1

Notes

2

Notes

In this talk I will concentrate on the legal issues for land owners wanting to allow an energy company to build a wind farm on their land. The principles I outline in relation to wind farms can apply to similar arrangements for solar and biomass developments. CAAV publication 202: Solar Farms a First Guide for Valuers, is a very helpful guide.

3

Notes

The usual arrangement is for the landowner to grant to the energy company a right (option) within a limited period for the energy company to call for the grant of a lease of the wind farm site. The energy company needs the comfort of knowing it can take a lease before it incurs the substantial planning and other costs, associated with wind farm development. If the energy company does call for the lease then the landlord grants the lease on the terms agreed and the energy company builds the wind farm and pays the landowner during the lease period.

4

Notes

The key objectives for the landowner are ,to not only to maximize receipts, but also to minimize and so far as possible protect against the downside liabilities and costs. Guard against landowners being seduced by the potential receipts and ignoring the potential downside costs and liabilities. The best return is found when both are dealt with effectively.

5

Notes

Given the numerous factors that need to be taken into account in identifying a potential wind farm site: proximity to buildings, radio and radar interference, average wind speed bird migration etc., the energy company will have done a lot of preliminary research identifying the wind farm site before approaching the landowner - they will have already decided the site has potential. The first step in negotiations with the energy company will be the signing of Heads of Terms outlining the deal. Whilst the Heads should be non binding and subject to formal contract it is difficult to depart from their basic terms in the binding legal documents. They form the instructions for the legal documentation. Care is needed to ensure the Heads cover the key issues, doing so will help minimize cost and delay and maximize return to the landowner. Given the importance of the Heads of Terms in setting the ground rules for a deal it is helpful if the landowner, his agent, solicitor and tax adviser all have input in negotiating the heads - this potentially involves the landowner in a lot of cost and I will comment on how to deal with that next.

6

Notes

I will comment in more detail on some of the main do’s and don’ts that I think should be covered in the Heads in a moment but first I will say a few words about some things to consider from the start of negotiations. Landowners professional costs The landowner is likely to incur substantial professional costs with agents and legal advisers in assisting with the negotiation of the heads of terms, the option and the lease. If those negotiations fail then the landowner can be faced with a large bill for professional fees and be out of pocket. The fact that professional costs are mounting up can in itself weaken the landowner’s negotiating position with the energy company. Faced with the prospect of a large bill and no return the landowner can be tempted to settle for less than he should get rather than risk the deal with the energy company falling through completely and him being out of pocket on costs

7

Notes

Two ways to address the cost problem are either: A) Insist from the start of negotiations that the energy company pays the landowners professional fees, and gives a solicitors undertaking to that effect at the start. If given this will normally be limited to a maximum amount. or B) Professionals agree that they work on the basis of no (or limited) charge unless the Heads are agreed. If they are prepared to work on this basis there may be a mark up on the normal fees to cover the risk of not being paid The cheaper option is to have the energy company agree at the start of negotiations that the energy company pays the landowners professional costs whether or not a deal is completed with the energy company.

8

Notes

Before starting to negotiate Heads of Terms check who exactly owns the land affected by the wind farm proposal - is it the landowner, client alone or jointly, a partnership? A company or pension fund? Are there any third parties whose permission is needed? • Mortgagees • Tenants • Restrictive covenant holders • Owner of mineral rights Consider the landowners tax position income and family needs: is it worth transferring the land into a new company to hold the wind farm lease? A company can protect from liability and shelter profits at corporation tax rates.

9

Notes

This is fundamental, perhaps obvious but nevertheless sometimes forgotten It is essential that the developer energy company contracting with the landowner in the option and lease has the funds to carry out its obligations or to pay the landlord compensation if it does not. No matter how well drafted the option and lease are, if the developer energy company has no assets the option and lease documentation gives the landowner little if any protection. Even though the approach for a wind farm will be made by an energy company with substantial assets: EDF, EON, EnergieKontor, RES etc., I think without exception, the energy company will form a shell company that has no assets to contract the option and lease with the landowner. The obligations of that shell company to the landowner must be supported in some way by a company with substantial assets

10

Notes

Tools available for securing the option and lease obligations of the developer energy company Parent company guarantee bond - a company with sufficient assets in the energy company group will commit to the landowner to honour the obligations of the developer energy company - they will want to limit the maximum liability under the bond. Get as high a figure as possible. Also if possible make sure the company giving the guarantee has to maintain assets of a minimum amount or has to offer a bond from a company with assets. This stops the energy company group re arranging its group to strip out assets from companies giving bonds over time. Bank/insurance company bond - this is very expensive for the energy company and is hard to get Cash deposit held on trust - this is becoming more common particularly to cover restoration obligations Insurance - to cover liability to third parties for injury nuisance etc Most energy companies will offer these options in some combination. If the security offered is less than needed then the landowner should consider taking a bigger return for the additional risk or forming a limited company to hold the wind farm.

