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Absence of project company legal team: Project companies do not always have dedicated in-house legal teams to manage the project in the collective interests of all project sponsors. Each sponsor will typically have its own in-house legal team and may (but not necessarily) second its members into the project company. The absence of an independent legal function within the project company which can give instructions to external lawyers that represent the aligned position of all sponsors can create an unnecessary obstacle to important commercial and legal decisions being made. Further difficulties can arise if sponsors have different corporate cultures or where certain sponsors are also involved in other parts of the project chain (and therefore have different interests).
Competing interests among sponsors: Different sponsors often have conflicting financial and commercial goals. While the involvement of PE funds will typically be limited to a fixed and relatively short period compared to more traditional long-term asset owners, other types of sponsors may play multiple and more long-term roles in a project (eg as the offtaker or the operation and maintenance contractor) and as a result have a different risk profile and attitude towards delays or defects. Misaligned sponsor interests can affect productive contract negotiations and, once contracts are awarded and the works are underway, the project company's approach towards contractor claims, including the timing and quantum of settlement offers made or accepted. For example, a sponsor who is also a project's main offtaker may be incentivised to resist a contractor's claim for an extension to the project completion date if this delays the project's commercial operations and the sponsor's ability to fulfil downstream supply contracts under which it may be exposed to liquidated damages.