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Key considerations for transactions in the energy sector

The Screening of Third Country Transactions Act 2023 came into effect on 6 January 2025. Our Competition, Antitrust & Foreign Investment team outlines the key aspects of the regime and considers the types of transactions which are caught by the Act.


The Screening of Third Country Transactions Act 2023 (the Screening Act) came into effect on 6 January 2025.

The Screening Act gives the Minister for Enterprise, Trade and Employment the power to review certain acquisitions by foreign investors that relate to, or impact on, a number of broad categories of sensitive and strategic sectors or activities, including the energy sector.

Parties to a transaction that meets the relevant criteria set out in the Screening Act must now notify and obtain approval from the Minister prior to completing the transaction. Failure to do so is a criminal offence, punishable by fines. Therefore, in the case of energy transactions directly or indirectly involving foreign acquirers, careful consideration is required as to whether the transaction triggers a notification requirement. Helpfully, the Minister recently published the final ‘Inward Investment Screening Guidance’ (the Guidance), which clarifies several elements of the Screening Act, including aspects of the notification criteria.

How the Screening Act applies to the energy sector

Similar to the existing Irish merger control rules, the Screening Act creates a mandatory and suspensory notification regime for transactions meeting certain criteria. A transaction will be notifiable to the Minister where all of the following four criteria apply:

1. A “third-country undertaking”, ie from outside the EU/EEA and Switzerland, or a person connected with such an undertaking:

  • Acquires control of an asset or an undertaking in the State, or
  • Changes the percentage of shares or voting rights it holds in an undertaking in the State:
    • From 25% or less to more than 25%, or
    • From 50% or less to more than 50%

2. The cumulative value of the transaction and any related transactions in a period of 12 months prior to the date of the transaction is at least €2 million.

This threshold relates to the entire value of the consideration being paid by the acquirer. In other words, the threshold is linked to the total purchase price paid by the acquirer, including any international dimension.

3. The same undertaking does not, directly or indirectly, control all the parties to the transaction, ie the transaction is not an internal re-organisation.

4. The transaction relates to, or impacts on, one or more of the following matters referred to in the EU Screening Regulation:

  • Critical infrastructure, whether physical or virtual, including infrastructure in the energy sector, among other critical sectors
  • Critical technologies and dual use items
  • The supply of critical inputs, including energy, raw materials, and critical medicines
  • Access to sensitive information, including sensitive personal data, or
  • The freedom and pluralism of the media

A broad range of transactions required to be notified

The Screening Act captures not only outright acquisitions, but also minority investments and joint ventures. Examples of the types of transactions that could fall within the scope of the Screening Act include where a “third country undertaking" or a person connected with such an undertaking:

  • Directly or indirectly, acquires sole or joint control of assets in the State or an undertaking in the State
  • Directly or indirectly, acquires or increases its percentage of shares or voting rights in an undertaking in the State to more than 25%
  • Makes a greenfield investment involving the purchase of land where the land is necessary for operating critical energy infrastructure

Critical energy assets and entities in scope

Assets and/or entities providing services in the energy sector often come within scope of the definition of “critical infrastructure”. However, other categories, such as the “supply of critical inputs” may also be relevant. Therefore, it is expected that many transactions in the energy sector directly or indirectly involving a “third country” acquirer will require notification to, and clearance by, the Minister before the transaction can close. This could include, for example, the acquisition of all or part of an asset or an entity in the State whose activities involve the production, distribution, supply, storage, operation or transmission of electricity, oil, gas, or hydrogen.

The Guidance helpfully clarifies the meaning of “critical infrastructure” for the purposes of the Screening Act. The Guidance states that, in determining whether a notification is required, parties should consider:

  • The EU’s Critical Entities Resilience Directive (EU Directive 2022/2557), which identifies essential services across 11 critical sectors, including the energy sector, and
  • An “assessment of criticality”

According to the Guidance, the criticality assessment involves considering, by reference to a list of criteria set out in the Guidance, whether an incident would have significant disruptive effects on the provision of one or more essential services. While we expect the criticality assessment will narrow the types of “critical infrastructure” in scope of the Screening Act, many transactions will still come within its remit. These transactions can include those in the energy sector that may satisfy the criticality assessment or fall under one or more of the other critical matters outlined in the EU Screening Regulation. Therefore, decisions about the notifiability of a transaction must be made on a case-by-case basis.

Residual regulatory risk

Even if a transaction does not satisfy the criteria for a mandatory notification under the Screening Act, the Minister may ‘call-in’ a transaction for review if he/she has “reasonable grounds for believing that the transaction affects, or would be likely to affect, the security or public order of the State.” While this would appear to be a relatively low bar, the Guidance also states that, in the case of non-notifiable transactions, the call-in power is particularly aimed at new or emerging technologies or sectors that are not captured by the mandatory criteria. This suggests that the power will be used selectively.

Despite this, non-notifiable transactions should be assessed on a case-by-case basis to determine the extent of any risk that the Minister would decide to call-in the transaction pre- or post-closing. The deadline for exercising the call-in power for non-notifiable transactions is 15 months post-completion. The Minister has broadly the same powers to impose mitigations on completed transactions as it does on transactions that are notified pre-completion.

There is no option to make a voluntary notification. As a result, parties to a non-notifiable transaction that presents substantive risk of call-in will need to carefully consider their options for maximising regulatory certainty, if required.

Comment

Ireland’s investment screening process needs to be considered in the context of all transactions for the sale or purchase of, or investments in, energy and renewables assets or undertakings in Ireland. A mandatory notification has the potential to impact significantly on deal timelines as a split signing and completion will generally be required. Therefore, specific condition precedents to closing will need to be incorporated into the transaction documentation and timelines to completion and longstop dates will need to be mapped accordingly.

Early in the M&A process, investors should start thinking about key questions such as:

  • Does the transaction meet the criteria for a mandatory notification?
  • Are investment screening warranties required in the deal documentation?
  • Should the deal documentation provide for a potential notification?
  • What impact would a notification have on the deal timeline?
  • What mitigations could be imposed by the Minister to address any public order and/or security concerns?
  • Is there a risk, if the transaction is closed or non-notifiable, that it would be called-in for review by the Minister?

For more information and expert guidance on how the new regime will impact any anticipated projects or transactions, please get in touch with a member of our Competition, Antitrust & Foreign Investment or Energy teams.

The content of this article is provided for information purposes only and does not constitute legal or other advice.



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