11

Notes

All energy companies will want the right to transfer their rights under the option within their group of companies and to outside third parties. Make sure that the security arrangements put in place for the original developer energy company remain in place on transfer or are replaced by an equivalent security on transfer. It is common for larger energy companies to sell on their option rights to smaller energy companies once planning has been obtained - the landowner should take a fee for allowing the sale

12

Notes

With your notes you have a sample heads of terms which I think cover many of the key issues that are likely to arise. However deals are all different as landowner’s circumstances and needs are not all the same and the Heads need to reflect that. I will deal with some of the issues to cover in the heads that may be less obvious. Describe the land affected carefully: • What land will be in the option and what land will be in the lease. This is

important - there are cases of landowners mistakenly granting options over their whole farm for long periods of time. This can sterilize the farm and make dealings difficult.

• In the option minimise the area of land the energy company has rights over. • Make the energy company specify the location and maximum dimensions of

turbine bases, crane pads, construction compounds, access roads, substations. The energy company will want some flexibility on location of the bases and other element of the wind farm but limit that to changes agreed with the landowner (not to be unreasonably withheld).

Make sure all elements of the wind farm are located so as to minimise the disturbance to the landowner’s farm and to minimise difficulties to farming the land once the wind farm is built. Make sure the contractors have to use specified access roads when constructing the wind farm - stop them driving all over the option site.

13

The energy company and their contractors should agree to do as little damage as possible to the option site during site investigation and the running of the wind farms and agree to indemnify the landowner against loss. There are a number of practical measure that can help minimize damage: • Make agreed schedules of condition - preferably when the land is not covered

with standing crops • Do not forget to consider potential damage to existing roadways and buildings • Make provision for on site supervision during construction by the landowner or

agent on his behalf (with his costs paid by the energy company)

14

Notes

The planning consent and related s106 planning agreement will impose obligations to reinstate the wind farm usually after 25 years. Make sure the landowners obligations under s106 are limited: no obligation to pay money or do work; no obligation arises until development has started; no obligation on the landowner once he has disposed of the land affected. Make sure that restoration is the responsibility of the energy company to deal with this. If not the liability falls on the landowner. Make sure there is a bond or fund in place to cover potential liability unless the landowner (for more rent?) is prepared to risk the scrap value of the equipment covering the restoration costs - for this consider whether the equipment should belong to the landowner? The lease should extend for a couple of years after the planning for the wind farm has expired - to ensure the energy company is still liable as tenant. Breaks: any ability for the energy company to end the lease early should be conditional on the energy company having done the restoration works.

15

Notes

The sample Heads list various types of payment the landowner can ask for. Do get a minimum rent whether or not the turbines are operating. If possible require the energy company to operate the wind farm to maximize income. Consider getting the right to share in any warranty claim the energy company makes against suppliers. Rent reviews: most leases rely on index linking rather than market value review - there may be too many site specific variables to find market comparables

16

Notes

There have been a number of claims for nuisance arising from wind farm noise and the landowner can be liable - as well as getting an indemnity from the energy company make sure there is a clear obligation in the lease that the energy company tenant must not commit nuisance, this will help avoid successful nuisance claims against the landowner.

17

Notes

18

Notes

1

CAAV

NORTHERN GROUP CONFERENCE

18 SEPTEMBER 2013

YORK

Sample

Heads of Terms

for a

Potential Wind Farm Development

THESE HEADS ARE FOR ILLUSTRATION ONLY AND ARE NOT APPLICABLE IN ALL

CIRCUMSTANCES

EACH CASE IS FACT SPECIFIC AND PROFESSIONAL ADVICE SHOULD BE

OBTAINED TO ENSURE ALL RELEVANT ISSUES ARE COVERED IN EACH CASE

2

Landowner’s

agent legal and

other professional

costs

As a first step - ideally before negotiating the Heads of

Terms - obtain an undertaking from the Developer’s

Solicitors to pay, on demand, the Landowners reasonable

professional costs [limited initially to £X] whether or not

the option agreement is completed.

3

HEADS OF TERMS

NOTE:

These heads of terms do not and are not intended to create any legally binding obligations.

These heads are subject to contract, completion of formally executed legal documentation and

approval of the Landowner and the Developer.

The documentation for the proposed letting may contain such further terms as the Landowner

and the Developer may require, including additional terms on matters that are or are not covered

in this document.

OPTION

AGREEMENT

1. The Parties:

1.1 Landowner

1.2 Landowner’s

Agent

1.3 Tenant

1.4 Mortgage Lender

1.5 Landowner’s

Solicitors

1.6 Developer

1.7 Developer’s

Solicitors

1.8 Guarantor/bond

2. Key terms:

2.1 Commencement

Date

The earlier of date the Option Agreement is exchanged and six months

from the date of these Heads of Terms.

2.2 Option Fee: A one off payment of [£*****] payable in advance.

2.3 Initial Option

Period:

An initial period of [5] years but subject to clause 2.4.

