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Renewable energy deals concentrate risk in a handful of legal pressure points. Therefore, legal due diligence in Romania for the renewable energy sector might be a crucial action.
The red flags most likely to erode value are:
The playbook that protects value is straightforward: front‑load a Romania‑specific permit and land matrix, verify binding grid milestones (and compensation for curtailment under EU rules where applicable), run a contract dependency map to close back‑to‑back gaps, pressure‑test governance and financing constraints, and tie critical cures to conditions precedent and specific indemnities in the SPA. Present findings through a concise Red‑Flag report (issue → impact → remedy) mapped directly to SPA protections and post‑closing actions.
What to look for: Gaps in the ownership chain or use rights (leases/usufructs), overlapping rights-of-way, outdated or missing urbanism documentation (PUG/PUZ), or reliance on exceptions to planning rules without robust paper‑trail.
Impact: Clouded title or fragile urbanism footing can immobilize a site (injunctions, challenges from neighbors/authorities) and trigger valuation haircuts or lender pushback. A weak lease term or termination clause can jeopardize the entire project footprint. (Permits/consents expectations for energy sites and the central role of ANRE further amplify the risk.)
Mitigation: Full title chain and encumbrance review; curative acts (supplemental easements, notarial corrections), title insurance where appropriate; confirm applicability of Law 50/1991 and subsequent amendments; document the planning path used (including any reliance on fast‑track rules) and make land cures conditions precedent (CPs) to closing.
What to look for: Missing or conditional permits (construction/operation), environmental approvals (EIA/SEA) with unresolved conditions, and inconsistent content across the permit “matrix” (e.g., grid, construction, environmental, aviation, cultural heritage). Romania’s framework hinges on Law 50/1991 for construction works and sectoral approvals, with ANRE as the key regulator.
Impact: Stop‑work orders, fines, revocations, or litigation—often surfacing post‑closing when timing to cure is worst. In a competitive auction, permit uncertainty is a primary price‑chip for buyers and a bankability constraint.
Mitigation: Build a permit matrix early (status, validity, conditions, transferability) and reconcile it against project design and land rights; obtain written confirmations where feasible; tie critical permits and condition clearances to CPs and price adjustments. Where fast‑track urbanism is used, collect legal opinions validating applicability.
What to look for: Non‑binding or expired grid connection offers, unclear interconnection milestones, and curtailment regimes lacking clear compensation. Romania’s transmission (Transelectrica) and DSOs are central, with significant pipeline booking highlighting congestion risk. EU rules on redispatching/curtailment (Art. 13 of Regulation (EU) 2019/943) frame when compensation applies.
Impact: Stranded capacity, volatile revenues, and model underperformance. Where curtailment is treated as non‑market‑based redispatch, compensation principles under Article 13(7) apply—key for lenders and valuation.
Mitigation: Verify binding ATR/connection agreements and milestone securities; pressure‑test curtailment provisions (compensation, caps, reporting); align PPA take‑or‑pay/availability metrics with interconnection obligations; price in realistic congestion scenarios.
What to look for: Termination‑for‑convenience without compensation, liquidated damages that are one‑sided or uncapped, vague force‑majeure and change‑in‑law clauses, non‑assignable contracts (missing consent/novation), and misalignment between EPC performance guarantees and PPA availability metrics.
Impact: Revenue erosion, exposure to contractor claims, and gaps that destroy “back‑to‑back” protection across the contract suite.
Mitigation: Run a contract dependency map and fix misalignments; negotiate consent/novation roadmaps; add step‑in rights; harden change‑in‑law and curtailment compensation; use price collars or LD caps where bankability requires.
What to look for: Shareholder agreements with vetoes that block future refinancings, capex, or asset sales; missing board minutes/resolutions; deadlock mechanisms that freeze operations; unidentified reserved matters that require third‑party approvals.
Impact: Deadlocks and execution delays; inability to implement performance remediation or portfolio re‑gearing post‑closing.
Mitigation: Amend SHAs (refine reserved matters, add tie‑breakers); implement fit‑for‑purpose governance charters; secure waivers/consents ahead of signing or as CPs.
What to look for: Undisclosed pledges or negative pledges over shares/assets, change‑in‑control triggers in general lending conditions, cross‑defaults, or covenants restraining transfers/encumbrances. These surfaced as material exposure in comparable DD exercises (accelerated maturity risk).
Impact: Forced refinancings, blocked closings, or penalty interest; in worst cases, loan acceleration endangering project continuity.
Mitigation: Full security and covenants audit; lender waivers and consent packages; targeted specific indemnities and R&Ws for hidden debt/pledges; intercreditor alignment as needed.
What to look for: Ownership gaps in SCADA/monitoring software, expiring or non‑assignable licenses, cybersecurity vulnerabilities, and weak data‑processing addenda (DPAs) with O&M/tech vendors.
Impact: Operational downtime, data loss, regulatory exposure (security of network/systems), and insurance issues.
Mitigation: License audit; obtain assignment/novation consents; include minimum cybersecurity and data protection warranties; negotiate source‑code escrow where mission‑critical.
What to look for: Biodiversity constraints (protected areas/migration corridors), stakeholder/community objections, and supply‑chain human‑rights risks that increasingly flow into procurement. OECD’s RBC due diligence lens and the evolving EU reporting landscape (ESRS) are shaping expectations—even where not yet fully mandatory for all SPVs.
Impact: Permit challenges, reputational harm, and off‑take/financing friction; ESG misalignment can translate into harsher SPA protections demanded by buyers or lenders.
Mitigation: E&S action plans, grievance mechanisms, supplier codes, and targeted SPA specific indemnities where residual risk remains. Align project disclosures with ESRS‑style data to meet stakeholder expectations.
What to look for: Pending administrative or contractor claims, historic landowner disputes, and gaps between seller disclosures and public‑record searches. Prior DDs frequently uncover incomplete litigation records or narrow framing of “receivables lawsuits only.”
Impact: Unbooked provisions, escrow needs, and valuation adjustments; legacy disputes can impede permit renewals or grid works access.
Mitigation: Litigation schedules reconciled against court registries; targeted escrows and indemnities; early settlement strategies baked into the post‑closing plan.
What to look for: Unfunded decommissioning plans, inadequate restoration bonds, unclear scrap/land restoration obligations, and lack of clarity on who bears end‑of‑life responsibilities in SPVs or land agreements.
Impact: Hidden future capex and landowner disputes; lenders may discount cash flows or demand covenants.
Mitigation: Size the decommissioning bond realistically; include decommissioning plan as a CP; clarify salvage rights and land restoration in leases and permits.
What to look for: Sparse or outdated documents, over‑redaction, and slow Q&A that makes verification impossible. This is a recurring friction point in practice, requiring persistent escalation and clear IRL (information request list) management.
Impact: Extended timelines, inability to validate key assumptions, and broader red‑flag classifications across multiple chapters.
Mitigation: Maintain an RFI tracker with deadlines; stage red‑flag reviews so unresolved items are visible to deal teams; insist on focused live Q&A with seller counsel when written loops stall.
An effective legal due diligence analysis reveals red flags and vulnerabilities among the companies within the renewable energy sector in Romania.
Our specialists are ready to offer you support in conducting a thorough due diligence review by evaluating the legal processes in Romania, providing clarity and assurance in the context of mergers, acquisitions, or investments.
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