RENEWABLE ENERGY SURETY BONDS

Use your capital more efficiently and economically

Renewable energy companies are relying on this innovative alternative to meet financial assurance requirements.

Renewable energy companies, whether serving as an asset manager or developer (or both), often find financial assurance requirements in contractual agreements with utilities, public entities, and corporate off-takers.  

Using a surety bond instead of a letter of credit or cash to meet contract requirements has many advantages. Our team has paved the way in working with renewable energy counterparties over the past few years to allow for the acceptance of surety bonds to meet financial assurance requirements in power purchase agreement (PPA), interconnection, decommissioning, and procurement contracts. 

 

ADVANTAGES OF USING SURETY BONDS

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Credit Availability

Where a letter of credit ties up a company's credit capacity, surety bonds are not credited against a company's bank line.

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Rates

Surety bonds often cost less than a letter of credit, and they don't incur additional fees or fluctuate based on market conditions.

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Security/Collateral

Where letters of credit from a bank require a Uniform Commercial Code (UCC) filing, which acts like a lien to protect the bank's financial interest, surety bonds require only a hold harmless agreement.

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Covenants

Banks may have restrictive covenants as part of the bank line of credit or letter of credit program. Surety agreements do not have covenants.

Speak with Karl Choltus

Beecher Carlson Surety Overview

TYPES OF RENEWABLE ENERGY OBLIGATIONS

PPAs

Power Purchase Agreements

These agreements typically have a security requirement tied to power production. Surety bonds can be used as a new form of assurance with many counterparties throughout the country.

Interconnection

Interconnection Agreements

Energy companies typically require a financial guarantee to ensure that a developer will perform maintenance and corrective work for the duration of the interconnection. Surety bonds are now acceptable forms of assurance with many counterparties.

Decommissioning

Decommissioning

Many towns, counties, and public sector organizations require a form of financial assurance to address cost to remove installed power generation equipment at the end of lifetime to return the site to pre-construction condition. Surety bonds are now widely used to meet this financial obligation.

Procurement

Procurement

Purchase orders for modules, inverters, and other materials usually require not only a deposit, but also additional security to cover a portion of the full purchase order cost while in transit. Both domestic and overseas suppliers can accept bonds for purchase order obligations.

MEET OUR LEADERSHIP

Karl Black

Karl Choltus
kcholtus@beechercarlson.com

National Surety Manager

Karl has over 25 years of experience as a surety manager and surety underwriter. He partners with renewable energy companies to create unique solutions to address their evolving needs by using surety bonds as an alternative to other forms of security. His achievements include developing new bond forms specific to renewables, and negotiating the acceptance of surety bonds as a new form of assurance with many counterparties, including utilities and public sector entities.

Want to learn more?

Listen to Karl's podcast episode with Norton Rose Fulbright where he discusses the ins ands outs of surety bonds.

Contact us today!