A recent post on Foley Hoag’s State AG blog about New York’s proposed pre-merger notification legislation details the potential new notification requirement, but we wanted to dive a little deeper into the impact the proposed legislation could have on transactions in the energy industry.
Summary of Legislation
If it passes the 21st Century Antitrust Act would create a new premerger notification requirement unlike anything that currently exists in New York and broader than any requirement in any other state. Transactions that involve the acquisition of $10.1 million or more of voting securities or assets and in which at least one party involved has assets or annual net sales in the state of New York in excess of $10.0875 would be required to provide notice to the New York Attorney General 60 days prior to closing. Alternatively, if the transaction is subject to the federal Hart‐Scott‐Rodino Antitrust Improvements Act of 1976 (HSR Act) and the parties provide the New York Attorney General with a copy of their HSR filings simultaneous with their submission to the Federal Trade Commission and the U.S. Department of Justice, then no additional notification will be required and the waiting period will be reduced to 30 days. As a result, the 21st Century Antitrust Act’s notification requirement and 60-day waiting period will mostly impact transactions that are either below the HSR thresholds or otherwise exempt.
Impact on Renewable Energy Projects
Transactions below the HSR thresholds and transactions that qualify for an exemption from the HSR Act previously were able to close shortly after signing, but many of these will now have to wait 60-days between signing and closing or face penalties of $10,000 per day for failure to comply with the proposed notification requirement. As I mentioned in the previous post, the proposed legislation includes a few exemptions similar to exceptions in the HSR Act, but not all of them.
In particular, some of the exemptions that purchasers of partially developed, pre-notice to proceed or pre-NTP stage renewable energy projects or project company SPVs that largely hold inchoate project development rights often rely upon are noticeably absent. For example, the New Facilities exemption (16 CFR § 802.2) exempts from HSR filing obligations the acquisition of a structure that has not produced income and was either constructed by the acquired person for sale or held at all times by the acquired person solely for resale. Businesses involved in the development of solar energy projects that develop projects for the purpose of selling them, while exempt from the HSR Act, would be subject to New York’s notification requirement. Also absent are the Foreign Acquisition exemptions (16 CFR §§ 802.50 and 802.51). Businesses with assets in New York involved in transactions involving the acquisition of projects outside the United States could also be subject to New York’s notification requirement.
All of this could change once the legislation is passed because it empowers the New York Attorney General to create new exemptions for transactions which are not likely to cause harm to competition. If the legislation is passed as currently drafted, there could be a tidal wave of notifications filed and it is possible that the Attorney General will move swiftly to implement many of the exemptions to the HSR Act that are currently absent from the 21st Century Antitrust Act. In the meantime, Foley Hoag will be carefully monitoring the legislation’s progress as it moves through the New York Senate and Assembly and we are happy to answer any questions you may have.
