusion (“FEI”), a fund managed by Lion’s Head Global Partners, as lender in relation to a multi-country facility to SolarX, a leading West-African C&I player with a strong focus and expertise in the Sahel region. Read more.

Mini-Grid Financing in Madagascar – Trinity has advised European Investment Bank (EIB), EDFI ElectriFI – The Electrification Financing Initiative and Triodos Investment Management as lenders in relation to a EUR 19 million loan to Welight to finance the development and construction of over 120 solar mini-grids in Madagascar. Read more.

Trinity has advised the lenders – Facility for Energy Inclusion (“FEI”), a fund managed by Lion’s Head Global Partners, Proparco, Norfund and AfricaGoGreen Fund, in relation to an additional EUR28.3 million multi-country facility to AktivCo SAS and its subsidiaries in Burkina Faso, Cameroon, Chad, Côte d’Ivoire and Niger. Read more.

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A recent case before the High Court has highlighted the need to get a notice of a warranty claim right.

Drax Smart Generation Holdco Limited (the “Buyer”) acquired the target company (the “Company”) from Scottish Power Retail Holdings Limited (the “Seller”).  Under the share purchase agreement (the “SPA”), the Seller provided a warranty that a reorganisation would occur, and also gave an indemnity in favour of the Buyer in respect of any losses resulting from a failure to implement the reorganisation before a specific deadline.  It transpired that the reorganisation was not implemented correctly, with the result that the Company suffered a loss and, accordingly, the Buyer claimed against the Seller: (i) for breach of warranty; and (ii) under the indemnity.

Under the SPA, notice of a claim issued needed to state “in reasonable detail the nature of the [claim] and the amount claimed (detailing the [buyer’s] calculation of the Loss thereby alleged to have been suffered” before a specified date. The Court examined whether the “reasonable recipient” of the notice would have understood it, and while the identification of the events and relevant clauses of the SPA giving rise to the claims were properly inserted in the notice, the key issue was whether the Buyer had stated in reasonable detail the nature of the claim and the calculation of the loss suffered, which the Seller disputed.

The notice of claim issued by the Buyer referred to the losses suffered by the Company instead of the reduction in the value of the shares acquire by the Buyer. The Seller argued that the loss should have been based on the diminution in the value of the acquired shares (being the typical measure of loss for breach of warranty in an SPA) and that this was not demonstrated in the notice, as was required under the SPA. The Court agreed that the Buyer had failed to properly explain the calculation of its loss, which should have been the difference between the “warranted” value of the shares and their actual value. Instead, the Buyer’s wording meant a reasonable recipient would assume that the loss was that of the Company rather than the Buyer. Accordingly, the notice did not state the loss suffered directly by the Buyer based on the diminution in the value of the shares.

The notice also referred to future losses likely to arise, which were unrelated to the diminution in the value of the shares. As the Buyer did not properly detail the calculation of the loss and did not meet the SPA’s requirements, the Court deemed the notice invalid and, accordingly, the Buyer had failed to issue a valid claim for breach of warranty within the period required by the SPA.

However, in this case, all was not lost as the Buyer had an alternative action under the indemnity in the SPA. The Court held that, unlike a warranty claim, the Buyer was not required to identify an ascertained amount within the time limits imposed by the SPA in order to bring an indemnity claim.

So if you are considering bring a warranty claim under an SPA, make sure you get it right and rigorously follow the terms of the underlying agreement.  Courts are unlikely to be lenient where this is not the case. The case also re-iterates why buyers should try and negotiate cover for certain historic liabilities through both representations and warranties and specific indemnities, albeit this is often a much-argued point in the context of agreeing the terms of an SPA.

Hugh Naylor, Head of Private Equity

Rita Doureradjam, Associate

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At Trinity, we are increasingly advising clients on regulatory and structural issues across the carbon credits value chain, including in relation to offtake, financing and marketing arrangements for renewable energy projects, forest protection initiatives and other emission avoidance projects. In this article, we will take a brief look at the carbon credits markets (both regulatory and voluntary), discuss the roles of major stakeholders within the voluntary carbon market and analyse the implications of the growth in the voluntary carbon market from a business and legal perspective.

What are Carbon Credits?

A carbon credit is a tradeable certificate that represents the right of the holder to emit one tonne of carbon dioxide (tCO₂e) or the equivalent in other greenhouse gases.

When referring to the carbon market, it is important to distinguish between the compliance or regulatory market and the voluntary market.

The Compliance or Regulatory Market

Under the Kyoto Protocol, there are caps on the GHGs that can be emitted by developed Annex 1 countries. In turn, these countries set quotas on the emissions of the most polluting organisations  and manage this through national registries which are monitored by the United Nations Framework Convention on Climate Change (UNFCCC). At the end of a given period, companies and countries that have emitted more GHGs than their allocated allowances, must either purchase additional allowances (i.e., carbon credits) privately from other companies or countries or on the open carbon market through the Kyoto Protocol’s market-based mechanisms (the International Emissions Trading, the Clean Development Mechanism and the Joint Implementation).  

The Voluntary Market

Unlike the compliance market, the stakeholders purchasing carbon credits in the voluntary market do so voluntarily as part of their ecological commitment to reduce or offset their GHG emissions rather than to meet a regulatory requirement.

