On February 16, 2023, CEE Legal Matters reported that Dentons had advised a banking consortium on their EUR 155 million financing for the 103.3-megawatt Krivaca wind farm project co-owned by Serbia’s MK Group and Slovenia’s ALFI Green Energy Fund. CEELM reached out to Dentons Partner Simon Dayes to learn more about the financing.
CEELM: At what stage was Dentons involved in the deal and what was the firm's mandate?
Dayes: We were involved from the agreement of the term sheet by the Lenders and Sponsors. Dentons’ mandate was to act as lead counsel to the Lead Arrangers, the Lenders, the interest rate hedge providers, the Facility Agent, and the Onshore and Offshore Security Agents. The key duties as lead advisors were to manage the transaction generally, act as the first point of contact for the Lenders in all legal matters, report on the bankability of Project Documents, manage and liaise with all Lenders’ external counsel (Serbia, Slovenia, Cyprus, Germany, and Switzerland), draft and settle all English law documents, particularly the facility agreement (but also including ISDA documentation, equity contribution agreement, intercreditor and subordination agreements, six direct agreements, and a duty of care agreement with project counterparties, fee letters, and various other finance and related documents) and review all other finance and project documents and legal due diligence reports. We also supervised and managed signing and financial close, up to the first and second utilisations of the facility, including issuing English law opinions, and reviewing and settling all other legal opinions.
CEELM: And *how* did the firm win the mandate? What do you believe it was about your team that “won” the client over?
Dayes: We gave detailed fee proposals to the Lead Arrangers in a competitive tender to which a number of law firms were invited. Dentons (and the legal team we proposed) is well known by the Lead Arranger, and Dentons is also known to the Sponsors. We have advised lender groups on limited recourse project finance of two other wind farms in Serbia (and other similar renewables project financings in Central Europe) so our team has a track record. Finally, I believe the Sponsors and the Lenders believed our proposed pricing to be reasonable.
CEELM: How was the workload split between your Duesseldorf and Bucharest offices?
Dayes: Our colleagues at Dentons Germany advised on two aspects of the transaction: (1) advice and assistance in the settlement of the German law Project Documents, namely (i) the EFET (market access agreement) forming part of the PPA structure, and (ii) two guarantees being given by Nordex entities (turbine suppliers/installers) established in Germany, and (2) to draft and settle German law security over those Project Documents, together with law legal opinions to the Lenders. Our advice from Dentons as lead counsel is summarized under question 1 above.
CEELM: What would you say was the one most complex aspect of the deal?
Dayes: The most complex, and most pioneering, aspect of the transaction was the structure of the long-term PPA made between the project company and the electricity off-taker Axpo (Switzerland). Broadly, the PPA was made up of two separate documents: (1) a German law EFET (or market access agreement) for the offtake of electricity – on which Dentons Germany advised, and (2) an English law ISDA framework documenting a long-term financial swap – on which we advised. The swap gave Sponsors and Lenders alike comfort that the income from electricity sales would be predictable and would ensure a working financial model. The risk of close-out of the swap (potentially causing significant termination liability on one side or the other) was managed in various ways, including Axpo taking second ranking security (behind the Lenders) over certain of the project assets. The resulting relationship between Axpo and the Lenders (as security holders) and the project company (as security provider) was governed by a bespoke intercreditor agreement – the first ever of its type. The structure and content of this document were created and settled by us.
CEELM: And what did you feel ran particularly smoothly?
Dayes: An excellent working relationship and understanding with Sponsors’ legal counsel, both (1) on the facility side (settlement of facility and security documents) and (2) on the energy side (settlement of the PPA documents), was the main factor behind a smooth and relatively quick financial close. We cannot thank enough Matjaz Ulcar of Ulcar & Partnerji (Sponsors’ international counsel – facility side) and Jan Antoni of ALFI Green Energy (Sponsors’ energy counsel – energy side) for their support and cooperation, making the transaction a happy experience for us and for many others, notwithstanding the complexity of bringing together such a large number of parties’ diverse interests.