4

2.4 Right to Extend the

Initial Period

2.4.1 The Initial Period can be extended if:

a planning decision or Court decision is pending; or

a planning decision was issued/handed down not more than 6 (six)

months before the end of the Initial Period

the developer gives at least one month’s prior written notice expiring on

the last day of the Initial Period and when giving the notice makes the

payment detailed in clause 2.5.

2.4.2 Under no circumstances shall the total Option Period exceed [7]

years.

2.5 Extension Fee An annual payment of [£**] payable in advance.

2.6 Proposed Scheme

Size

[Potentially **-**MW or **-**Turbines.]

2.7 Option Site The Option Site will be the area of land identified (excluding all

dwellings and buildings) and outlined on the plan attached.

2.8 Exercise of Option:

2.8.1 Notice to be served within the earlier of:

The Option Period (the Initial Period and any extension);

and

12 (Twelve) months after the expiration of the legal

challenge period or the determination of any legal challenge

lodged following the grant of planning consent

2.8.2 The Developer may only exercise the Option when they have:

Planning Permission for the proposed scheme,

All other necessary consents based on the original application

or any variation thereto approved by the Landowner

and

Adequate finance available to complete the construction,

commissioning and operation of the consented scheme;

2.8.3 The Lease is to be completed within 2 (Two) months after the

notice.

2.9 Planning Gain Fee: A one off payment once an acceptable planning consent has been

granted the payment to be made one month after the expiration of the

legal challenge period or any legal challenge lodged following the grant

of planning consent equivalent to [£***] per MW.

5

2.10 Development Fee: A one off payment upon entry to the site following the Exercise of the

Option to commence construction equal to [£****per MW ] (50% on

entering site to construct, 50% on first generation)

2.11 Lease Signing Fee A one off payment upon signing the Lease equal to [£****.]

2.12 Anemometer Fee Anemometer Fee [£**] per year or part year

2.13 Payment Reviews: All payments to be increased annually in line with the RPI from the date

these Heads of Terms are agreed.

3. Developer’s

Rights

3.1 Developers Rights Subject to the Developer complying with its obligations: during the

Option Period, and after giving reasonable notice to the Landowner, so

far as is reasonably required for the Proposed Scheme, the Developer

may enter onto the Option Site with or without vehicles, plant,

machinery and equipment as follows:

3.1.1 Vehicular access on tracks;

3.1.2 Pedestrian access on fields;

3.1.3 Dig boreholes and sink trial pits subject to the location and access

routes being agreed with the Landowner beforehand;

3.1.4 To install and use noise monitoring and/or anemometry equipment

(with a maximum [80]m height) subject to the location and access

routes being agreed with the Landowner beforehand;

3.1.5 Carry out tests and surveys (including without limitation

environmental and geotechnical surveys) in connection with the

proposed planning application.

3.2 Assignment: 3.2.1 The Option can only be exercised and the Lease taken by the

Developer;

3.2.2 Any Assignment or Change of Control is prohibited during the

Option Period except where such assignment is to a [Group Company]

subject to the Developer providing a Parent Company Guarantee Bond

(“PCG”) in a form and amount and from a Group Company acceptable

to the Landowner.

4. Developer’s

Obligations

4.1 Anemometer Data: On a quarterly basis, the Developer will confirm to the Landowner or his

Agent the estimated average wind speed based on the data collected.

6

4.2 Access, Damage

Reinstatement and

Drainage

4.2.1 The Developer not to enter the Option Site without notifying the

Landowner prior to entry;

4.2.2 The Developer to take and agree a schedule of condition (at their

cost) of any areas where they are proposing to carry out investigations

and will reinstate where possible or pay compensation to the Landowner

if not possible for any damage including crop loss and any associated

agricultural and environmental subsidy or similar payments;

4.2.3 The Developer agrees not to exceed 5mph while on Option Site;

4.2.4 Prior to any construction works the Developer shall appoint a

qualified drainage consultant who will design and implement any

required drainage works at the Developers cost having first agreed such

works with the Landowners drainage consultant whose costs will be paid

by the Developer.

4.2.5 The Developer will obtain the Landowner's prior consent (not to be

unreasonably withheld or delayed) to any works involving the breaking

of ground and will make good any damage caused by the exercise of the

rights set out in this clause.

4.2.6 The Developer will ensure all works are safe and fenced where

required to make safe.

4.3 Promotion of

Scheme:

4.3.1 Developer undertakes to use all reasonable endeavours to promote

the scheme through the Planning process;

4.3.2 To submit the Planning Application within 18 months of the

Option date and to use all reasonable endeavours to pursue the planning

application;

4.3.3 If the Planning Application is not determined within 12 months

following submission the Developer [is to] submit an appeal for non-

determination;

4.3.4 Once the Planning Application has been determined the Developer

is to either:

appeal against refusal or conditions attached to planning decision

within statutory period;

or to resubmit the scheme within twelve months of the planning

decision;

or to confirm the planning is an acceptable consent and pay the

Planning Gain Fee

4.3.5 If the Developer fails to take any of the above actions the Option

Agreement will terminate.