The stakeholders in the voluntary market include project developers or sponsors that set up different types of offsetting projects. For instance at Trinity we have been advising clients on (a) emission avoidance projects (which either reduce the existing CO₂ in the atmosphere or reduce fossil fuel consumption or prevent the emission of CO₂) such as renewable energy projects and installation of fuel efficient stoves and (b) emission sequestration projects (which store part of the CO₂ already present in the atmosphere) such as reforestation projects (including Reducing Emissions from Deforestation and Forest Degradation (REDD+) projects and direct air capture technology).

Certifying bodies or Standards certify whether a particular project has met its stated objects and its stated volume of avoided or sequestered emissions and therefore the number of carbon credits the project produces over time. They also ensure that the core principles of carbon finance, such as additionality, permanence, no double counting, robust independent third-party validation and verification, are respected. These certifying bodies also establish registries to enable the registration and traceability of carbon credits, to ensure they are only transferred once. There are about ten independent certifying bodies in the world, with the three most popular being Verra (formerly VCS) which controls more than 50% of the voluntary market, the Gold Standard and Plan Vivo.

Once the certifying body issues the carbon credits to the project sponsors or developers, these can then be sold to end buyers, typically companies or even individuals seeking to offset part or all of their GHG emissions.

Due to growth in the voluntary carbon market, there have been additional players such as wholesalers who purchase large amounts of carbon credits directly from a project sponsor, bundle them into portfolios and on-sell to end buyers. There are also brokers who buy carbon credits from the wholesalers and market them to end buyers for a commission. Underpinning the voluntary carbon market are carbon credit funds which may be private or government owned funds that finance the development of carbon offset projects or purchase of carbon credits for sale to end customers.

Implications for Businesses

There has been a significant growth in the voluntary carbon market which was estimated as being worth US$2billion in 2021, about four times its value in 2020. It is also estimated that by 2030, it could be worth between US$10billion and US$40biliion.[1] This presents significant opportunities for stakeholders. For instance, businesses involved in renewable energy projects may wish to consider whether such projects will be eligible for carbon finance. Additionally, such businesses may create an additional income stream by obtaining carbon credit certification for such projects and on-selling to end buyers. Finance companies seeking to invest in green projects may also consider offering carbon finance to project sponsors. Companies may also consider purchasing high quality carbon credits to meet their net-zero commitments.

Legal Implications

Businesses seeking to participate in the voluntary carbon market will need to understand the legal framework underpinning the market.  Firstly, international law does not define the legal nature of carbon credits. Therefore, it is necessary to apply national laws, which may be the governing law of the contract for the sale of carbon credits or the law of the host country in which the project is implemented. However, many countries have not implemented legislation to address this, particularly developing countries in which majority of these carbon offset projects are based. Moreover, even countries which have enacted legislation have done so restrictively with reference to the regulatory market only. Therefore, in the absence of specific legislation, contracting parties need to carefully identify the legal nature of carbon credits by analogy. For instance, by considering them as intangible movable property as seen in England, France and Latin law countries. The legal nature of the carbon credit will determine how they can be traded, how security can be taken and how they are treated on insolvency. Secondly, in the absence of a regulatory framework, it is important to carefully identify the owner(s) of the carbon credits as multiple parties throughout the project value chain may seek to lay claim to the carbon credits. For example, title to Verified Carbon Units (VCUs) under the Verra programme is not based on registration with the Verra, but rather the Verra registry is a public record of who is authorised to deal with which VCUs. Since title to VCUs is passed by the underlying contractual agreements, parties will need to carefully analyse the contribution of all parties and seek to clarify any rights or responsibilities they may have in the contractual arrangements. Thirdly, where multiple owners are identified, parties will need to develop a marketing mechanism for the marketing and sale of the carbon credits on behalf of all owners.

African Carbon Markets Initiative

The carbon credit market provides a significant opportunity for developers, investors and governments in in Africa to take action in tackling climate change as demonstrated by African Carbon Markets Initiative (ACMI) which was established at the COP27, with the aim of growing the voluntary carbon markets across Africa[2].

ACMI is sponsored by the Global Energy Alliance for People and Planet (GEAPP), Sustainable Energy for All (SEforALL), and the UN Economic Commission for Africa, with the support of the UN Climate Change High Level Champions. Its 13 member steering committee consists of various state and non-state stakeholder contributors (for instance, the Vice President of Nigeria, the Integrity Council for the Voluntary Carbon Market and Verra). ACMI’s core objectives include (a) growing the African carbon credit retirements (i.e. usage) to ~300MtCO2e by 2030 (a 19 fold increase from 2020), (b) creating or supporting ~ 30 million jobs by 2030, (c) raising the quality and integrity of African credits and (d) ensuring equitable and transparent distribution of carbon credit revenue.  To date, ACMI has announced thirteen action programmes to support the development of voluntary carbon markets in Africa. Co-ordinated initiatives such as ACMI will be critical in providing the necessary impetus for the development and growth of the voluntary market sector in Africa.

Rinku Bhadoria, Partner

Demilade Banjoko, Associate

[1] Shell and BCG: “The Voluntary Carbon Market: 2022 Insights and Trends” (January 2023). 

[2] https://www.seforall.org/publications/africa-carbon-markets-initiative-roadmap-report

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