Contracts for Difference
Implementation Update
21st January 2015
Welcome, Agenda and Safety
2
Agenda
CfD Round 1 Progress and Timeline
CfD Allocation Overview
Sealed Bids Rules & Form Demo
Applicant Processes (Submit & Withdrawals)
CfD Contract Signing Process
CfD Contract Management
LCCC Key Contacts
Q&A & Close
121 discussions
Contracts for Difference
Round 1 Progress and Timeline
John Perkins
CfD Manager
1. PreApplication
Activities
2. Application
Applicants
3.
Qualification
4. Review
5.
Appeal
6. Valuation
Request
Review
Apply
7. Sealed
Bids
8. Allocation
&
Independent
Audit
9. Allocation
Notification
Request
Appeal
Round Variation / Budget Revision Notices
Assess
Eligibility
RO Check
Review
Qualified
Applicants
Appeal
5
1. PreApplication
Activities
2. Application
3.
Qualification
4. Review
5.
Appeal
Applicants
6. Valuation
7. Sealed
Bids
8. Allocation
&
Independent
Audit
9. Allocation
Notification
Submit Sealed
bids if requested
Round Variation / Budget Revision Notices
Value
qualified
applicants
Request
sealed bids
if required
Allocation &
Independent
Audit
6
Applicant Options in a Bid Window
Submit
Sealed Bids
• Defaults to single bid as per original
application if none submitted
• Note: Potential NDD policy impacts
Withdraw
Sealed Bids
• Ability to submit new sealed bids
• Default as above
Withdraw
Application
• Note: Impact on Eligibility for
Renewables Obligation
7
1. PreApplication
Activities
2. Application
3.
Qualification
4. Review
5.
Appeal
6. Valuation
7. Sealed
Bids
Applicants
8. Allocation
&
Independent
Audit
9. Allocation
Notification
Contract
Signature
Allocation
Reports Review
CfD
Notification
Appeals
Register
Issue
Contract
s
CfD
Register
8
Expected Key Dates
Process Step
Date
DB Notice to SOS
SOS Budget Review
Auction Notice
Sealed Bid Submission
20-Jan
21-27 Jan
28-Jan
29 Jan - 4 Feb
Allocation
SOS review
CFD Notification
LCCC prepare Contracts
5-20 Feb
23 & 24 Feb
26 Feb
27 Feb - 12 Mar
Contract Signature
13-27 Mar
National Grid Contact Details
'
Phone: 01926 655300
(calls recorded on this number)
*
Email: emr@nationalgrid.com
website: www.emrdeliverybody.com
10
Contracts for Difference
Allocation Rules
Yasharn Smith
EMR Delivery Manager
CfD – Competitive Allocation Principles
Used to identify
Successful applicants and
Strike Prices
Years can close
independently
Allocation in ascending
price order (across years)
Minimum allocated first
Sealed bid process
(includes bidder flexibility)
Each delivery year
has a separate
clearing price
Triggered by breach of
Budget
12
When is an Auction Required
Illustration only
AUCTION
REQUIRED
NO AUCTION
REQUIRED
13
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 Principles
Budget
Rule
• Pot /Budget (Cannot Be Exceeded Except for Pending Projects)
• Only competitive where binding constraint (E.g. MIN capacity/Pot Budget)
Constraint
Across
Years
Bids/ Prices
Pay as
Cleared
• All projects in same Pot will compete on strike price basis, regardless of delivery
year.
• Years can close independently
• Projects will be awarded in order of lowest to highest strike price
• Sealed bid process (includes bidder flexibility)
• Clearing Price set by most expensive successful project in each year (subject to
cap at the Technology Admin Strike price).
Project
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
Bids are assessed in order of strike price bid
(cheapest first) . If they fit the budget profile after
clearing consideration, they are accepted.
Close Year
A2
K1
Close Year
Tiebreak with
A1 & C1
G3
C2
Strike Price Bids
Flexible Bids- Increasing Price
CfD Allocation – Flexible Bids
A1

