Contracts for Difference

21st January 2015

Implementation Update

Welcome, Agenda and Safety

2

Agenda

CfD Contract Signing Process

CfD Allocation Overview

Sealed Bids Rules & Form Demo

CfD Round 1 Progress and Timeline

Applicant Processes (Submit & Withdrawals)

Q&A & Close

121 discussions

CfD Contract Management

LCCC Key Contacts

Contracts for Difference

John PerkinsCfD Manager

Round 1 Progress and Timeline

5

ApplicantsApply

Assess Eligibility

Request Review

Review

Request Appeal

Appeal

Round Variation / Budget Revision Notices

Qualified Applicants

RO Check

5.

Appeal6. Valuation 7. Sealed

Bids

8. Allocation &

Independent Audit

9. Allocation Notification

1. Pre-Application Activities

2. Application 3. Qualification 4. Review

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Applicants

Round Variation / Budget Revision Notices

Submit Sealed bids if requested

Value qualified applicants

Allocation & Independent Audit

Request sealed bids if required

5.

Appeal6. Valuation 7. Sealed

Bids

8. Allocation &

Independent Audit

9. Allocation Notification

1. Pre-Application Activities

2. Application 3. Qualification 4. Review

Applicant Options in a Bid Window

• Defaults to single bid as per original application if none submitted

• Note: Potential NDD policy impacts

Submit Sealed Bids

• Ability to submit new sealed bids• Default as above

Withdraw Sealed Bids

• Note: Impact on Eligibility for Renewables Obligation

Withdraw Application

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8

Applicants

Allocation Reports Review

CfD Notification

Issue Contracts

Contract Signature

5.

Appeal6. Valuation 7. Sealed

Bids

8. Allocation &

Independent Audit

9. Allocation Notification

1. Pre-Application Activities

2. Application 3. Qualification 4. Review

CfD Register

Appeals Register

Expected Key Dates

Process Step Date

DB Notice to SOS 20-JanSOS Budget Review 21-27 Jan

Auction Notice 28-JanSealed Bid Submission 29 Jan - 4 Feb

Allocation 5-20 FebSOS review 23 & 24 Feb

CFD Notification 26 FebLCCC prepare Contracts 27 Feb - 12 Mar

Contract Signature 13-27 Mar

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National Grid Contact Details

' Phone: 01926 655300 (calls recorded on this number)

* Email: emr@nationalgrid.com

website: www.emrdeliverybody.com

Contracts for Difference

Yasharn SmithEMR Delivery Manager

Allocation Rules

CfD – Competitive Allocation Principles

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Used to identify Successful applicants and

Strike Prices

Sealed bid process (includes bidder flexibility)

Each delivery year has a separate clearing price

Triggered by breach of BudgetMinimum allocated first

Allocation in ascending price order (across years)

Years can close independently

When is an Auction Required Illustration only

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AUCTION REQUIRED

NO AUCTION REQUIRED

Budget Notice

£m 11/12 prices 15/16 16/17 17/18 18/19 19/20 20/21

Pot 1 (established) 50 65 65 65 65 65

Pot 2 (less established) 0 155 235 235 235 235

Pot 3 (biomass) 0 0 0 0 0 0

Total 50 220 300 300 300 300

Maximum amounts consumers would be expected to fund in each year

Conversion factor to translate budget to 2012 prices : 1.0195

CfD Allocation – General PrinciplesBudget Rule

• Pot /Budget (Cannot Be Exceeded Except for Pending Projects)

Constraint

• Only competitive where binding constraint (E.g. MIN capacity/Pot Budget)

Across Years

• All projects in same Pot will compete on strike price basis, regardless of delivery year.

• Years can close independently

Bids/ Prices

• Projects will be awarded in order of lowest to highest strike price• Sealed bid process (includes bidder flexibility)

Pay as Cleared

• Clearing Price set by most expensive successful project in each year (subject to cap at the Technology Admin Strike price).

CfD Allocation – Flexible BidsProject SP Bid Del Yr MW

A2 115 16/17 43

K1 113 18/19 700

G3 112 18/19 5

C2 108 17/18 28

A1 105 15/16 47

C1 105 17/18 38

D6 97 16/17 42

D1 94 16/17 80

H4 93 17/18 35

B2 92 16/17 50

F2 90 17/18 80

E1 88 16/17 63

B7 85 15/16 50

Fle

xib

le B

ids

- In

cre

as

ing

Pri

ce

15/16 16/17 17/18 18/19

B7

Str

ike

Pri

ce

Bid

s

B2

D1

D6

A1

A2

Bids are assessed in order of strike price bid (cheapest first) . If they fit the budget profile after clearing consideration, they are accepted.