7

4.4 Planning Process: 4.4.1 The Developer to obtain Landowners consent to the proposed

development or any variations thereto including any planning

agreements or Habitat Management Plans, such consent not to be

unreasonably withheld or delayed;

4.4.2 Wherever possible the development is to minimise the impact on

the remaining land, for example, turbines to be located adjacent to

existing access tracks or field boundaries so as not to leave areas cut off

and uneconomic to farm.

4.4.3 The Developer will provide a bi-monthly written report on project

progress to the Landowner and their Professional advisors to include as

appropriate the Minutes of all meetings with any Local Authorities,

Statutory Consultees and Stakeholders.

4.5 Indemnity: 4.5.1 To indemnify the Landowner against all third party claims

resulting from the Developer's actions, inactions or use of the property

or breach of the rights granted under this agreement subject to a limit of

[£10m] per incident. Any claims by the Landowner will also be subject

to the above limit and will exclude indirect consequential and economic

losses.

4.5.2 For the avoidance of doubt the initial figure will be increased in

line with RPI in accordance with [Clause 4.4] of the Lease terms below.

4.6 Insurance: The Developer will carry and maintain an insurance certificate of at least

[£10m (Ten Million Pounds)] per incident which will be produced on

demand.

8

4.7 Landowner’s Costs: 4.7.1 The Developer will be responsible for meeting all the Landowner’s

reasonable professional fees including both Legal Advisor and Agents

costs;

4.7.2 The Developer will also be responsible for paying the costs of

obtaining vacant possession of the land, if it is subject to any tenancies,

or negotiating any other third party rights. If necessary, the Developer

will be responsible for all costs incurred in negotiating any agreements

with the tenants or other third parties to facilitate that wind farm and the

Developer will also pay any compensation or other sums that are due to

the tenants (whether under statute or by agreement) in connection with

the wind farm;

4.7.3 Fees will be charged:-

a) On agreement of Heads of Terms (the Landowner’s Agent reserves

the right to claim an interim fee if Heads of Terms have not been agreed

within 6 (six) months of appointment);

b) On a 3 (Three) monthly basis up to completion of all documentation

if requested;

c) If necessary on completion of any Section 106 agreement;

d) On the signing of the Option agreement;

e) As necessary in respect of any further negotiations, notices or the

completion of further legal paperwork in respect of the wind farm and

any general matters arising from the Developers occupation of the site;

4.7.4 For the avoidance of doubt the Developer will settle such fees that

are due and provide an undertaking from the Developer’s Solicitors to

meet costs which will remain due even if the paperwork is not

concluded.

4.8 Exclusivity: Neither the Developer nor the Landowner will submit an application for

an alternative wind energy site proposing wind turbine(s) with a [50]

metre tip-height or more, within the same Local Authority area or within

10km from this site until this Option has been exercised and the Lease

taken or this Option has been terminated unless otherwise agreed by the

Landowner or Developer, as appropriate, acting reasonably.

5. Landowner’s

Rights

5.1Continued Use of

Site:

The Landowner to enjoy full use of the Option Land for all other

purposes other than wind farm development save that the Landowner

covenants not to build new buildings and/or plant new vegetation with

an actual or expected eventual height of 10 (ten) metres or more within

600 metres of wind turbine locations proposed on the Option Land from

time to time except with the Developer’s prior approval, not to be

unreasonably withheld or delayed.

5.2 Small Scale

Turbines:

The Landowner reserves the right to install small scale turbines on the

Site (up to 50m tip-height) with the Developer’s prior approval on

location, such approval not to be unreasonably withheld or delayed.

[Any application made by the Landowner cannot be made before the

Developer’s turbines have been consented and the legal challenge period

has expired.]

9

6. Landowner’s

Obligations:

6.1 Planning and

Promotion:

6.1.1 The Landowner will assist in any planning application for the site

where requested by the Developer, subject to any additional costs, losses

or expenses incurred in this process being met by the Developer;

6.1.2 The Landowner will support the planning submission for the

development, including any planning conditions or associated

agreements with 3rd

party regulatory authorities, so long as the

Landowner is fully indemnified by the Developer

6.1.3 Provided that any conditions imposed as part of the Planning

process only affect the Option Site, are directly related to the use of the

property as a wind farm, are proportionate to the scale of the scheme and

only become binding after the Lease is completed and the Developer

covers all the costs, losses and expenses incurred in association with

meeting said conditions the Landowner will not unduly withhold

consent;

6.1.4 At least 30 days prior to submission of a planning application and

at any subsequent point when material changes to layout are proposed,

the Developer will submit a plan for the Landowners approval which

shall not be unreasonably withheld or delayed;

6.1.5 As soon as reasonably practicable after completion of the Option,

the Landowner shall provide the Developer with any such information

they have relating to the ground condition of the Option Site (including

any information relating to contamination) and details of all previous

uses of the Option Site of which the Landowner is aware;

6.1.6 During the Option Period the Landowner agrees not to use the

Option Site for a purpose or activity which would adversely affect, the

Developer’s proposed use of the Option Site as a wind farm or, the

prospect of securing planning permission for a wind farm.

