New Energy Expert Insights: structuring successful joint ventures with Tracy Pyle, Senior Managing Director of Ankura

In this edition of New Energy Expert Insights, we sat down with Tracy Pyle, Practice Group Leader for Ankura’s Joint Venture & Partnership Practice, to discuss how parties can structure joint ventures that work in practice and not just on paper.

Ankura is a global advisory firm supporting organisations across the full transaction and asset lifecycle, including strategy, transactions, performance improvement and disputes. In the energy and infrastructure sectors, Ankura is particularly well known for advising on complex joint ventures, consortium arrangements and strategic partnerships, often involving multiple stakeholders, cross‑border elements or assets at different stages of development.

What are the top three structural issues parties should focus on when forming a joint venture?

Scope

Clarity around what the joint venture will do and what it will not do is fundamental. In the renewables context, this often arises where joint ventures are intended to cover projects that will span multiple stages of the value chain. Defining scope clearly at the outset helps align expectations, informs the operating model and minimises misalignment (and therefore disputes) as the project progresses.

Ownership and governance

Ownership percentages and governance rights are related but distinct, concepts. While ownership is often driven by relative capital contributions, governance does not need to mirror equity. Minority partners can have meaningful governance rights, including veto rights over key decisions, while majority ownership does not necessarily equate to control.

In practice, both 49/51 and 50/50 structures can work well, provided the governance framework reflects how decisions will be made in reality and accommodates any asymmetry in contributions, expertise, or risk exposure. Parties may favour majority/minority structures where one partner is better positioned to make operational decisions efficiently, or where accounting or consolidation outcomes are important.

Legal Form

Parties need to consider whether the joint venture should be incorporated or unincorporated, and, if incorporated, what type of entity, jurisdiction and choice of law. First, the parties should consider what they are trying to achieve, then consider the vehicle that will achieve those outcomes and importantly, what works from a tax and accounting perspective.

Are 50/50 joint ventures successful?

50/50 structures are often assumed to be prone to deadlock and thus JV failure. However, experience suggests otherwise.  Benchmarking by Ankura and market observations indicate that 50/50 joint ventures last longer and are more successful than majority/minority ventures, largely because both parties feel like they are equally invested in the outcome.

In majority/minority joint ventures, even if the majority partner has veto rights, the joint ventures that work best are those that try to achieve unanimity even if it’s not required in the joint venture agreement.

Joint ventures are a unique beast. Unlike M&A transactions, they require a genuine alignment of interests to succeed. If one party perceives the arrangement as unfair, whether in decision-making rights, economics or operational control, the venture is unlikely to deliver its intended value.

What derails a joint venture?

There are many issues that can undermine a joint venture, such as weak business cases, unclear interfaces with partners, cultural incompatibility, failure of partners to deliver promised capabilities, or, misalignment on strategy.

In the renewables sector, particularly where partners come from different industries or operate across the value chain, a common challenge is the absence of a jointly developed business case. Without early alignment on the commercial rationale and shared assumptions underpinning the venture, parties risk misalignment that can prevent the venture from being consummated or cause it to fail in its early stages.

How should parties approach risk allocation in joint ventures?

Risk allocation should reflect both control and exposure. Where partners have equal control over, and exposure to, a particular risk, it is often simplest for the joint venture to bear that risk, with partners sharing it pro rata.

Where control is asymmetric, risk allocation can be adjusted through incentives and protections. For example, where one partner controls demand by marketing the joint venture’s output or acting as an offtaker, mechanisms such as tiered pricing, milestone payments, equity adjustments or tailored exit rights can be used to balance that asymmetry.

In some cases, services provided by a partner (such as securing grid connection) may be documented through service agreements with the joint venture, with built in performance‑based incentives. While less common, equity adjustments may also be used creatively to bridge gaps in expectations.

How can parties deal with the complexity of cross-border joint ventures?

Cross‑border joint ventures introduce additional layers of complexity, which may be due to differences in corporate culture, decision‑making authority and internal approval processes that can materially affect transaction timelines.

Parties should be transparent early about approval requirements, decision‑making processes and expected timeframes. Tax, legal and accounting considerations also require careful coordination to ensure the structure works across multiple jurisdictions.

In practice, in‑person negotiations can significantly improve efficiency in cross‑border joint ventures, particularly where cultural differences are pronounced.

How can parties plan for exit from day one?

When considering exit, it is important to understand the most likely exit scenario. In the majority of joint ventures, this involves one partner acquiring the other’s interest.

Exit provisions should be designed with that reality in mind, recognising that there is often a natural buyer and a natural seller, for example, where one party operates that asset or holds core technology.

Ankura’s benchmarking of joint ventures shows that while most joint venture agreements include standard exit triggers (such as default, insolvency or prolonged deadlock), voluntary exit rights are also common. These are typically subject to mechanisms such as rights of first refusal, rights of first offer or buy‑sell arrangements, with rights of first refusal being the most prevalent.

Importantly, exit provisions rarely dictate outcomes in practice. They provide a framework for negotiation, rather than a script that is followed strictly. Lock‑up periods of three to five years are also common, helping stabilise the venture during its early stages, alongside high‑level provisions for transition services on exit.

What are the key trends shaping joint ventures?

Globally, Ankura has observed the following:

• Joint ventures are increasingly being formed to support AI-driven power demand including the energy requirements of data centres.
• Governments are playing a more active role in brokering and co-investing in joint venture structures through incentives, grants and direct investment. While this has traditionally been more common in the Middle East, it has expanded in prevalence globally in response to geopolitical developments.
• Innovative funding structures are emerging with ventures increasingly paired with strategic investments or bespoke commercial arrangements that extend beyond standard services agreements.

What practical tips can you offer to accelerate the process to establish a joint venture?

Joint venture transactions are notoriously protracted. Ankura’s benchmarking indicates a median of 408 days from term sheet announcement to close, with the longest transaction taking 708 days. Given the significant investment of resources involved parties should consider the following to accelerate the process:

• Establish a dedicated deal team: joint ventures require focused attention and part-time resourcing invariably leads to delays.
• Use a neutral external party: this can help drive the process and maintain momentum.
• Keep key decision-makers engaged throughout negotiations: significant delays often arise when parties negotiate terms without involving decision-makers until a later stage, only to find that sign-off is not forthcoming.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the structuring and negotiation of joint ventures. For more information, please contact Jo Ruitenberg and Hannah Jones.