The standard carbon abatement contract includes the capacity for a “conditions precedent”. Conditions precedent are events or circumstances that must occur before the delivery and payment obligations of the contract come into force.
Conditions precedent can be used to give you time to establish third party agreements (including agreements to sell part of the projects’ abatement), obtain regulatory approvals, or meet other conditions that are required to establish your project.
The Clean Energy Regulator can also use conditions precedent to assure itself that the project that supports the contract is established, genuine, and capable of generating the contracted abatement.
Conditions precedent must:
The Clean Energy Regulator will not accept a condition that:
Conditions precedent can be proposed by you or the Clean Energy Regulator, but must be agreed to by both parties for you to be eligible to qualify to participate in an auction.
Column A conditions precedent are for the sole benefit of, and may only be waived or deferred by the Clean Energy Regulator.
If you have not started your project, you will be required to have a Column A condition precedent stating that the project has begun to be implemented. This is to ensure the contracted project is established and will be used for the delivery of abatement. The following condition must be added:
The Seller has notified the Buyer in writing on or before the Conditions Precedent Expiry Date and has provided the Buyer on or before the Conditions Precedent Expiry Date with documentary evidence that is satisfactory to the Buyer acting reasonably to the effect, that each Project specified in Item 2 of these Commercial Terms has begun to be implemented.
Column B conditions precedent are for the sole benefit of you, the seller and may only be waived by you. A Column B condition precedent can be used to manage the start date of your deliveries so that you are able to maximise the amount of abatement that can be delivered. This should only be used if there are no other conditions precedent, or if you want the commencement date to be after the date you expect any other conditions to have been met. Example wording for this condition is:
The date __ / __ / ____ has occurred.
If your project is conditionally declared, then the Clean Energy Regulator will require the following condition be included:
Each condition (if any) specified under section 28(2) or 28A(2) of the Carbon Credits (Carbon Farming initiative) Act 2011 (Cth) (the CFI Act) in each declaration made under section 27 of the CFI Act in relation to each projects specified in Item 2 of these Commercial Terms, has been removed from the relevant declaration.
You can also propose Column B conditions that relate to regulatory approvals or third party agreements that are required for your project to proceed. You should only propose these if they are in addition to the conditions of your project declaration. Column B conditions precedent include:
The Column B conditions you propose must be measurable, and include specific details that clearly determine the basis of their fulfilment. Examples include:
If you are unsure of the wording of the condition you wish to propose then please contact the Clean Energy Regulator prior to submitting your auction qualification.
Column C conditions precedent are for the benefit of the Clean Energy Regulator and the seller and may only be waived or deferred with the consent of both.
Some of the project(s) included in the offer may be:
If either of the above points are true for any of the included projects, then the Clean Energy Regulator will require the following condition precedent to be included in the offer:
That the Buyer and the Seller are each satisfied, each acting in its sole discretion and based on evidence provided to the Buyer by the Seller by no later than seven business days prior to the Conditions Precedent Expiry Date, that the Seller is likely to meet its obligation under the Contract to Deliver the Agreed Quantity of Contract Units in accordance with the Delivery Schedule. Capitalised terms used in this condition precedent have the meanings given to them in the Documentasset::Code of Common Terms – version 3 of the Contract to which this condition precedent pertains.
If your offer relates to a project that is registered under the Carbon Credits (Carbon Farming Initiative–Emissions Abatement through Savanna Fire Management) Methodology Determination 2015 and the intention is to change it to the new Carbon Credits (Carbon Farming Initiative–Savanna Fire Management–Sequestration and Emissions Avoidance) Methodology Determination 2018, then the Clean Energy Regulator will require the following condition precedent to be included in the offer:
The conditions precedent expiry date is the final date that all conditions precedent must be fulfilled or waived. The contract will automatically lapse if all conditions precedent are not fulfilled or waived by the conditions precedent expiry date.
The conditions precedent expiry date should provide a reasonable period of time for the condition(s) to be met, allowing for potential delays. The Clean Energy Regulator will not accept a conditions precedent expiry date that is greater than 18 months from the contract date (five business days after the auction).
The delivery period (for example, seven years) of your contract will normally commence on the conditions precedent expiry date or an earlier date as nominated by you if all conditions are fulfilled earlier. To further understand the conditions precedent expiry date and how it influences the delivery schedule and the amount of abatement that can be delivered refer to the delivery schedule calculator.
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