6.1.7 Planning Agreements: Landowner is not obliged to enter into any

Planning Agreement unless obligations imposed are conditional on

commencement of development, Landowner not liable unless it holds

an interest in the land on which the breach occurs, the Landowner is

released from liability on disposal of his land interest, the Landowner is

not obliged to carry out works or make payments or if the Landowner is

required to restrict land outside the option area.

[Possibly get Developer to limit the effect of the Planning Agreement to

its leasehold interest].

6.2 Developer

Exclusivity:

Exclusive agreement for the Developer to promote wind developments

on the Option Site during the Option Period.

10

6.3 Title: 6.3.1 The Landowner’s Solicitors will provide replies to enquiries in

standard form and copies of the Landowner’s Titles. The Developer’s

Solicitors will then investigate and carry out any necessary searches in

relation to Title to ensure it is satisfied. Once title has been disclosed the

Developer shall be deemed to have full knowledge of the matters

disclosed and the Landowner will have no further liability to the

Developer in respect of title issues disclosed.

6.3.2 If the title identifies that the consent of any third parties including

Tenants mortgagees, covenant owners or mineral rights owners is

required the Landowner’s and the Developer’s Legal Advisors will

jointly use all reasonable endeavours, at the Developer’s cost, to obtain

these necessary consents.

6.3.3 The Option will be noted against the Landowner’s title at the Land

Registry or the Land Charges Department (as appropriate).

7. General:

7.1: VAT: All figures are exclusive of any VAT payable and the Landowner

reserves the right to exercise their option to tax VAT if they have not

already done so.

7.2: Confidentiality: Unless required to do so for statutory or regulatory purposes, neither

party will discuss / divulge to any third party any information, unless

authorised by the other or where such information is clearly in the public

domain with the exception of the Professional advisors of the

Landowner. Except that the rental figures may be disclosed to any bona

fide prospective lending institution for the purposes of security, or to any

bona fide prospective purchaser of that party’s interest in the property.

7.3: Termination: 7.3.1 The Developer can terminate the Option in writing, subject to

payment of all outstanding fees and expenses, at any time on giving 6

months notice;

7.3.2 For the avoidance of doubt there will be no reimbursement of any

Option fees already paid;

7.3.3 The Landowner may terminate the Option if the Developer is in

material breach of the terms or has not met the maximum time scales for

submission and subsequent appeal of the scheme;

7.3.4 If the Developer terminates the Option prior to the submission of a

planning application for a wind farm then all information, survey results,

and data collected by the Developer or their contractors is to be passed

to the Landowner without charge and free of confidentiality provisions

who can then use such information and disclose it to third parties.

11

7.4: Turbine layout and

selection:

7.4.1 The layout of wind turbines will be consummate with engineering,

design, technical wind and environmental requirements and construction

feasibility;

7.4.2 The Developer will use reasonable endeavours to locate turbines so

as to minimise disturbance to the Landowners property in accordance;

7.4.3 The Developer provide details of the proposed turbines including

peak output, hub height, blade length etc prior to submitting planning

and confirming turbine choice and estimated energy yield (P50 and P90)

prior to exercise of the option;

7.4.4 The Developer undertakes to either install the turbine with the

highest estimated energy yield (P50) as detailed under clause 7.4.3

above (subject to reasonable exceptions including for the avoidance of

doubt the unavailability of the stated turbine, whereupon the second

highest turbine details will be used) or to pay an increased Variable Rent

to reflect the percentage difference in the P50 performance between the

installed turbine and the highest P50 turbine.

7.5: Lease

(LTA 1954 excluded)

The agreed form Lease will be attached to the Option and the Developer

will cooperate with the Landowner to ensure the necessary procedures

are complied with to exclude the Lease from the security of tenure

provisions of the Landlord and Tenant Act 1954

12

LEASE TERMS

1. The Parties:

1.1 Landowner:

1.2 Developer:

1.3 Developer’s

Guarantor

2. Key points

2.1 Leased Area: 1.1.1 The Leased Area will be those areas of the Option necessary to

operate and maintain the approved wind farm to include, towers,

anemometer masts, hard standings, sub station, control and metering

stations;

1.1.2 It is anticipated that these areas should be no larger than:

a) Individual turbine sites will be no more than [2,500]m2;

b) The substation will be no more than [600]m2;

c) The Anemometer sites will be no more than [50]m2;

d) Construction Compound;

e)

1.1.3 Any requirement for a larger area than the proposed measurements

will be consented where the Developer can demonstrate a requirement to

the Landowner’s reasonable satisfaction and will be subject to a further

one off payment of £[*]/m2 for the additional land taken including land

rendered uneconomic contrary to Clause 4.4.2 of the Option terms;

1.1.4 Access Roads will be as near to field boundaries as possible so as

to minimise land rendered uneconomic.

