Projects

General government authorisation

What government authorisations must investors or owners obtain prior to constructing or directly or indirectly transferring or acquiring a renewable energy project?

Renewable energy projects require the following licences, permits and agreements prior to construction:

  • construction licence from SATBA (which is similar to a licence to develop);
  • environmental licence from the Environmental Protection Organisation;
  • land agreement(s) with private owner(s) or the relevant government entity;
  • grid connection permit from Tavanir (or its regional affiliates);
  • PPA with SATBA; and
  • a foreign investment licence (referred to as a FIPPA licence) if the equity investment is of foreign origin.

Each licence or permit will be subject to specific terms and conditions. The issuing authority may revoke the licence or permit should the holder breach these terms and conditions. Once the licence or permit is expired, the issuing authority may refuse to renew it.

Before signing the PPA with SATBA, the applicant must have obtained construction, grid connection and environmental licences and secured the project land. Following the execution of the PPA, the project owner has a specified time period to construct the project and achieve commercial operation. This time period varies based on the type of project, as well as stipulations in the particular PPA. For example, the time period for the construction of a solar project is 15 months

After execution of the PPA, any foreign investor will become eligible to apply for a foreign investment licence (known as FIPPA licence) issued by the Organisation for Investment, Economic and Technical Assistance of Iran (OIETAI). Although obtaining a FIPPA licence is not mandatory, in practice, SATBA requires all foreign investors to obtain the licence after the PPA is executed.

A direct transfer of a renewable project to a third party usually requires the prior consent of SATBA. Indirect transfers through selling the shares of a project company is also restricted during the construction phase (that is, prior to the commercial operation date) when investors may not transfer more than 25 per cent of their shares in the project company without SATBA’s prior consent. Depending on the version of the PPA used, the 25 per cent restriction may have been extended to the operation phase. To avoid revocation of the construction licence or breach of the PPA, SATBA’s consent must be obtained prior to any such restricted transfer.

Offtake arrangements

What type of offtake arrangements are available and typically used for utility-scale renewables projects?

SATBA acts as the offtaker of electricity generated from renewable sources on a guaranteed basis and, according to the FIT programme. However, there is no legal prohibition for sale of electricity directly to other offtakers (i) if according to its construction licence the project is set to sell the electricity to other offtakers (such as in case of electricity exporting plants); (ii) if consented by SATBA with respect to the electricity generated within the capacity set forth in the underlying PPA; or (iii) in respect of the electricity generated occasionally in excess of the capacity set forth in the underlying PPA.

As a credit-enhancement measure, Iran has put in place a legal regime for issuing sovereign guarantees through the Ministry of Economic Affairs and Finance (MEAF). For renewable energy power plants, the MEAF is able to guarantee payment obligations of SATBA to the project owner (ie, the seller of electricity). As a matter of policy, however, the government issues such sovereign guarantees only for very large-scale projects.

Procurement of offtaker agreements

How are long-term power purchase agreements procured by the offtakers in your jurisdiction? Are they the subject of feed-in tariffs, the subject of multi-project competitive tenders, or are they typically developed through the submission of unsolicited tenders?

Renewable projects are exempt from the bidding process, and SATBA does not hold competitive bids for awarding renewable energy project PPAs, which are the subject of a FIT programme. Instead, the awardof licences, which may lead to the signing of PPAs, is based on the qualification criteria of SATBA and at its discretion. Before awarding a project licence or PPA, SATBA may require the applicants to show a track record in developing and constructing similar projects, or to introduce a recognised local or foreign investor whose participation would be expected to help in developing and constructing the project.

Operational authorisation

What government authorisations are required to operate a renewable energy project and sell electricity from renewable energy projects?

Once a renewable energy project reaches commercial operation, an operation licence is issued to the project company by SATBA (provided that Tavanir or its affiliates confirm the project power production meets the levels stipulated in the underlying PPA).

Electricity generated from renewable projects is sold to SATBA based on the executed PPAs. No further government authorisation for the sale of electricity would be required. Power producers can sell their electricity directly to consumers, or on IRENEX, but the lower prices (compared with subsidised SATBA offtake rates) discourage this practice.

Decommissioning

Are there legal requirements for the decommissioning of renewable energy projects? Must these requirements be funded by a sinking fund or through other credit enhancements during the operational phase of a renewable energy project?

There is no specific legal regime for the decommissioning renewable energy projects. Decommissioning could become an issue if the project company is required to evacuate the project land, and this aspect of it would be dealt with in the land lease agreement.