Gone are the days when wind power projects were done mainly for depreciation benefits. They have now become significant investment opportunities. However, contract documentation continues to be influenced by the early history of this sector.
The contract structure generally comprises a number of purchase and work orders coupled with a wrap-around or umbrella agreement, as opposed to a comprehensive engineering, procurement and construction (EPC) contract or a split EPC contract.
There are two main reasons for this structure.
First, early investors, concerned more about reducing their income tax liability by claiming up-front depreciation benefit, were not bothered about trivial issues such as coverage of contractual risk and the long term future of the project. The contract documentation was therefore quite sketchy.
In the next issue Akshay Jaitly and Nishant Beniwal will look at other legal issues related to infrastructure. Trilegal is a full service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.