1.1.5 The anticipated position of the turbine bases, crane pads

hardstandings, access roads, construction compound, cable runs are

shown on the plan and will not be changed except with the consent of

the Landowner (not to be unreasonably withheld or delayed).

Reasonalbe compensation will be paid is respect of any change.

2.2 Access: 1.2.1 Right to construct access roads to the Leased Areas of no more

than 5m running width subject to the payment below, with appropriate

passing places and corners subject to Developer maintaining these roads;

1.2.2 There will be no payment for the first [****]m2 of land taken on

average per turbine over and above the running area of the existing

access tracks (where these are used);

1.2.3 Any requirement for a larger area than the proposed measurements

will be consented where the Developer can demonstrate a requirement to

the Landowner’s reasonable satisfaction and will be subject to a one off

payment of £[5]/m2 for the additional land taken including land

rendered uneconomic contrary to Clause 4.4.2 of the Option terms.

2.3 Lease Term: A period of [27] years to include construction period and reinstatement

period but subject to Clause 7.2 below.

2.4 Landlord and

Tenant Act 1954

The Lease is to be contracted out of the Security of Tenure provisions of

the Landlord and Tenant Act 1954.

13

Exclusion:

3. Developer’s

Rights

3.1 Developer’s Rights Subject to the Developer complying with its obligations under the Lease

the Developer has the following rights:

3.1.1 Construction of wind turbines and associated substation, control

building, works compound and anemometer in accordance with the

Proposed Scheme;

3.1.2 Right to construct access roads within a [10] metre wide working

strip, and to maintain, repair, renew, replace, use and remove these

access roads as agreed in the option/planning subject to damage

reinstatement/compensation including compensation for crop loss and

any agricultural and environmental subsidy or similar payments and

damage to drainage;

3.1.3 Additional Construction areas for the period of construction and

refitting subject to damage reinstatement/compensation including

compensation for crop loss and any agricultural and environmental

subsidy or similar payments and damage to drainage:

The construction area will be no more than [3,000]m2 round

each turbine;

The construction area will be no more than [1,500]m2 for the

anemometry mast;

An area of no more than [2,500]m2 will be allowed for a

temporary construction compound and;

The construction area will be no more than [1,000]m2 for the

substation;

3.1.4 Rights to lay and maintain, repair, renew, replace, use and remove

associated underground power and telemetry cables within a [5]m

easement corridor subject to damage reinstatement/compensation

including compensation for crop loss and any agricultural and

environmental subsidy or similar payments and damage to drainage.

Wherever possible these are to follow access roads;

3.1.5 Right to oversail the Landowners adjoining property;

3.1.6 Subject to payment of compensation and to obtaining all necessary

consents and approvals, the right to fell, lop or cut trees on the

Landowners adjoining area within [300]m of the turbines that interfere

with the operation of the wind farm, such right being subject to any

legislation or environmental stewardship schemes;

3.1.7 Any land permanently taken out of agricultural production over

and above the areas outlined above for the purposes of planting schemes,

dead areas of fields due to layout constraints etc to be compensated by a

one off payment following the commissioning of the wind farm at the

rate of £[*]/m2.

14

3.2 Assignment:

3.2.1 No underletting of the whole or any part of the Leased Area

(except as provided for in 3.2.3);

3.2.2 Any Assignment or Change of Control is prohibited during the

Lease Period except an assignment of the whole of the Leased Area in

the following circumstances:-

(a) Where such assignment is to a Group Company subject to a

Parent Company Guarantee Bond (“PCG”) in a form and from a

Group Company acceptable to the Landowner;

(b) Assignment to third parties shall be subject to Landlords consent

(acting reasonably and promptly)

(c) On any assignment to a third party the Tenant shall be obliged to

provide a payment to the Landlord, the greater of £[****] per MW

of installed capacity defined in MW or £[***] per wind turbine

with planning permission;

3.2.3 Underletting of part or all of the substation and associated

equipment to the Regional Distribution Company (RDC) or sharing

occupation with the RDC for use in connection with the wind farm does

not require consent but the Tenant shall notify the Landlord of the

subletting or sharing occupation within one month of it taking place.

4. Developer’s

Obligations

4.1 Rent: 4.1.1 Initial Payments During Construction

£[****] payable on the signing of the Lease in accordance with Clause

2.11 of the Option above and a Development Fee of £[****]/MW in

accordance with Clause 2.10 above, 50% on entering the site and 50%

on first generation plus crop loss including any agricultural and

environmental subsidy or similar payments.

