renewable energy capital markets

Additional guidance and information on regulatory and industry trends for clean and renewable energy companies can be found in the complete practice note, Clean and Renewable Energy Industry Guide for Capital Markets. § 240.3b-4.

Issuers often select a registered broker-dealer to serve as a placement agent and assist in finding potential investors. Energy Capital Partners has managed ~8,800 MWs across seven renewable platforms spanning solar, hydro, geothermal, waste-to-energy, and wind.

In addition, earlier stage and/or private clean energy companies have had access to a growing pool of venture capital and seed funding. Notwithstanding the emphasis on the nonconsolidation and separateness of an SPV with its sponsor, including the transfer of the assets of the SPV off the sponsor’s balance sheet, companies should ensure that their corporate governance policies and procedures provide adequate information regarding the operations of the SPV and its relationship with its sponsor to the audit committee and the board of directors. Although a strong fourth quarter helped to stabilize investments for the year, funding in 2016 constituted a drop-off to this growth trend. A follow-on offering of equity or an offering of debt can take anywhere from several days to several weeks to complete, absent complications.19. For a form of registration rights agreement, see Registration Rights Agreement. They may exist at all of the international, federal, state, and local levels and consist of dozens of distinct programs with distinct characteristics. 32. Securities offerings are governed by a comprehensive set of laws and regulations that are applicable across industries. Internal counsel should also be prepared to address the status of any existing, pending, or threatened litigation or investigations. Please refresh the page and try again. Usually in an IPO, and often in other offerings as well, due diligence may also include conversations with the issuer’s suppliers, customers, and collaborators.

These companies may allow consumers to purchase a solar system outright, to lease a solar system, or to have a solar system installed and be paid for the power produced. It is important to understand the required vote and the parties that will control or influence the vote.

In addition, the structure of the board of directors is likely to change in an IPO. These disclosure requirements, which are generally standard and do not require different categories of information for different industries, can include the following: The federal securities laws and regulations currently require that an issuer disclose the most significant factors that make an investment in its securities speculative or risky.

However, the terms of a bank’s form of underwriting agreement may be negotiated to suit the specific facts and circumstances surrounding an offering.

with similar characteristics as Series A financing.

ALL RIGHTS RESERVED. The Trust Indenture Act of 1939 prohibits public offerings of debt securities unless there is an indenture that complies with the requirements of such act and provides for the appointment of a trustee to protect the rights of security-holders. More so than most sources of clean and renewable energy, the production of wind turbines requires a substantial initial capital outlay, thus leaning more heavily on the project finance markets than traditional equity or debt capital markets for capital raises. For example, it is common for companies to negotiate representations and warranties related to the following: (1) possession and maintenance of material intellectual property rights necessary to conduct business; (2) compliance with applicable regulatory laws; (3) possession and maintenance of all necessary licenses, permits, and regulatory approvals to conduct business; and (4) compliance with environmental laws, which may include laws related to the disposal of hazardous materials. A foreign company will qualify as an FPI if 50% or less of its outstanding voting securities are held by U.S. residents and none of the following three circumstances applies: (1) the majority of its executive officers or directors are U.S. citizens or residents, (2) more than 50% of its assets are located in the United States, or (3) its business is administered principally in the United States. In order to achieve these two objectives, the Securities Act requires that every offer and sale of securities in the United States be registered with the Securities and Exchange Commission (SEC), unless an exemption from registration is available. The appropriate treatment of such programs will vary based on the purpose and nature of the incentive program, and counsel should coordinate with the issuer and its accountants to ensure that the bases for the issuer’s chosen accounting treatment are accurately and fully described in MD&A.25. Consequently, the time allotted for due diligence should be extended to match the level of familiarity of the investor with the particular clean and renewable energy segment. 33.

Companies raising capital should be ready to educate potential investors on the regulatory environment as part of the due diligence process. There are few continuous disclosure and corporate governance requirements that apply to clean and renewable energy companies aside from the standard corporate governance requirements promulgated by the SEC and securities exchanges.

10. The regulated nature of clean and renewable energy businesses often adds a layer of complexity to the due diligence process. In-house counsel must have a good understanding of the various regulatory regimes that impact the company’s business. This can be important when the economic terms are not favorable to the company’s prior investors (either because it is a down round or the new investor demanded preferential rights). § 229.10.

