Land title in India can be uncertain and there is no assurance of clean title.
There is no central title registry for real property in India. Property records in India are generally maintained at the state and district level and are updated manually through physical records of all land-related documents and may not be available online for inspection or updated in a timely manner. This could result in property records investigations taking a significant amount of time or being inaccurate in certain respects, which may impact the ability to rely on them. Land records are often handwritten, in local languages and not legible, which makes it difficult to determine the content. In addition, land records are often in poor condition and are at times untraceable, which materially impedes the title investigation process. Further, improperly executed, unregistered or insufficiently stamped conveyance instruments in a property’s chain of title, unregistered encumbrances in favor of third parties, rights of adverse possessors, ownership claims of family members of prior owners or third parties, or other defects that a purchaser may not be aware of, can affect the title to a property. As a result, potential disputes or claims regarding title to the land on which power plants are developed or used for operations, or will be constructed in the future, may arise.
Risks associated with any changes in Brazil's current sector regulatory framework and to the conditions applicable to the authorization to explore and wind energy generation projects.
The Brazilian federal government has been implementing policies that have a comprehensive impact on the Brazilian energy sector and, in particular, the electricity sector. As part of the restructuring of the industry, Law No. 10,848/2004, known as the New Industry Model Law, introduced a new regulatory framework for the Brazilian electricity industry. This regulatory structure has undergone several changes over the past years, and may be subject to further changes depending on the increase or decrease of energy prices and the political situation in Brazil.
Authorizations for the exploration of wind power projects are granted by the federal government. However, such authorizations are temporary and may be revoked at any time by the competent authority on the grounds of public interest and upon prior law providing authorization; and the corresponding compensation may be lower than the investments made. These authorizations may be renewed at the government's discretion.
Non-compliance with any regulatory provision in connection with the exploration of the wind power projects may subject the relevant project companies and/or subsidiaries to penalties by ANEEL, which may range from a warning to a penalty corresponding to a percentage of annual revenues (up to 2%) or even revocation of the authorization granted by such agency.
Renewable power generation projects in Brazil, including the projects owned by the Company, are normally structured in separate special purpose vehicles in order to take advantage of regulatory incentives, which also result in more favorable tax treatment. Regulatory and tax authorities may challenge that structure in the future, which may increase the taxes that the Company is required to pay or otherwise cause an increase in costs.
The grid tariffs paid by our Brazilian projects are defined by ANEEL and may vary in the future. In February 2017, ANEEL issued new regulations providing for the inclusion of compensation to certain transmission companies in the calculation of grid tariffs, which could cause a substantial increase in grid tariffs.
The revenues from our Brazilian projects depend on the timely accounting and settling of the power market by the CCEE. When authorities issue new regulations or change existing regulations, negatively affected parties may file lawsuits and obtain injunctions staying the accounting and settling of power market transactions with respect to those parties, which could impact the payment of revenues to our Brazilian projects by the CCEE.
Certain of our PPAs contain joint and several liability between holding companies and operational companies.
In Brazil, certain of our PPAs in the government regulated market have offtake counterparties that are special purpose entities under the control of the legal entities that participate in the government auctions. If such a special purpose entity fails to deliver the commitments under the government auction rules, the controlling entity that participated in the auction is jointly and severally liable for all obligations and liabilities arising from the government auction and the applicable PPA. Therefore, liability is not isolated to a specific power plant simply by operating the power plants under a separate legal entity. Significant potential liabilities could arise from: (i) the delay in any of the milestones for the implementation of the power plants; (ii) subject to certain related obligations, the delay in recovering the value or delivery of the performance bond; and (iii) the failure to satisfy all the qualification requirements under the applicable government auction rules and the applicable PPA. The failure to comply with government auction milestones may also trigger enforcement of bonds (participation and performance), payment of fines and suspension from participating in any public auction for up to two years. There is no limit on the amount and kind of losses and damages covered under the government auction rules and the applicable PPA. Therefore, damages could potentially include the loss of profits and consequential damages.