Development Service Agreement vs. Membership Interest Purchase Agreement, Explained

Solar deals eventually require ownership to change hands, whether a project gets assigned to a developer through a development service agreement (DSA) or an asset gets sold outright through a membership interest purchase agreement (MIPA). We asked Keith Cronin, instructor of Inside the Solar Executive MBA Data Room, to untangle these two agreements that often get confused. 

Here’s what he had to say.

Could you explain what the DSA and the MIPA are and how they relate to each other, since that seems to confuse some people?

A development service agreement is similar to thinking about how an EPC builds a project for a developer or a financier. The DSA basically outlines the scope of work, and it’s structured a lot like an EPC agreement, but instead it’s assigning the project to the developer or the financier, with the developer making milestone payments similar to what you’d see in an EPC agreement. At a high level, that’s what a development service agreement is. You’re essentially transferring a project from one LLC to another, and almost every project in the marketplace today sits under the auspice of an LLC.

The MIPA is a bigger discussion, a much more detailed document, so I’ll keep this at a high level. We offer some free preview videos in the course that cover it. A MIPA, or membership interest purchase agreement, is generally the financial instrument used to buy and sell assets, or to buy and sell the project company itself. The agreement defines everything: what the project is, where it’s located, and in the actual MIPA templates we use, you’ll find different exhibits covering the project’s location, system size, and production. There are estoppels in there, lien release documentation, and all the pieces that go with a final purchase document.

Think of it a bit like the closing document when you buy a house. The MIPA is where everything about the project gets finalized, photos, insurance details, every aspect of the deal, and it’s the mechanism by which one LLC dissolves and folds into itself while another is born, once a seller and purchaser complete the transaction. We go into that in detail in the course, and each module includes a free workflow video walking through what the agreement is and what it does at a high level. Once you’re in the course, you get the actual document, and it starts to make a lot more sense.

One thing I’ll tell everybody: we don’t provide legal, tax, or accounting advice in the course. We always recommend having in-house or outside counsel guide you through the specific terms and conditions in these agreements.

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Keith walks through the full DSA and MIPA templates, including the exhibits, estoppels, and lien release documentation referenced above, in the new Inside the Solar Executive MBA Data Room course. It also includes the EPC agreement, O&M agreement, PPA/SSA, a financial model, and two full case studies, so you can see how each contract fits into a real deal from origination to close.

Enroll in the course today!