BT-REQ-4413 EU-UK Renewables thought leadership V1 RL V6 (2) - Flipbook - Page 4
Managing risk exposure in a shifting
regulatory landscape
Here are a few best practices to keep
top-of-mind:
The question isn’t whether European
renewable projects are exposed to
China or other external markets – it’s
how developers and investors manage
such exposure in today’s fast-changing
regulatory environment. The key is
to form productive partnerships with
overseas partners that want to invest
in compliance and share technology
and skills, with both sides working
together to address any regulatory
inquiries that arise.
Risk mapping and rigorous supply
chain diligence
No longer “nice to haves,” these elements should
be baked into any project or deal at the outset.
Buyers must look beyond the immediate supplier
and go down the chain – i.e., to suppliers of
suppliers – to map out sanctions, export-control,
and ESG risks. Trace the origin of the equipment
and the components that you’re buying and do
it early, because it can be time-consuming to
have to switch gears once a project is already
underway.
It’s also important to test how counterparties
monitor those risks themselves. What kind of
risk profiling has a prospective supplier done?
Has it taken actions to mitigate or remediate
issues? Assess whether renewable project
partners and targets understand the impact of
key FSR and NZIA requirements. Any gaps must
be priced into the deal or addressed via postclosing remediation.
Contract tools and exit mechanics
On the contractual side, much of the work
involves apportioning which party bears the
risk of non-compliance and how that risk will be
reflected in pricing. On a recent deal involving a
rooftop solar portfolio in Germany, for example,
our team validated that supply chain warranties
were robust and enforceable and made sure that
the seller remained on the hook if upstream
suppliers failed.
European and UK companies are also
prioritizing “ring-fencing” projects and joint
ventures that do business with China, in case
they need to exit quickly. In the above solar deal,
we mapped out contingency plans for replacing
Chinese suppliers in the event of sanctions or
trade measures.
Compliance audits
Once you’ve signed a contract, ensure your
counterparty is complying with the terms of
the agreement. Embed checks into contracts
themselves by incorporating audit rights, and
think about what those processes might involve
to make sure you can monitor suppliers and
partners effectively.
