Land Procurement for Finnish Renewable Energy Projects

Finnish renewable projects can reach substantial sizes, with capacities in the three-digit range covering multiple square kilometres of land. This underscores the importance of land rights procurement and subsequent contract management.

The rights to the project area are typically procured by long-term lease and use rights agreements rather than by purchasing real estate. Depending on the project location, one may encounter various forms of land ownership, each with their own challenges:

Many areas consist of a multitude of small properties each owned by different private landowners. It is not uncommon for large-scale projects to require agreements with hundreds of landowners, which makes contract negotiation and management complex. Making the process manageable will often require putting some form of landowner representation in place, so that communications can be channelled through an organised body rather than negotiating with each landowner individually.

At the other end of the spectrum are vast state or forest-utility owned plots. While dealing with fewer contracting parties simplifies matters, landowners in this category often refrain from committing to binding agreements, or even discussing commercial terms, until the project has reached a certain level of maturity (such as a legally binding master plan). As a result, land procurement and associated cost risks are deferred to a relatively late stage of the project.

With the rise of Power-to-X projects that rely on access to port and rail infrastructure or proximity to industrial hubs, an emerging trend is municipality-led land development, followed by (quasi) public calls to tender or apply for pre-zoned sites. Specifics depend on the municipality, but often sites are offered for long-term lease either for a general activity type and construction size, or for a more limited usage with the intention to form a strategic partnership around a pre-defined functionality.

As the renewables industry has matured, landowners have become more coordinated and aware of the business side of land access. Consequently, lease arrangements have grown more complex. In sought-after areas, it is not uncommon for lease payments to include multiple elements, such as payments tied to various project milestones, fixed lease payments based on capacity or area usage, and a share of the revenues or income generated by the project.

As a rule, making a project bankable requires that leaseholds for all essential plots are registered with highest priority. This becomes a challenge where parts of a property have been secured by neighbouring projects, or where different assets of a hybrid project need to be accommodated in the same area. Giving lenders the necessary degree of comfort will typically require arrangements between different lessees to ensure that each party’s land access is adequately secured. This may include creating corporate structures that hold any land that is jointly used.