Template talk:EFET Allowance Annex 8

8 Remedies for Failure to Transfer or Accept. § 8 of the General Agreement is deleted and replaced with the following new § 8 (Remedies for Failure to Transfer or Accept):

§ 8.2 Failure to Accept:

(a) Two Business Days Grace Period. When Buyer fails to accept Transfer of a Contract Quantity in whole or in part on a Delivery Date as required in accordance with the terms of an Allowance Transaction, and such failure is not excused by an event of Force Majeure, Suspension Event or Seller’s non-performance, Seller shall afford Buyer an opportunity to remedy its failure by again attempting to Schedule and Transfer such Contract Quantity (or undelivered portion thereof) to Buyer on the second Delivery Business Day following the Delivery Date, provided that such day is not on or after the Reconciliation Deadline applicable to the undelivered Allowance(s), and further subject to the additional obligation of Buyer to pay Seller, as compensation for its failure to accept Transfer of the Allowances, interest calculated: (i) as follows for the two Delivery Business Day grace period; and (ii) as set forth in the applicable subpart of this § 8.2 for any longer period Buyer fails to accept the Allowances thereafter.

Interest for the two Delivery Business Day grace period shall accrue at the Interest Rate specified in § 13.5 (Default Interest) for the period from (and including) the Delivery Date to (but excluding) the second Delivery Business Day following the Delivery Date on the Total Contract Price of the Allowances not accepted by Buyer, such Total Contract Price calculated as follows: the number of Allowances not accepted by Buyer multiplied by a fraction determined by dividing the Total Contract Price by the Contract Quantity.

(b) Seller’s Cover Costs. If Buyer fails to accept Transfer of all or any portion of a Contract Quantity as required by § 8.2(a) (Two Business Days Grace Period) in accordance with the terms of an Allowance Transaction and Seller has not agreed to a Deferred Acceptance Date as provided for in § 8.2(c) (Seller’s Right to Waive Its Cover Costs), Buyer shall incur the obligation to pay Seller, as compensation for its failure to accept Transfer of the Allowances, an amount (hereinafter “Seller’s Cover Costs”) equal to the sum of:

(i) the price, if any, less than the portion of the Total Contract Price applicable to the Allowances not accepted by Buyer, which Seller, acting in a commercially reasonable manner either did, or would have been able to, receive, in an arm’s length transaction with a third party or parties, from the resale of the Allowances not accepted by Buyer;

(ii) such reasonable additional incidental costs as Seller incurred in attempting to make or making such resale of the Allowances; and

(iii) interest accrued during the two Delivery Business Day grace period as provided in § 8.2(a); plus interest, at the Interest Rate specified in § 13.5 (Default Interest), accrued from (and including) the first Delivery Business Date following the Delivery Date, to (but excluding) the date of receipt by Seller of damages for Buyer’s failure to accept, such amount calculated as follows:

Amount on which interest accrues = ANA x CP

Where:

ANA means Allowances not accepted, the total number of Allowances Buyer failed to accept; and

CP means the aggregate Contract Price that Buyer would have to pay to Seller for all Allowances not accepted by it.

(c) Seller’s Right to Waive Its Cover Costs. The Seller may invoice Buyer for damages payable pursuant to § 8.2(b) (Seller’s Cover Costs) in accordance with the requirements of Payment Cycle B as defined in § 13.2 (Payment). However, Seller may alternatively, but shall be under no obligation to, defer the due date on the payment of such damages for a reasonable period of time (but in no event beyond the applicable Reconciliation Deadline) if Buyer has indicated to Seller its intent to attempt to cure its acceptance default within a period of time acceptable to Seller.

(i) At any time prior to the due date applicable to the payment of damages due to Seller under §8.2(b), Buyer may offer to accept Transfer from Seller on a new Delivery Date (the “Deferred Acceptance Date”) of the Allowances it failed to accept Transfer of on the original Delivery Date. The Seller may, but is not required to, agree to attempt to again Transfer such replacement Allowances to Buyer on the Deferred Acceptance Date. If it so agrees, Seller, in lieu of the damages it is entitled to recover under § 8.2(b), may both Transfer and receive payment of the Contract Price for the Allowances on the Deferred Acceptance Date and to further invoice Buyer for interest for the intervening period calculated as the sum of the interest accrued during the two Delivery Business Day grace period as provided in § 8.2(a) plus interest at the Interest Rate specified in § 13.5 (Default Interest), from (and including) the second Delivery Business Day following the Delivery Date to (but excluding) the date of actual acceptance of Transfer of the Allowance(s) previously not accepted, accrued on the amount calculated in accordance with the formula set forth in § 8.2(b)(iii).