Next
cheapest
bid is for
same
project
Budget
would be
exceeded
in 16/17


Same Commissioning Year Flexibility
B7

If a bid is successful, remove from stack all other
bids relating to same project
15/16
C1
Reject all
other bids
for 16/17
Close Year
D6
D1
A1 uses budget
best in final year

H4
B2
E1

16/17
F2


17/18
18/19

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
Confirm projects
with same S.P would
exceed budget
Assess all
combination of tied
projects which
exceeds budget
Consider other flex
bids for
unsuccessful
projects
Remove other flex
bids for successful
projects
Choose combination
of projects which
best uses budget
For further ties –
Random number
generator is to be
used
Contracts for Difference
Sealed Bids
Giampaolo Panizio
EMR CfD - Commercial Analyst
Sealed Bids – Relevant Material
Sealed Bid
Submission User
Guide is available
on the Delivery
Body Portal
https://www.emrdeliverybody.
com/Pages/AnnouncementDes
cription.aspx?CID=98
Sealed Bids Submission Rules
General
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
 No bids accepted
after window
closes

Must be same capacity or less than original application

TCD must fall within the TCW
 Relevant ASP is
used if no bids are
submitted

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
 Bids must be in
2012 prices
(£/MWh)
 Withdraw & resubmit bids during
submission
window
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
Applicant Processes
Yasharn Smith
EMR Delivery Manager
Sealed Bids Submission process
Auction Notice
Published
Pre-populated
Sealed Bid Forms
(Sent on - 16/12/14)
Send form to DB
Applicants Fill in
Sealed Bid Forms
Applicants
Validate Form
Withdraw
Application/
Sealed Bids &
Resubmit
DB Uses Bids to
Run Auction
Auction Notice
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
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
 Applicants must not change the file name of the pre-populated
Sealed Bid form sent from the DB
Upload file to be
sent here
1.
2.
3.
4.
Select CFD Sealed
Bids on the [Type of
Submission] drop
down box;
Click on the Add Files
button;
A file dialog box will
appear which enables
Users to select their
files, upload Validated
Sealed B
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
Agenda
• Introduction
• Notification to Contract Signing
• Initial Conditions Precedent and Beyond
31
31
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.
32
32
Contract Management Tasks
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.
Today’s
Agenda
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
33
33
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
34
Agenda
• Introduction
• Notification to Contract Signing
• Initial Conditions Precedent and Beyond
35
35
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.
36
36
End of Auction to Contract Signing
Action 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
37
37
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
38
Arezou Farhadi
James
Krzyszkowski
Puk LykkeMoller
Stephanie
Houston
38
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!
39
39
How the process works in more detail
40
Working
Days
(Regs)
Counter
Typical
date
Time
Obligation
Action
0
Thur
26 Feb
Before
5pm
Process initiated
N Grid provide data to Low Carbon
Contracts Company
10, and
initiates
new
counter
Thur
12 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
Fri
27 Mar
5pm
1 copy of Contract must
arrive at Fleetbank House
Scanned via Egress e mail and/or
deliver paper copies.
40
What you will receive
The 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,
41
41
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
•
42
For 13 Months no re-applications allowed
42
Agenda
• Introduction
• Notification to Contract Signing
• Initial Conditions Precedent and Beyond
43
43
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
44
44
Extreme Compass Co-ordinates
Extreme co-ordinates – WGS84
Northerly
Easterly
Southerly
Westerly
45
Latitude
53.385943
53.359055
53.350056
53.385000
Longitude
-3.421383
-3.414001
-3.421000
-3.431000
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)
46
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 questions
– But will not provide Contract explanation
– Applicants need to access legal advice
47
47
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.
48
Fleetbank House
49
•
E mail
contractmanagement@lowcarbonc
ontracts.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
49
Closing Remarks
50
•
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.
50
Contracts for Difference
Closing Remarks and Questions
John Perkins
CfD Manager
National Grid Contact Details
'
Phone: 01926 655300
(calls recorded on this number)
*
Email: emr@nationalgrid.com
website: www.emrdeliverybody.com
52