NORWAY Law and Practice Contributed by: Ida Marie Windrup, Magnus Tønseth, Markus Nilssen and Daniel Jovanovic, BAHR
requirements would have to be taken into account when enforcing the relevant security. 8.5 Structuring Deals A significant factor in structuring a project financing is determining the legal form of the project compa- ny, taking into consideration liability and tax effects, based on Norwegian company-related legislation. An SPV in a project financing, which will incur significant investments prior to becoming cash flow positive, will often be incorporated as an unlimited partnership ( Delt Ansvar or DA). When an SPV with unlimited part- nership generates taxable income, it will not be taxed at the SPV level, but rather flow up to each respective partner based on its ownership share. Each partner will in turn often be incorporated as a limited liability company and can take advantage of group contribu- tions to offset tax income or losses in other parts of the Norwegian tax group. Through this structure and generally speaking, partners with taxable income in Norway can benefit from the tax losses in the SPV’s early phase to offset such taxable income in other parts of the group. The parties would also need to consider each partner’s recourse to other assets to mitigate the unlimited nature of the SPV’s liability. Also, for any project financings which involve the acquisition of a Norwegian limited liability company, refer to 5.4 Restrictions on the Target setting out the Norwegian financial assistance rules, which are quite strict. As outlined there, in order to be able to benefit from the relevant “whitewash” exceptions and thereby be allowed to obtain guarantees and transac- tion security from a Norwegian target company, the acquiring entity must be incorporated within the EEA. 8.6 Common Financing Sources and Typical Structures Bank financing remains, in the authors’ view, clearly the largest source of project financing in Norway for all construction projects. To some extent, export credit financing providers are also seen being included in these structures. For project financing within the real estate sector, bond financings have also been exten-
sively used, particularly for projects which are out of the construction phase and more into the operations phase (and further development alongside normal operations). Particularly within the real estate sector, but also in some more aggressive corporate refinanc- ings, a more extensive layering of debt sources, with up to three layers of debt, has been seen. A typical example could be super senior bank, senior bond and junior bond. 8.7 Natural Resources The most notable requirement in relation to natural resource project developments in Norway is that of public ownership, which entails a requirement for two- thirds public ownership in certain hydropower pro- jects. Moreover, any change of ownership requires governmental approval in other contexts, such as in connection under the Norwegian Petroleum Act and the Marine Energy Act. There is no direct Norwegian ownership requirement on fish farming, but a resource rent tax has been imposed. Finally, and on a general basis, all licence-based operations and businesses will need to comply with the conditions on which the licence is granted, including as regards duration and degree of utilisation. 8.8 Environmental, Health and Safety Laws Broader ESG and HSE concerns remain central to project sponsors’ risk analyses. Under the Norwegian Transparency Act of 2021, companies are required to carry out due diligence ( aktsomhetsvurderinger ) on fundamental human rights and decent working conditions in line with the OECD Guidelines for Multinational Enterprises, and they must report on their efforts annually. Also, the labour market in Norway is strictly regulated and all project companies must adhere to detailed rules with regard to salaries, working conditions, and general HSE requirements. Major breaches of relevant HSE requirements can be considered a criminal offence under Norwegian law, whereas less serious offences would typically be settled by fines and/or injunctions to correct the relevant breaches.
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