Same Commissioning Year Flexibility

If a bid is successful, remove from stack all other bids relating to same project

E1

G3

Close Year

Reject all other bids for 16/17

Budget would be exceeded in 16/17

Next cheapest bid is for

same project

F2

H4

Close Year

C1

C 2

K1

Close Year

Tiebreak with A1 & C1

A1 uses budget best in final year

CfD Allocations – Tiebreaker Rules

Tie-breaker rules applies where 2 or more projects with the same strike price bid, both cannot be awarded a CfD without exceeding budget limits

Assess all combination of tied projects which exceeds budget

Choose combination of projects which best uses budget

For further ties – Random number generator is to be used

Confirm projects with same S.P would exceed budget

Consider other flex bids for unsuccessful projects

Remove other flex bids for successful projects

Contracts for Difference

Giampaolo PanizioEMR CfD - Commercial Analyst

Sealed Bids

Sealed Bids – Relevant Material

Sealed Bid Submission User Guide is available

on the Delivery Body Portal

https://www.emrdeliverybody.com/Pages/AnnouncementDescription.aspx?CID=98

Sealed Bids Submission Rules

General

Bids must be in 2012 prices (£/MWh)

Withdraw & re-submit bids during submission window

No bids accepted after window closes

Relevant ASP is used if no bids are submitted

Detail Submit combination of different bid price, capacity, TCW, &

TCD

No bids above the ASP

Max 10 Bids per project

No more than 3 bids for the same Delivery Year (DY)

No two bids can have the same price

Must be same DY or later than original application

Must be same capacity or less than original application

TCD must fall within the TCW

Lowest price in each DY expressed to nearest whole pence (e.g. £100.01)

All other bids (except for lowest in each DY) expressed to nearest 0.1 pence (i.e. £100.011)

Only 1 Sealed Bid can have the same first DY and capacity as original application

For AD, Hydro, Onshore, Solar projects the bid capacity must be > 5 MW

Phased Projects’ Specific Rules

Detail

Must include a single Strike Price to apply to all phases The total capacity of all phases must be no greater than 1500 MW The first phase must represent at least 25% of the total capacity of the

CFD Unit after all phases are completed The first phase is targeted to complete by a date no later than 31st

March 2019 The target commissioning date of the last phase is no later than 2 years

after the date referred above

Sealed Bids Form Demo

Original Applications’ Information:

• Single Phased Project

• Technology: Onshore Wind

• Applicant name: Panizio Ltd

• Application ID: CFD-PNZO-01-01

• Name of CFD Unit: Eolo Farm

• TCD: 15 July 2016

• DY: 2016/2017

• TCW start Date: 1 January 2016

• TCW end Date: 31 December 2016

• Capacity: 80.00 MW

• ASP: £95 per MWh

Sealed Bids Submission Guidance

Guidance Notes Excel Macros must be enabled

Do NOT manually hide or unhide rows

Do NOT copy and paste data into cells

Do NOT copy and paste the form in another excel file

Do NOT rename the sealed bids form

Validate Sealed Bids and save the form

Contracts for Difference

Yasharn SmithEMR Delivery Manager

Applicant Processes

Sealed Bids Submission process

Auction Notice Published

Pre-populated Sealed Bid Forms

(Sent on - 16/12/14)

Applicants Fill in Sealed Bid Forms

Applicants Validate Form

Send form to DB

Withdraw Application/

Sealed Bids & Resubmit

DB Uses Bids to Run Auction

Notice of Auction will be sent from the DB to:

Inform qualified applicants that the value/capacity (min) of a pot(s) has been exceeded and therefore a competitive allocation is required for that pot;

Inform applicants of the dates for opening and closing sealed bids submission window

Provide links to: to guidance on how to submit and fill a sealed bids form Sealed Bids withdrawal form Application withdrawal form

Auction Notice

Application/ Sealed Bids Withdrawal

Applicants participating in an auction may

Withdraw applications during the submission window;

Withdraw and re-submit sealed bids during the submission window.

