Issue link: https://digital.shearman.com/i/1425143
S H E A R M A N & S T E R L I N G L L P | 1 1 Joe Freeman Counsel Singapore T +65 6230 3865 joe.freeman@shearman.com Jean-Louis Neves Mandelli Partner Singapore T +65 6230 3834 jean-louis.nevesmandelli@shearman.com Third party builds and operates transmission lines This is, for instance, the approach that is being proposed for the Singapore 100MW Import Tender, whereby importers are required to use the existing interconnector between Malaysia and Singapore, which is separately owned and operated. In these circumstances, since the project company is dependent on a third party's assets to reach the power delivery point, its sponsors and lenders will need to consider how to manage the risk of the transmission assets being unavailable (e.g., due to damage). Only limited insurance will be possible as the project does not own the transmission assets, so understanding the contingency options and redundancies available to mitigate these circumstances will usually be a key focus. If the transmission assets are to be built by a third party concurrently with the construction of the project, it will be critical for the project company to have visibility on the construction and ensure proper protections if the transmission lines are not available on time. B. TRANSMISSION ASSETS WITHIN IMPORTING COUNTRY As with any IPP, lenders will want the risk of any delays in constructing the interconnection equipment and any unavailability of the grid to be allocated appropriately, including the issue of compensation for lost revenues. This risk tends to be allocated to the buyer in the importing country, given the delivery point is typically at the border with the generating country, following a more typical regional IPP structure where grid risk below the delivery point is taken by the offtaker. That said, this is not the universal position taken. For instance, in developed power markets like Singapore, the curtailment risk under the 100MW Import Tender is allocated to the importer, reflecting the stronger grid reliability than in some of the less developed power markets in the region.