A Joint Venture (JV) is an innovative way to deliver infrastructure and an alternative to a purely contractual agreement with a service provider.
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A Joint Venture (JV) is an innovative way to deliver infrastructure and an alternative to a purely contractual agreement with a service provider. It should not be seen as a delivery model in which the local authority (LA) transfers all risk to the private sector. Setting up a JV comes with its own range of risks which should be carefully considered before choosing this route .
JVs are usually established because the parties forming the business entity have objectives which complement each other and share a common view of the scope of the JV’s activities and benefits. For EVI deployment, this entails the need to deploy investment into assets and then manage a service delivery program. The JV entity should represent the best route for risk management for the LA where it is unable to achieve this through contractual arrangements.
The risk, responsibilities and benefits are usually shared based on each party’s financial contribution to the venture. In reality, this division of categories is a broad sliding scale. Therefore, while the JV might be the entity which invests, owns and operates the EVI network with all associated risks, the LA is taking a business and reputational risk in setting up this entity.
Important Considerations
The division of risks and responsibilities are complicated to articulate for a JV. This will be defined in the agreements and contracts through which a JV is established. The risks to consider for EVI procurement will apply to a JV in this case rather than the LA.
The following points are important to consider before setting up a JV for EVI procurement and delivery:
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The LA still owns a reputational risk when choosing this arrangement. The success of JV will determine the mitigation of the reputational risk. This arrangement should not be seen as a way to transfer all risk to the private sector through the creation of an arm's length relationship; this differentiates it from a PPCP arrangement.
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A JV involves collaboration between parties with different goals and ambitions. It is important for the LA to ensure this approach provides a better route to realise benefits, fulfil its EVI strategy and ensure value for money compared to other Commercial Arrangements.
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In addition to the technical and operational aspects of the EVI network, the LA will need to think about the process of selecting a joint venture partner. In some instances, the LA may be procuring a partner for a JV which later may enter into contracts with the same LA. Where this happens, the LA must keep clear separation between its role as a JV partner and its role as aLA client.
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It is advised that the LA seeks professional legal and commercial advice before deciding whether to select the JV route. Your can find more advice in our joint venture topic
Key Features:
The division of Investment, Ownership, Control, Responsibility and Revenue between the LA and service provider are presented below just for Own and Operate. This is an extract of the full comparison between all Commercial Arrangements available in NEVIS.
Who Invests?
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CAPEX
JV
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OPEX
JV
Who Owns What?
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Grid connection
LA or JV
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Grid connection to feeder pillar
LA or JV
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Feeder pillar
LA or JV
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Groundworks to charge points
JV
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Charge points
JV
Who Controls What?
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Technical specification
JV
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Location choices
JV
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End user tariff
JV
Who is responsible for?
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Planning approvals
JV
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Grid connection
JV
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Grid connection to feeder pillar
JV* -*may be subcontracted.
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Feeder pillar
JV* -*may be subcontracted.
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Groundworks to chargepoints
JV* -*may be subcontracted.
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Chargepoint Installation
JV* – *may be subcontracted.
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Operations
JV* – *may be subcontracted.
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Insurance
JV* – *may be subcontracted.
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Customer service
JV* – *may be subcontracted.
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Electricity purchase
JV* – *may be subcontracted.
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Decommissioning
JV* – *may be subcontracted.
Who owns the risk?
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Technology obsolescence
JV
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Regulatory change
JV
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Electricity prices
JV
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Utilisation
JV
Who takes the Revenue?
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EV charging income
JV
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Ground rent
N/A
Funding
The funding of the JV can be via a range of sources, whether separately or combined:
- Internal LA capital budgets
- Regional grants
- National schemes (e.g. LEVI)
- Asset financing
- Equity loans
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