The CfD sealed bids withdrawal form and the CfD application withdrawal form will be made available on the EMR DB Portal when an auction commences

The DB has contingency processes in place to manage these processes and will communicate to applicants if required

Submission through Egress

Applicants must send filled in (validated) sealed bids form/withdrawal forms to the Delivery Body through Egress Switch: https://secureform.egress.com/emr/

Applicant contact details required here

DB will not accept Sealed Bid forms from unregistered person

Submission through Egress

Upload file to be sent here

1. Select CFD Sealed Bids on the [Type of Submission] drop down box;

2. Click on the Add Files button;

3. A file dialog box will appear which enables

4. Users to select their files, upload Validated Sealed B

Applicants must not change the file name of the pre-populated Sealed Bid form sent from the DB

Enter an alternative email address if required for copies of submission to be shared

Preparing for Contract Signing

and Next Steps

Nic Rigby

Low Carbon Contracts Company

IC Event

21 January 2015

31

Agenda

• Introduction

• Notification to Contract Signing

• Initial Conditions Precedent and Beyond

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Disclaimer

• Parties should rely upon the drafting of the relevant CFD Agreement and FiT CFD Standard Terms and Conditions in relation to the contract they enter into, not these slides

• Parties are recommended to obtain their own Legal advice.

• Once Allocation Results are announced Low Carbon Contracts Company will not be available for any discussions on contract interpretation.

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Pre-Application

Considering requests for minor and necessary amendments to generic CFDs before the potential applicant decides to apply for a CFD

From Allocation to Start Date

Execution:

1. preparation of CFD and arranging execution

2. satisfaction of Initial Conditions Precedent

Milestone Satisfaction: Substantial Financial Commitment by Milestone Delivery Date.

Start Date: satisfaction of Further Conditions Precedent and certification of Start Date.

Post Start Date (when payment flows commence)

Payment and settlement

Reference Price review and Strike Price indexation

Audit of metering and reporting

Fuel monitoring and sampling compliance

Contract Management Tasks

Today’s Agenda

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What Does Success Look Like

1) Win the offer of a CfD Contract in the auction

2) If you get past 1 then you must

3) Sign a Contract by 27 March

4) Meet Initial Conditions Precedent within 10 Business Days of signing the CfD Contract

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Agenda

• Introduction

• Notification to Contract Signing

• Initial Conditions Precedent and Beyond

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The Contracts for Difference (Standard Terms)Regulations 2014

Offer to contract

10.—(1) An offer of a CFD is made by the CFD counterparty signing two copies of a CFD completed in accordance with regulation 9(3) and sending both copies to the eligible generator.

 

(2) The CFD counterparty must make an offer of a CFD within 10 working days of receiving a CFD notification.

 

(3) The eligible generator, to whom the offer of a CFD is made, enters into a CFD where—

  (a) the eligible generator signs both copies of a CFD and returns one copy to the CFD counterparty; and

(b) the CFD counterparty gives the eligible generator a notice stating that the CFD counterparty has received a copy of the CFD from the eligible generator which has been signed by both contracting parties.

(4) The CFD counterparty must give the notice under paragraph (3)(b) as soon as reasonably practicable after the CFD counterparty receives a signed copy of a CFD from an eligible generator.

(5) Where a CFD is entered into, the CFD counterparty must inform the delivery body as soon as reasonably practicable.

 

Failure to accept an offer

11.—(1) Where the CFD counterparty does not receive a signed copy of a CFD from an eligible generator within 10 working days of the offer being made, the offer lapses.

 

(2) Where an offer lapses, the CFD counterparty must, as soon as is reasonably practicable, give the eligible generator and the delivery body a notice which states that the offer has lapsed.

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End of Auction to Contract SigningAction by Process Timing

N Grid Provide Low Carbon Contracts Company (LCCC) with list of successful Applicants

26 February

LCCC (Your allocated Contract Manager)

Send data ex N Grid and draft contract to Applicants for checking

LCCC Send 2 copies of Signed Contract to Applicants

Within 10 Working Days (Regs)

LCCC/ Applicants

Signing day(s) Week beginning 23 March

Applicant Return 1 signed copy of Contract to LCCC

Within 10 Working Days (Regs)

Working Day (Regs) = Weekdays – Bank Holidays in any part of the UK

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In practice – Getting your contract signed

• All parties allocated a CFD will get a dedicated Contract Manager• Each Contract Manager covers all the projects that are operated by a

Company or Group. • Contract Managers already allocated to Investment Contract Generators. • Contract mangers appointed as soon as we receive Auction results

Nic Rigby Arezou Farhadi James Krzyszkowski

Puk Lykke-Moller

Stephanie Houston

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In practice – first 10 working days

• Low Carbon Contracts Company will write and set out exactly what you must do and by when in a “Key Dates Letter”

• Contract Managers appointed• The LCCC have very limited time to check information provided by the

generator in application to delivery body• We can only change information that was not used as part of decision

making process in allocation • We will be able to change a postcode but not MW• If we do not get a very rapid reply to any requests for confirmation of

data - LCCC will have no choice but to send agreement with the information that we hold

• Please note allocation is not public knowledge at this point!

