New FIRB laws show further support for renewables projects
WHO SHOULD READ THIS
- Current and future investors in the renewables sector.
THINGS YOU NEED TO KNOW
- New regulations relax Foreign Investment Review Board (FIRB) requirements around investment in wind and solar power projects.
WHAT YOU NEED TO DO
- Understand the status of the land prior to entering into any agreements to acquire the project.
Recent amendments to the Foreign Acquisition and Takeovers Regulation 2015 (Cth) (Regulations), which came into effect on 1 July, provide greater flexibility to foreign investment in renewables projects in Australia – another strong show of support for this rapidly developing industry.
Previously, established solar or wind power station projects were generally classified as agricultural land or vacant commercial real estate. The acquisition of these types of projects by a foreign investor was therefore often subject to the lower thresholds applicable to those types of land, being $15 million (in aggregate) for agricultural land and nil for vacant commercial real estate. Although not prohibitive to a transaction, these lower thresholds did increase delays and transaction costs associated with the overall transaction.
As a result of the recent amendment to the Regulations, an established commercial wind or solar power generation project is likely to be categorised as developed commercial real estate and the acquisition by a foreign person will generally only require FIRB approval if the land (together with improvements) is valued at over $252 million*.
A wind power or solar power station is defined for the purposes of the Regulations as any accredited power station or component of such accredited power station within the meaning of the Renewable Energy (Electricity) Act 2000 (Cth). This means that the relaxation of the FIRB rules only applies to operational solar and wind projects, not to acquisitions of land on which such renewable projects are to be developed. Acquisitions of land for the development of a renewables project will usually involve the acquisition of vacant commercial real estate or agricultural land. The FIRB approval requirements for these types of land differ, both in terms of the monetary threshold under which FIRB approval is not required, and the fees payable for an application for FIRB approval.
FIRB has released a guidance note confirming that even if land would ordinarily qualify as agricultural land, it will be treated as vacant commercial real estate if it is not being used wholly and exclusively for a business of primary production, and:
- an application has been made to a government authority for approval for establishing or operating a wind or solar power station on the land
- an approval of a government authority is in force allowing a wind or solar power station to be established, or
- the land is acquired solely or is used solely or predominantly to meet a condition of an approval of a government authority for a wind or solar power station to be established or operated on the land.
In such circumstances, a foreign investor can apply to FIRB for the acquisition of the land and will generally be granted approval, subject to a condition that it be developed within 5 years. This type of application is preferable to an agricultural land application as it attracts significantly lower application fees.
Although this is a rather simple amendment, it is again demonstrating that the Commonwealth Government (with the support of State Governments) is eager to support development in the renewable energy generation sector.
If you have any queries and concerns as to how this may impact your proposed investment or sale of renewables projects or renewable projects in general, please contact us.
* There are limited circumstances where the $252 million dollar investment would not apply. The key one being where the land is considered ‘sensitive land’, in such circumstances, the relevant threshold is $55 million.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.