The issuer may need to make certain filings (for example, a Form D if relying on Regulation D), and may also have Form 8-K or other Exchange Act filing or disclosure obligations as a result of the financing.20. As part of any later-filed public registration statement, a company will have to describe all sales of unregistered securities for the three years prior to the sale. The registration statement includes the prospectus and is filed with the SEC. Other participants include wind farm developers, many of which take the form of yieldcos (i.e., companies that seek to generate cash flows from a group of assets and then pay it back to investors as dividends), including Hannon Armstrong Sustainable Infrastructure, Pattern Energy Group, and Brookfield Renewable Energy Partners. 17 C.F.R. To qualify for a private offering exemption (which is discussed in more detail above), however, issuers must comply with limitations on the manner and form of the offering, including restrictions on the types of investors who can participate in the offering or the amount of capital that can be raised. The Exchange Act was created to govern securities transactions on the secondary market and requires that companies with a security listed on a U.S. stock exchange, meeting certain asset amount and shareholder number requirements, or making public offerings of securities in the United States, register such securities and file certain periodic and other reports with the SEC. However, for companies that expect to be in the market and their counsel, it is a good idea to maintain updated data room files in an organized fashion where new documents are easily identifiable. Knowledge of the existing regulations is important, but so is an understanding of where the regulatory environment is likely to go in the future. For further information on accounting treatment and related issues generally, see Accounting and Auditing Professional Bodies and Standards.

Nasdaq rules only require a review, not an approval, by the audit committee of related party transactions, and NYSE rules merely recommend, but do not require, audit committee review and approval of related party transactions. Among other items, the process is designed to confirm the capitalization, confirm ownership of the intellectual property, identify any third-party consents, and identify any activities that might give rise to liability (e.g., indemnities to third parties, arrangements with distributors and agents operating internationally, exclusivity, rights of first negotiation, noncompetition, and most favored customer arrangements). Seed financing can also consist of common stock or simple agreements for future equity (a contractual agreement that has many of the same features of a convertible note).

16.

For this reason, the parties rigorously investigate the issuer’s business and financial operations in due diligence and carefully and comprehensively review the registration statement and prospectus. The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) mandates a number of reforms to enhance financial disclosures and combat corporate and accounting fraud.

26. 17. For example, Chinese companies such as Solar Power, Inc. and Canadian Solar have recently expressed aspirations to attempt IPOs in the United States. Among the most commonly utilized, Regulation D of the Securities Act contains safe harbors that allow issuers to raise up to $5 million (Rule 504),4 or an unlimited amount subject to limitations on the type of permitted investor (Rule 506).5 Rule 144A6 permits resales of certain qualified securities to sophisticated, large institutional investors and is frequently used for debt financing and offerings of other securities that are not listed on a national securities exchange. 1. An IPO, including due diligence, is a very intensive process. Depending on the details of the transaction, filings with FINRA, Nasdaq, or NYSE, and state or blue sky filings may also be necessary. The focus of the SEC evolves over time and it is a good idea to stay abreast of the current focus.

In connection with an offering by a clean and renewable energy company, the most commonly negotiated provisions of an underwriting agreement will likely be the representations and warranties of the company. This energy can be obtained both by burning the biomass directly (e.g., wood and manure) as well as converting the biomass to a different form of usable energy, such as ethanol, which can be added to gasoline to power automobiles. The registration statement is filed with the SEC, and the SEC will typically review and provide comments that must be addressed before the registration statement is declared effective (unless the registration statement is automatically effective, as discussed earlier). Lawyers working with clean and renewable energy companies should be aware of the major federal laws and regulations that govern the industry, including rules and regulations promulgated by the U.S. Energy Department and the EPA. General Electric is a major player in this space, and a handful of others trade over-the-counter, including Nordex, Siemens, and Vestas. For more information, see Private Placements Resource Kit, and Private Placement Considerations. This disclosure helps to provide investors with a full view of the potential risks and rewards facing the clean and renewable energy industry. Furthermore, these regulatory requirements may vary across jurisdictions.24. Major producers of biomass and biofuels include Green Plains Inc., an ethanol manufacturer that went public in 2007; BioAmber Inc., which sells a biologically produced, chemically identical replacement for petroleum-derived succinic acid, and who completed their initial public offering (IPO) in 2013; and FutureFuel Corp., a company that produces and sells biodiesel, a renewable energy fuel, and went public in London in 2007 before its later U.S. listing.

For information on materiality, see Materiality Determination Guidelines and Determining Materiality for Disclosure Checklist. Prepare employee stock option and stock purchase plans and descriptions as early as possible. Additional guidance on and examples of SVP disclosures from clean and renewable energy companies can be found in the complete practice note, Clean and Renewable Energy Industry Guide for Capital Markets.

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