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Contract management principles

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12 October 2017

We have developed a set of principles to guide Clean Energy Regulator staff in their administration of carbon abatement contracts and our expectation that sellers will fully meet their delivery obligations under the contract. The principles are:

These principles will be used whenever a Clean Energy Regulator delegate is required to make a discretionary decision or exercise a power in relation to a contract, for example, when deciding whether to:

  • agree to contract variations, including revised delivery schedules or extended conditions precedent expiry dates
  • enforce buyer's market damages
  • terminate the contract following an event of default by the seller
  • dispute a claim of force majeure.

Contract management plan

The above principles are underpinned by the Contract Management Plan. The purpose of the contract management plan is to provide guidance to Clean Energy Regulator staff involved in the management and administration of carbon abatement contracts from award to completion. This contract management plan will be used by Clean Energy Regulator staff to monitor the performance of sellers under the contracts and to guide the agency’s response to non-performance.

Sellers should make deliveries when due

Each seller must deliver their agreed quantity of Australian carbon credit units.

Each seller proposes their own delivery schedule.

If a seller has a delivery failure it can suggest that the project is underperforming or that the seller misrepresented its intentions when completing its contract documentation. In such a case where the Clean Energy Regulator considers that Emissions Reduction Fund monies are not targeting genuine abatement, we may, in accordance with the contract, seek buyer’s market damages or terminate a contract.

We will consider any request for early delivery of Australian carbon credit units based on its merits, taking into consideration availability of funding and the viability of the relevant project(s).

Good faith negotiations on proposed contract amendments for the benefit of the Commonwealth

We will, acting in good faith, make reasonable endeavours to agree on potential amendments to conditions precedent (including conditions precedent expiry dates) or delivery schedules proposed by a seller, but will always put the interests of the Commonwealth first in any negotiation.

We will not negotiate over:

  • the code of common terms
  • the financial terms
  • increases to the agreed quantity (total abatement under the contract)
  • the expiry date.

Responsive prompt engagement

We will deal with all seller enquiries efficiently and effectively, with accurate information but not advice. We will provide routine reminders of key contract milestones, upcoming deliveries and conditions precedent expiry dates.

Assignment of Contract

We have developed a standard documentasset:Carbon Abatement Contract Novation Deed that should be used to vary contractual arrangements. The novation agreement should be used where a different person or legal entity is taking over the rights and obligations under your contract. A novation effectively substitutes one contract party for another party without changing the rights and obligations under the original agreement. A novation gives rise to a new agreement on the same terms as the original agreement, with the original agreement being discharged.

In dealing with non-compliant sellers, we will prefer a remedy that maximises carbon abatement at least cost

There is some flexibility in the contract for a seller that has an underperforming project, and there is also some flexibility for us in how we deal with a non-compliant seller. Our preferred remedy will be the one that appears, based on the facts at the relevant point in time, most likely to maximise carbon abatement at least cost.

Fair and proportionate action

Our exercise of discretion under the contract will be fair, having regard to how other sellers would expect to be treated, and proportionate, taking into account the particular facts of the situation.

Confidentiality

We will treat information relating to a seller, including unit price, in confidence, and such information will only be made available to Clean Energy Regulator staff and other persons envisaged in Clause 11.1.1.a with a need to know for their duties. We also expect sellers to treat their unit price in confidence.​

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