National Security Review of Renewable Energy and CleanTech Transactions

Abstract

The American Recovery and Reinvestment Act of 2009 (Recovery Act) included a number of provisions to spur investment in the renewable energy and cleantech sectors. The Obama administration considers those sectors key to enhancing the nation's energy independence while preserving its competitiveness in the global economy. Massive investments are needed in renewables and cleantech to make a significant dent in the U.S. energy generation mix, update the electricity grid, and bring wind and solar energy closer to grid parity. In the current economic climate, domestic financial resources will not suffice to reach these goals. Foreign investments in the form of joint ventures, mergers, acquisitions, and takeovers (Foreign Acquisition Transactions) of U.S. renewable energy and cleantech businesses could provide much desired capital. However, structuring such transactions only begins after a favorable economic viability assessment. Among the myriad regulatory considerations involved in structuring of Foreign Acquisition Transactions, has increased in significance in recent years and now requires thorough analysis in any deal involving foreign investment. Indeed, since the passage of the Foreign Investment and National Security Act of 2007 (FINSA), the investment community has experienced heightened scrutiny by the interagency Committee on Foreign Investment in the United States (CFIUS). Moreover, as further explained below, CFIUS reviews transactions on a case-by-case basis. Outcomes of its fact-specific analysis have defied expectations of the transacting parties. Furthermore, the very essence of national security has evolved along the years, shifting with it the focus of CFIUS' analysis. To assist parties to renewable energy and cleantech Foreign Acquisition Transactions navigate the rapidly evolving CFIUS review process, this article discusses recent developments in this area while analyzing their applicability to future transactions.