Energy Limited Partnership - Reasons Why You Would Establish One
Auguest 10, 2004
By Richard Smith, LLB
Ever since the collapse of Enron, those
involved in the energy sector have been looking for
investor friendly vehicles that also provide investors
with a certain level of transparency. In this regard,
an energy limited partnership may well be just the
answer to their problems.
As is the case with other limited partnerships, energy
limited partnerships are created with the aim of fulfilling
the business aims of the partnership - in this case
the energy sector.
However, due to the level of money needed to develop
a new energy operation, and the risks involved (no matter whether
the investors are looking to develop a new oil field; power station;
or to install a new grid-line) it5 is prudent business practice
for such investors to establish a limited liability relationship
between each other.
Energy Limited Partnership - How Is One Set Up
Actually, the establishment of an energy LP is no different from
that of any other limited partnership. All that need be done is
that the general and limited partners of the LP file a registration
certificate with the secretary of state, in the state in question,
requesting that their partnership be formally registered.
Along with the filing of the registration certificate, the partners
will also need submit the name of the partnership - and the registration
filing fees. Once the limited partnership has been registered, the
partnership can carry-on its business in the manner normally undertaken
by a limited partnership.
Where an energy LP will differ from other limited partnerships,
however, will be within the provisions of the partnership agreement.
Obviously it will be very important for the members of the partnership
to set out the purpose of the partnership clearly in the partnership
agreement.
Included here will also need to be what energy project the partners
intend to invest in. Finally, very careful provisions will need
to be include as to how the partnership can unwind in the event
that the energy development is not a success; or, more hopefully,
comes to a successful conclusion.
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