15

4.1.2 Rent During Lease to be the higher of:-

Guaranteed Fixed Rent:

Fixed Rent will be payable at the following rates:

A) From the start of the Lease to the 10th anniversary of

Commissioning = £[*******]/MW installed/to be installed;

B) 10th anniversary to 15th anniversary of Commissioning =

£[****]/MW installed;

C) 15th anniversary to end of generation = £[******]/MW installed

All Index Linked

and:-

Variable Rent:

Variable rent to be the higher of :

Period in Years

from

Commissioning/

12 months after

the date if the

lease (4.1.10)

Output Rent

(£/MWh)

Turnover Rent

(%)

1-10 £[***] [*]

11-15 £[***] [*]

16-end of

generation

£[***] [*]

4.1.3 For the avoidance of doubt the Turnover Rent is based on the

Gross Income derived from the wind farm including any subsidy or

trading payments and including the payments from the sale of ROC’s

and redemptions, LEC sales and redemptions, Triad benefits and any

other income derived from the wind farm, including but not limited to,

any future value arising from the sale or redemption of Carbon Credits

or REGO’s and so forth. Furthermore, any Power Purchase Agreement

is to reflect the full market rate available on the basis of an arms length

transaction;

4.1.4 The Variable Rent will be inclusive of any insurance receipts,

warranties or similar where these are in respect of loss of earnings rather

than capital payments;

4.1.5 Substation Rent of £*** per annum;

4.1.6 Works/Construction Compound Rent of £**** per annum;

16

4.1.7 Anemometry Mast Rent of £*** per annum;

4.1.8 Rent will continue to be due during the Decommissioning Period

and will be payable on a monthly pro-rata basis;

4.1.9 No turbines to be located on third party land.

4.1.10 The Variable Rent and Fixed Rent review dates will start from the

“Commissioning Date” or 12 months from the Lease start date,

whichever is the earlier.

4.2 Rent Start Date: Rent shall be payable from the start of the Lease.

4.3 Rent Payment

Dates:

Fixed Rents (Guaranteed Fixed Rent, Substation Rent, Anemometry

Mast, Minimum Payments etc) to be paid quarterly in advance, with

Output Rent and Variable Rent paid quarterly in arrears within 1 (one)

month of the end of each payment period save that Rent payable during

the Decommissioning Period will be paid monthly in advance.

4.4 Rent Reviews: All rents and payments to be increased annually in line with the RPI

from [**********] except the Turnover Rent.

4.5 Planning Consents,

and other legal

obligations:

4.5.1 The Developer will comply with all Planning, S106 and other legal

conditions;

4.5.2 No further applications without Landowner’s prior consent at his

absolute discretion.

4.6 Maintenance: 4.6.1 To keep the Lease areas and structures thereon in a good and

tenantable condition;

4.6.2 To maintain the Access Roads;

4.6.3 To maintain any drainage schemes affected by the project and

affect any repairs or replacements thereto.

4.7 Livestock/crop

protection:

The Developer will observe any regulations reasonably stipulated by the

Landowner for the protection of any livestock or crops on the

Landowner’s adjoining land.

4.8 Crop

Compensation:

4.8.1 To include crop loss, on any crop taken, including loss of any

agricultural and environmental subsidy or similar payments or

repayment of Woodland Grants;

4.8.2 Any such compensation will be payable on all land take areas

whether temporary or permanent;

4.8.3 This payment is a one off payment in respect of claims arising

during initial construction phase. Subsequent payments may be made in

respect claims arising as a result of works carried out by the Developer

outside the Leased Property after the completion of the initial

construction phase.

4.9 Indemnification: 4.9.1 To indemnify the Landowner against all third party claims

resulting from the Developer's actions, inactions or use of the property

or breach of the rights granted under this agreement subject to a limit of

£[20]m per incident. Any claims by the Landowner will also be subject

to the above limit and will exclude indirect consequential and economic

17

losses.

4.9.2 For the avoidance of doubt the initial figure will be increased in

line with RPI in accordance with Clause 4.4 above.

4.9.3 The Landowner may at any time during the Lease, acting

reasonably, require the Developer to increase the level of indemnity to a

level equivalent to that being provided in the market for wind farm

schemes of a similar size, subject to the Landowner being able to

provide evidence demonstrating the level of cover being provided

elsewhere.

4.9 Insurance: The Developer will carry and maintain an insurance certificate for

Public liability of at least £20m (Twenty Million Pounds) per incident;

index linked which will be produced on demand. Cover to include but

not be limited to construction and operational risks.

4.10 Rates and VAT: To pay all outgoings including Rates and any VAT.

4.11 Interest Rate: To be charged where necessary at 5% above the Landowner’s Bank’s

stated base rate.

4.12 Reinstatement: 4.12.1 Prior to taking entry to the site the Developer will produce at their

cost a Schedule of Condition of the Landowners property;

4.12.2 On termination to reinstate the site, returning it to the previous

state, and removing all objects to a depth of at least 1.2m (unless a lesser

depth is agreed by the Landowner at his absolute discretion) including

the removal of all access roads, electric cables, hardstandings and

equipment and replacing topsoil to a depth of not less than 300mm;

4.12.3 The Developer will fund a contamination report by a suitably

qualified independent expert including carrying out any recommended

remedial work resulting from the presence of the wind farm (not pre-

existing contamination) identified therein.

