- Client Context and Transaction Objective
We advised a company in the early stages of developing a large-scale electrofuel (eFuel) production facility in Paraguay within the RFNBO (Renewable Fuels of Non-Biological Origin) category. The client, a foreign investor in the renewable energy sector, identified a strategically located site in the District of Villeta, on the Paraguay River, for the development of an electrolysis plant and related infrastructure, including pipeline corridors, a dedicated electrical substation, and potential port facilities for bulk methanol exports.
Our engagement focused on structuring the legal framework for the acquisition of the target site and protecting the client's position during the pre-investment phase, ensuring legal certainty over the parcels of interest while technical, environmental, and commercial due diligence is carried out.
- Our Role and Scope of Advice
Our advice included:
a. Structuring the acquisition, assessing alternative mechanisms to secure the client's rights over multiple parcels owned by different landowners, with different title histories and legal statuses, including parcels subject to ongoing judicial proceedings.
b. Drafting and negotiating two parallel pre-contractual instruments: a Letter of Intent (LOI) with one landowner and a Memorandum of Understanding (MOU) with the other, each tailored to the specific legal and commercial circumstances of the relevant parcels.
c. Conducting title review and legal risk analysis, including identification of a title overlap dispute affecting two key parcels, assessment of a pending revindicatory action and judicial survey proceeding, and analysis of a title consolidation issue arising from an acquisition made on behalf of a company in formation.
d. Designing a multi-layered acquisition structure covering outright purchases, irrevocable purchase options for future expansion phases, pipeline corridor rights (through ownership or easement, depending on due diligence findings), a conditional tank storage option linked to port feasibility, and acquisition of the electrical substation together with underground cable routing rights.
e. Drafting payment protection mechanisms, including deferred payment arrangements linked to indemnity conditions to mitigate double-payment risk arising from the title dispute, together with vendor indemnities covering potential professional fee claims by attorneys involved in the underlying litigation.
f. Coordinating both parallel transactions to ensure consistent treatment of the title overlap dispute affecting parcels owned by each counterparty.
- Key Legal Challenges
The transaction involved several significant legal challenges:
Overlapping title dispute. Two strategically important parcels, one owned by each counterparty, were affected by an ongoing title overlap dispute subject to judicial proceedings. The planned access corridor to the port crossed the disputed area, directly linking title risk to the operational viability of the project. The transaction structure was designed to allow negotiations to progress while protecting the client from exposure to the underlying dispute.
Fragmented title structure. The parcels covered by the MOU were distributed across separate properties with differing ownership histories, requiring careful coordination of the acquisition structure.
Multi-layered acquisition framework. The project's phased development required five different acquisition mechanisms—outright purchase, purchase options, conditional options, easement or ownership rights depending on due diligence outcomes, and underground cable routing rights—each requiring tailored legal treatment while maintaining consistency across both framework agreements.
Regulatory and infrastructure considerations. The transaction also required anticipating regulatory requirements for the construction and operation of a dedicated electrical substation (ANDE authorization), underground cable crossings under public roads (municipal permits), and future port access arrangements, which were incorporated into the contractual framework through conditions precedent and cooperation obligations.
- Outcome and Current Status
Negotiations of both framework agreements have progressed positively, and the parties have reached alignment on the principal commercial and legal terms. While the transactions remain subject to ongoing negotiations and execution of the final documentation, the proposed contractual framework provides the client with a solid legal basis to continue its due diligence and advance the project.
The proposed transaction structure is expected to provide the client with:
- Exclusive rights over all target parcels for an 18-month period, covering the due diligence and contract negotiation phases, with both counterparties undertaking not to encumber or dispose of the relevant parcels.
- A coherent legal framework for a phased acquisition covering the initial electrolysis site, future expansion areas, pipeline and substation infrastructure, and conditional port-related rights.
- Protection against the title overlap dispute through conditions precedent, deferred payment arrangements, and vendor indemnities addressing both the underlying dispute and potential professional fee claims arising from the litigation.
- A clear due diligence roadmap identifying the principal legal, cadastral, and regulatory workstreams required prior to closing, including recommendations on title verification, cadastral overlay analysis, and regulatory pre-assessments.
Throughout the engagement, our team has acted as a strategic legal adviser, anticipating risks, coordinating the parallel negotiations, and developing practical solutions aligned with the client's commercial and operational objectives.
