Eco Joint Ventures and their use in LLPs

The use of a limited liability partnership (“LLP”) as the vehicle for joint ventures (“JV”) between parties is an untapped resource which can be both beneficial and an innovative business solution.

How, then, can an LLP be used to establish a JV between parties in respect of renewable energy generation and electric vehicle charging infrastructure – often referred to as an energy ecosystem? This type of LLP is referred to in this article as the “Eco JV LLP”.

Such an arrangement could be used by businesses with real estate using large amounts of electricity – office block providers, for example.

How does the structure work?

A new LLP will be established solely for the purpose of financing and operating the agreed energy ecosystem in accordance with the terms agreed between the parties.

In an Eco JV LLP, the energy ecosystem could encompass a renewable energy generator; for example a rooftop or carport canopy solar array, micro wind or ridge wind and battery storage, together with electric vehicle charge point infrastructure. Any excess energy produced can be used to generate a further revenue stream from the sale of renewable energy ‘guarantee of origin’ certificates (REGOs).

The parties to the Eco JV agree to share the costs of the installation of the energy ecosystem, draw down on the energy produced, and share in the profits arising through the operation of the EV charge points and emissions trading arrangements.

How should parties work together?

Usually, in such LLPs, the parties will be comprised of the following: a host who is the owner or tenant of the building and a renewable energy and charge point operator, which will be the members of the LLP.

The host will contribute access rights to its property and estate to the JV for the installation and maintenance of the energy ecosystem whilst the operator will contribute its reasonable time, skill, project management and operational expertise to installing and servicing of the renewable energy infrastructure.

The agreement

The terms of an Eco JV LLP agreement should be drafted to establish how the parties will work together to achieve the energy ecosystem in the chosen site.

The agreement will contain provisions relating to the rights and obligations of the parties as members to an LLP, and including but not limited to the following:

• Capital contributions, to finance the installation
• The roles of the members, as described above
• The distribution of energy output and profits
• Exit arrangements on disposal of a site, or at the end of the joint venture
• Certain provisions specific to the energy ecosystem.

What are the benefits of an LLP?

Looking to the benefits of the choice of vehicle:

• The flexibility of the use of an LLP allows the parties to replicate the precise arrangements which one would expect in a contractual joint venture
• As a separate body corporate, the LLP contracts it its own right
• The members have the protection of limited liability, like shareholders in a limited company, but without the restrictions of the legislative framework applicable to companies
• The LLP is tax transparent like a partnership.

In summary, we often find the use of an LLP for corporate joint ventures is too often not considered. Eco Joint Ventures are a particularly attractive options for those who are both looking for new vehicles for joint ventures and are also keen to explore the possibilities of renewable energy as a business model.