4.13 Restoration Fund: 4.13.1 The Developer will put in place a restoration fund or bond

adequate to cover the cost of de-commissioning, dismantling and

removing from site all the Developer’s equipment and restoring the site;

4.13.2 In the event of the Planning Authority requiring a restoration fund

or bond as part of a s.106 agreement or as part of the Planning consent,

the Developer may use the same fund or bond to cover both parties;

4.13.3 The initial sum deposited will be no less than £*** (** Thousand

Pounds) per MW of proposed capacity;

4.13.4 The sum deposited shall be reviewed on the 5th,

10th

, 15th

and 20th

anniversaries and thereafter will be reviewed every 2 (Two) years;

4.13.5 Interest will be credited to the account;

4.13.6 The revision of value is to be in accordance with the estimated

reinstatement cost of removing all of the Developer’s equipment and

reinstating the site. The resale value of any equipment removed may

only be defrayed against the removal of that piece of equipment.

4.14 Landowners Fees: Developer to be responsible for all the Landowners legal and surveyor’s

fees incurred in dealing with the Lease and the occupation by the

Developer.

5. Landowner’s

Rights:

18

5.1 Standard Legal

Rights:

5.1.1 Right of free running water including drainage;

5.1.2 Right of existing power, gas oil and other lines as now cross the

Leased areas;

5.1.3 Right of support for neighbouring land;

5.1.4 Mineral rights, but may only be exercised so far as they do not

materially effect the operation of the wind farm.

5.2 Landowner’s

Reservation:

5.2.1 Any parts of the Leased area, which are not occupied by the

Developer’s equipment can be used by the Landowner as long as his

activities are secondary to the Developer’s requirements, do not interfere

with the Developer’s interest and any agreed habitat management

requirements, other planning obligations and the terms of Landowner’s

reservations are complied with at all times;

5.2.2 Landowner specifically reserves the right to use all the access

ways and if necessary relocate any access ways subject to the

Developer's consent, such consent not to be unreasonably withheld or

delayed;

5.2.3 Landowner reserves the right to install small scale turbines.

5.3 Shooting: Shooting rights to be retained by the Landowner subject to an agreed

code of conduct.

6. Landowner’s

Obligations:

5.1.1 Not to damage electric / communication cables but to be allowed

to request a relocation of any cables required for the wind farm;

5.1.2 Not to erect any new buildings or structures that exceed 10 metres

in height within 600m of the nearest wind turbine at ground level

without the Developer's consent, such consent not to be unreasonably

withheld or delayed;

5.1.3 Not to plant new trees within 300m of turbines, with the exception

of replacing existing trees, which may affect the wind flow to the

turbines without the Developer’s consent, such consent not to be

unreasonably withheld or delayed;

5.1.4 To grant wayleave agreements to the DNO or National Grid in

respect of agreed conducting media routes on an annual basis;

5.1.5 For the avoidance of doubt the Landowner will be able to continue

to farm and peaceably enjoy the adjoining agricultural land.

7. General:

7.1 Confidentiality: Unless required to do so for statutory or regulatory purposes, neither

party will discuss / divulge to any third party any information, unless

authorised by the other or where such information is clearly in the public

domain with the exception of the Professional advisors of the

Landowner. Except that the rental figures may be disclosed to any bona

fide prospective lending institution for the purposes of security, or to any

bona fide prospective purchaser of that party’s interest in the property.

7.2 Break Clauses: 5.2.1 Developer to have the right to terminate after the 10th

, anniversary

of the Lease subject to a payment of two years rent (based on average

rent paid for the previous two years) and subject to the Developer not

19

being in breach of any other terms of the Lease and subject to the

Developer having discharged all restoration obligations;

5.2.2 The Landowner to have the right to terminate the Lease at any time

when the Developer is in breach of the agreement unless such breaches

are remedied within 90 (ninety) days of the breach;

5.2.3 The Landowner to have the right to terminate the Lease on or after

the expiry of the original planning consent for the wind farm subject to a

reasonable decommissioning period.

7.3 Disputes: Both parties agree that any dispute or difference that cannot be resolved

by the parties in connection with this Lease will in the first instance be

referred to mediation in an attempt to settle it through alternative dispute

resolution methods. [Thereafter the dispute will be referred to

arbitration in accordance with the Arbitration Act 1996], however,

neither party may commence any court proceedings or arbitration in

relation to any dispute until it has attempted to settle by mediation and

either the mediation has terminated or the other party has failed to

participate in the mediation, provided that the right to issue proceedings

or seek arbitration is not prejudiced by a delay.

7.4 Applicable Law: English.

LANDOWNER

DEVELOPER

Signed:

Signed:

Print Name:

Print Name:

Position:

Position:

Date:

Date: