Guarantees & surety
Renewable Energy Surety
The guarantees a wind, solar or storage project has to post before it earns anything — to secure its grid access and connection point, to the administration that authorises it, to take part in a capacity auction, on the EPC and supply contracts, to the offtaker and for dismantling the plant at the end — written as surety by an insurer, so the sequence is carried by one facility and the bank line that funds construction is left intact.
Boland’s Quay, Dublin · William Murphy, CC BY-SA 2.0
Who it is for
Renewable energy developers, independent power producers, EPC contractors and equipment suppliers in Spain, Ireland, the United Kingdom, Italy and Romania, and the brokers who place their security
What it does
- Guarantee for the grid access and connection permit, lodged with the Caja General de Depósitos or the regional treasury in Spain and with the system operator elsewhere
- Security to the administration on the autorización administrativa, the construction authorisation and the environmental declaration
- Participation and award guarantees for renewable energy auctions and capacity mechanisms
- Performance and advance payment guarantees on EPC, turbine and module supply contracts
- Guarantees on the delivery obligation under a power purchase agreement, and dismantling and site restoration bonds that outlive every other instrument
- One facility sized for the pipeline, one counter-indemnity, and a certificate per project stage — released as each stage closes
The product in full
A renewable energy project is secured by guarantees long before it generates a kilowatt-hour. In Spain, Real Decreto 1183/2020 requires anyone applying for a grid access and connection permit to lodge a financial guarantee with the competent administration — the Caja General de Depósitos for the transmission grid and most large plants, the regional treasury for the rest — before the application is admitted, calculated as a fixed sum per kilowatt of the capacity requested. It is held until the plant obtains its autorización de explotación and forfeited if the project misses the administrative milestones that keep the permit alive. The regulation admits a seguro de caución as a form of that guarantee; what the administration checks is that the insurer is entered on the DGSFP register for ramo 15, caución, and active, that the certificate follows the prescribed model, and that it is payable on first demand.
The access guarantee is the first of a sequence. The administration that authorises the plant commonly asks for a fianza on the environmental declaration and the construction conditions; a developer bidding into an auction for the renewable energy economic regime posts a guarantee to take part and keeps it posted to hold the award; the project company wants a performance guarantee and security for the advance it pays on turbines or modules from its EPC contractor, who wants the same from its suppliers; a corporate offtaker under a power purchase agreement asks for security on the delivery obligation; and the autonomous community requires a guarantee for dismantling the plant and restoring the land, which outlives every other instrument on the list. Five beneficiaries, five wordings — and in most of the files that reach the desk, five bank avales drawn on the credit line that was supposed to fund construction.
That is the case for writing them as surety. A caución is priced as a premium and sits outside the banking relationship, so the facility that funds plant, materials and the connection works is still there when construction starts; it is accepted by the Caja General de Depósitos, by a contracting authority under Ley 9/2017 and by a private beneficiary on the wording its contract requires. Surety is granted in aggregate against a balance sheet, so an underwriter looking at the fifth guarantee is looking at the total of the other four — and a developer that has secured each stage with a different bank has told nobody what the whole pipeline looks like. We would rather look at the project once, understand the pipeline behind it, and set a facility that follows it through. The same structure applies, under the local rules, to a project in Ireland, the United Kingdom, Italy or Romania.
How it works
What happens, in order
From the first enquiry to the point the cover, the contract or the facility is in place.
The procedure sets the requirement
The access regulation, the auction rules, the pliego or the EPC contract states the amount, the beneficiary, the term and the model the certificate must follow. In Spain the access guarantee is a fixed sum per kilowatt; an auction guarantee is set by the call; the administration and the EPC counterparty each prescribe a wording. We issue on the form the beneficiary requires, in its language.
We underwrite the sponsor, not the plant
The last audited accounts and the current management figures of the entity that will sign the counter-indemnity, the pipeline — projects by stage, capacity, grid node and expected dates — and, where the sponsor is a project company, the parent that stands behind it. A reference set of criteria is at least three closed financial years, positive results in the last two and no payment incidents on record.