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How the process works in more detail

WorkingDays (Regs) Counter

Typical date

Time Obligation Action

0 Thur26 Feb

Before 5pm

Process initiated N Grid provide data to Low Carbon Contracts Company

10, and initiates new counter

Thur12 Mar

Before 5pm

Last date for Low Carbon Contracts Company to send out 2 signed copies of contract

LCCC will e mail scanned copies via Egress and post paper copies.

10 Fri27 Mar

5pm 1 copy of Contract must arrive at Fleetbank House

Scanned via Egress e mail and/or deliver paper copies.

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What you will receiveThe CFD agreement + The Conditions applicable to the CFD Agreement between the Parties are the terms and conditions set out in version 1 of the document published by the Department of Energy & Climate Change entitled “FiT Contract for Difference Standard Terms and Conditions” as at 29 August 2014 (as amended, modified, supplemented or replaced by the CfD Agreement and as may be amended, modified, supplemented or replaced from time to time in accordance with the Conditions). For the purposes of confirmation of this and identification, the Parties have signed this covering page to the Conditions.

Signature required at

- end of contract text, and

- on this page to confirm

29 August version of Standard

Terms and Conditions,

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In practice – follow up

• The LCCC must notify generators of receipt of countersigned agreement

• LCCC must inform the delivery body of CFDs entered into

• LCCC will notify both generator and delivery body of any lapsed offers

• Parties that allow to lapse or terminate are subject to Non Delivery Disincentive• For 13 Months no re-applications allowed

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Agenda

• Introduction

• Notification to Contract Signing

• Initial Conditions Precedent and Beyond

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Initial Conditions Precedent

• Meet Initial Conditions Precedent (Schedule 1) within 10 Business Days

• Legal opinion that Duly formed & power to enter contract• Standard letter available on our web site

• Identification “Know your customer” checks• Provide map of facility

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Extreme Compass Co-ordinates

Extreme co-ordinates – WGS84 Latitude LongitudeNortherly 53.385943 -3.421383Easterly 53.359055 -3.414001Southerly 53.350056 -3.421000Westerly 53.385000 -3.431000

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Map Requirements

• To scale and scale provided

• Four extreme compass co-ordinates must be shown in WGS84 format

• All boundaries must be shown

• All mayor parts of the facility (eg sub station, turbine locations must be shown, fuel storage)

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Contract Management Approach

• Each Company who wins a Contract has a dedicated Contract Manager• Diverse experience of Contract Management and

Industry experience• Once allocation round results are announced Low Carbon

Contracts Company will not be available for any discussions on contract interpretation.

• Trade Associations have lists of Legal Advisers• Post Initial Conditions Precedent Low Carbon Contracts

will provide Q & A (signposts) on Contract questionsBut will not provide Contract explanation Applicants need to access legal advice

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Early preparation

1. Check Egress works for all key parties• Send e mail to contractmanagement@lowcarboncontracts.uk and we will reply

via Egress.

2. If e mails re CfD Contract need to go to different or additional parties then

• please inform Low Carbon Contracts Company • On Allocation Day when you receive “Key Dates Letter” including Invitation to

Signing Ceremony.

3. Decide if you want to attend Signing Ceremony.

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Fleetbank House

• E mail contractmanagement@lowcarboncontracts.uk to let us know when you intend to deliver or with any queries. Please use Egress for all confidential e mails re Contracts

• Question and Answer document can be found at www.lowcarboncontracts.uk

• Visit our web site or contact the team for more information

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Closing Remarks

• Low Carbon Contracts focus will be on getting everyone from offer of CfD to post Initial Conditions Precedent.

• Private law contract as offered on 29 August 2014

• All parties expect to be treated equally

• Stretching the requirement can’t be done equitably

• So no allowances can be made

• Check your ability to meet Contract commitments, including Milestone Requirement. Be aware of impact of not signing, Non Delivery Disincentive.

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Contracts for Difference

John PerkinsCfD Manager

Closing Remarks and Questions

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National Grid Contact Details

' Phone: 01926 655300 (calls recorded on this number)

* Email: emr@nationalgrid.com

website: www.emrdeliverybody.com