Agenda

THE EVOLUTION OF THE GLOBAL ENERGY MARKET

• The traditional sources – fossil fuels and the greenhouse gas debate
• Nuclear energy – a poisoned chalice?
  Case studies – Chernobyl, 3 Mile Island, Fukishima
• US shale oil and gas – the global ramifications
• LNG – it’s time still to come? Development of the LNG global market
• Renewables – drive for carbon reductions – solar, hydro, wind and tidal power sources examined
• Case study: A comparison between Solar 1 and the Crescent Dune facility
• The rise of the ‘spot market’ and the ‘Merchant’ power plant

KEY PPA CONSIDERATIONS

• ‘Bankability’ – an issue in flux
• Choice of technology – what type of power generation to be utilized/contracted with?
• Sources of financing
• No standard PPA – wide range of contractual differences in price mechanism – i.e. fixed price, ‘range’ (floor/ceiling), floating index based, etc.
• A ‘Contract for Difference’ (CFD) explained
• Term – long/short – ramifications of each
• Who is the offtaker – Wholesale/retail (utility vs. distributed (i.e. private))
• Feed in tariff costs (FIT)
• The ‘Effective Date’
• Agreed volume of supply and capacity
• ‘Synchronisation’ between lifespan of PPA and repayment of funding
• Environmental considerations

KEY GENERATOR ISSUES

• Size and output (capacity)
• Proven or ‘unproven’ technology
  case study – considerations for investment
• Metering capabilities at ‘point of delivery’ (POD)
• Expiration and renewal terms
• The question of ‘fair market value’

KEY RISK FACTORS

• Volatile tariffs/low tariffs
• Securing long term funding – The issue of ‘collateral’ (guarantee) (buyer to seller) – raising debt finance, the BOT model + variations (BOOT/BLT/DBOT)
• The mechanics of nonrecourse debt/loan
• Location/proximity issues (source; destination; infrastructure)
• Feedstock – security of supply – storage/transportation issues
• Difficulty in connecting to the grid (technical or commercial)

DEALING WITH DEFAULT IN PPA’S

• Risk allocation from generator to POD
• Transmission access and the cost of transmission upgrades
• Breach and misrepresentation
• ‘Cross default’ on site host lease agreement
• Deviation penalties
• ‘Notice and Cure’ provisions – attempting to avoid termination – EOT’s?
• The ‘Termination Purchase Price’
• Post termination obligations
• ‘Step – in‘ rights
• Mutual indemnification towards 3rd parties (damages resulting from misrepresentation or breach)
• Consequential damages disclaimer – ‘capping’ of damages
• Non-default events
• Dealing with compensation provisions in the contract

CURTAILMENT (DISPATCH BELOW MAXIMUM OUTPUT)

• Why does curtailment occur? – key reasons examined Renewables vs. traditional power generation
• The relationship between curtailment; degree of transmission infrastructure and excess capacity (periods of low demand)
• Ramping implications
• Question of payment if risk of interruption of supply – the need for ‘partnering strategies’
• Interruptions – emergencies; grid load balancing; transmission problems (or WIP-i.e. upgrading/repair/maintenance)
• Take or pay risk – up to POD or after PO

ASSIGNMENT AND NOVATION

• Assignment provisions – who may assign -conditions – assignee must have financial robustness and take on all (expressly drafted) PPA obligations (Offtaker perspective) from supplier perspective might be for raising finance; selling assets; or part of divestment strategy
• Agreed methodology of assignment (i.e. in writing)
• Creation of securities

BALANCING THE ENERGY SYSTEM

• Grid capacity/system congestion
• Frequency requirements
• Demand response
• Lack of supply/oversupply
• Transmission constraints
• Storage and infrastructure facilities/ capacities
• Organizational decision making/ response

LNG SPA’S

• Contractual adjustment mechanisms – the problem with the traditional ‘Take-or Pay’ perspective
• Portfolio SPA’s – guaranteeing security of supply?
• Key issues preventing standardization of LNG SPA’s
• The ‘Destination Clause’ examined
• Class discussion
• Stabilization Clauses examined
• Reopener Clauses examined
• The 10 significant impacting factors on LNG project finance and FID
• The ‘Confirmation Memorandum’ examined

FORCE MAJEURE

• A comparison of how different legal systems treat FM
• Some important doctrines – foreseeability; impossibility of performance; commercial impracticality; remoteness and causality
• The duty to mitigate
• FM by implication
• The vital importance of ‘drafting’ a FM clause – setting the scope correctly
• Intertradex v Lesieur
• The Eiusdem Generis Rule
• Some typical FM provisions

INTERNATIONAL COMMERCIAL ARBITRATION

• The commercial arbitral process explained
• The New York Convention – enforceability of arbitral awards
• Appointment of an arbitrator/arbitral tribunal
• Ad hoc vs. Institutional arbitrations
• The ‘seat’ of the arbitration
• The ‘Doctrine of Separability’
• The multi-tiered ‘escalation’ arbitral clause
• ‘Forum shopping’ explained
• Interim awards – a good idea?
• Grounds for challenging an arbitral award
• Class exercise – examining an Arbitral Clause
• Waiver of sovereign immunity