A facility is sized for the pipeline
An aggregate limit against one counter-indemnity, with the stages the facility is expected to carry — access, administration, auction, EPC, offtake, dismantling — and the beneficiaries that recur. Each certificate is then a call rather than a new underwriting, issued within days against the limit.
The certificate is issued and lodged
On our own paper, from the entity that carries the risk, under our DGSFP entry in Spain and under the Central Bank of Ireland authorisation everywhere. The sponsor signs the counter-indemnity. The certificate is lodged with the Caja, the regional treasury, the auction body or handed to the EPC counterparty, as the procedure requires.
It is released, and the capacity returns to the facility
An access guarantee is returned when the plant obtains its authorisation to operate; an auction guarantee when the plant is delivered by the date it bid; an advance payment guarantee reduces as the advance is recovered; a performance guarantee is cancelled at the end of the defects period; a dismantling bond runs for the life of the plant. A facility is measured by what is outstanding on it, so each release is capacity the next project draws on.
Suitability
Where the Renewable Energy Surety fits
The cases it answers, the cases it does not, and what an underwriter needs before quoting.
It is the right answer when
- A developer has to lodge the grid access and connection guarantee before its application is admitted, and would rather not draw it on the bank line.
- A sponsor is bidding into a renewable energy auction, or holds an award it must secure until the plant is delivered.
- A project company is placing an EPC or supply contract and both sides want performance and advance payment security from an insurer.
- A developer, IPP or EPC contractor has a pipeline — several parks at the permit stage, one about to start construction — and wants the whole sequence carried by one facility.
Look at something else when
- The beneficiary admits only cash or a bank aval and will not vary the requirement.
- The project has no sponsor able to sign a counter-indemnity against the amount guaranteed — a guarantee secures an obligation, it does not fund the plant.
- The requirement is a financing guarantee to a lender rather than security on a permit, an auction or a contract; that is a financial guarantee, underwritten differently.
What we need to quote
- 1.The access application, auction call, pliego or EPC contract that sets the security, and the model or wording the beneficiary prescribes.
- 2.The last audited accounts and the current management figures of the counter-indemnifying entity; consolidated accounts and the group chart where there is a group.
- 3.An energy activity dossier: the pipeline by project, stage, technology, capacity, grid node and the administrative status of each installation.
Questions
What brokers ask us about this product
Is a seguro de caución accepted for the grid access and connection guarantee?
Yes. Real Decreto 1183/2020 admits it as a form of the guarantee, beside cash and the bank aval, and the Caja General de Depósitos and the regional treasuries accept it on their prescribed models. The condition is that the insurer is authorised in ramo 15, caución, which a beneficiary checks on the DGSFP register under our clave.
What happens to the guarantee if the project misses a milestone?
The administration may execute it. Real Decreto-ley 23/2020 attaches dates to the authorisations, the start of construction and the commissioning, and a project that withdraws or misses them forfeits the access guarantee. That is why we underwrite the sponsor and read the pipeline: the question is whether the project will reach its milestones, and whether the sponsor could repay us if it did not.
Do you price the whole sequence at once?
We size the facility at once and price each certificate when it is issued, at the rate for its instrument, term and wording. The calculator on the guarantees range page gives an indicative figure for the facility at its published from-rate and for each underlying bond — a performance bond, an advance payment guarantee, a bid bond — and the questionnaire is how a facility is requested.
Who administers the guarantees in Spain?
Our associated managing general agent for the Spanish market receives the submission, issues under the mandate and administers releases, extensions and renewals in Spanish. Underwriting, pricing, the paper and the capital stay with us in Dublin. A broker starts with the broker desk and we make the introduction.
Apply and read on
The questionnaire, the explainer and the Spanish market
The surety application questionnaire is how a facility for a pipeline is requested — online, or as a fillable PDF in English or Spanish that emails itself to the desk. The insight sets out the five guarantees in full, and the Spain page carries our register entry and the energy market as we see it.
Every certificate is issued on FDI Insurance paper under our DGSFP entry for ramo 15, caución, in Spain, and under the Central Bank of Ireland authorisation everywhere, against the balance sheet published in the solvency section of this site.
Request information
Ask us about the Renewable Energy Surety
The form reaches an underwriter in Dublin. If you are an intermediary, say so and we will route it to the broker desk.