(ii) If Seller agrees to Buyer’s offer to accept Transfer of the Allowances on a Deferred Acceptance Date as provided above in subparagraph (i), but Buyer again defaults on its acceptance of Transfer obligation, Seller may invoice Buyer for an amount calculated in accordance with § 8.2(b) (Seller’s Cover Costs) save that the amount it may so invoice Buyer shall account for both:

(A) interest, calculated as provided in § 8.2(b)(iii); and

(B) any depreciation in the Seller’s Cover Costs reflecting lower prevailing market prices available for the resale of Allowances on the Deferred Acceptance Date when compared to those available in the market on the original Delivery Date.

§ 8.3 Excess Emissions Penalty (“EEP”) and EEP Equivalent:

(a) Applicability. The Parties to any Allowance Transactions desiring to make EEP inapplicable and inoperative to the calculation of the Buyer’s Cover Costs for any Allowance Transactions between them may do so either globally by specifying EEP as not applying in Part II of this Allowances Appendix, or specifically, with respect to a particular Allowance Transaction, by so agreeing in the terms of that Allowance Transaction itself.

(b) Excess Emissions Penalty. If EEP is applicable, Buyer may invoice Seller in the amount of an EEP it incurs as the result of Seller’s failure to Transfer to it Allowances when required pursuant to the terms of an Allowance Transaction.

(c) Excess Emissions Penalty Equivalent. If EEP Equivalent is applicable, Buyer may invoice Seller for an EEP Equivalent it incurs as the result of Seller’s failure to Transfer to it Allowances when required pursuant to the terms of an Allowance Transaction.

(d) Duty to Mitigate. The Seller’s obligation to pay the EEP or the EEP Equivalent is subject always to Buyer’s overriding obligation to use commercially reasonable endeavours (including, without limitation, making use of any excess Allowances it may have available to it at the time, and/or procuring such Allowances as are available in the market) to satisfy its obligation to surrender the required number of Allowances necessary to avoid or otherwise mitigate its EEP liability. For the avoidance of doubt, Buyer’s duty to mitigate its EEP exposure is limited to management of its Allowance portfolio and shall not impose upon it any further obligation regarding its operation of any installation with an obligation to surrender Allowances to a Relevant Authority.

(e) Evidence of Commercially Reasonable Efforts. Upon request, Buyer shall confirm to Seller:

(i) that it has incurred EEP consequent upon Seller’s failure to Transfer Allowances to it;

(ii) the extent to which the requirement for Buyer to pay the EEP or the EEP Equivalent results from Seller’s failure to make such a Transfer;

(iii) that it was unable to mitigate its EEP exposure,

and shall provide Seller with evidence: (A) that the EEP, as applicable, was incurred by it; (B) that such EEP was incurred as a result of Seller’s failure to perform its Transfer obligation; and (C) of its commercially reasonable endeavours to mitigate its exposure to such EEP as it has invoiced to Seller; provided, however, that should Seller elect to challenge Buyer in respect of any of the above matters, then the burden for demonstrating: (A) that such EEP was not actually incurred by Buyer; (B) that such EEP was not incurred by Buyer as a result of Seller’s non-performance; and/or (C) the insufficiency, lack of thoroughness or unreasonableness of such endeavours shall be on Seller and, if § 22.3 (Expert Determination) is specified as applying in Part II of this Allowances Appendix the process by which such challenge will be determined shall be in accordance with the procedures set forth in § 22.3 (Expert Determination).

(f) Later Mitigation of Recovered EEP or EEP Equivalent. To the extent an initially assessed and recovered EEP is later reduced and/or fully or partly returned or credited to Buyer by a Relevant Authority for any reason whatsoever, only such reduced and finally assessed EEP shall apply. EEP recovered by Buyer in the form of damages under this § 8 which are later reduced or returned to such Buyer shall be returned upon demand to Seller who paid such damages, and Buyer shall provide Seller with prompt notification of any such reduction or return. Similarly, in the event Seller has made Buyer whole for an EEP Equivalent, and all or any portion of the underlying EEP upon which Seller’s EEP Equivalent payment was based is later returned to Buyer by its resale customer, Buyer shall return an equivalent amount of its own EEP Equivalent payment to Seller.

§ 8.4 Amounts Payable. Amounts that are due according to this § 8 shall be invoiced and paid in accordance with Payment Cycle B as defined in § 13.2 (Payment).
§ 8.5 Remedies for Failure to Transfer or Accept after Cessation of Suspension Event.

(a) Where Buyer fails to accept Transfer from Seller of the Contract Quantity in whole or in part on a Delayed Delivery Date and such failure is not excused by an event of Force Majeure, another Suspension Event or Seller’s non-performance, the Seller’s Cover Costs shall consist of the sum of the following elements:

(i) the Seller’s Cover Costs as provided in § 8.2(b) of this Allowances Appendix;

(ii) an amount (the “Default Cost of Carry Amount”) calculated at the Default Cost of Carry Rate for the Default Cost of Carry Calculation Period multiplied by the product of the Contract Price and the number of Allowances not Transferred or accepted for the relevant Allowance Transaction, divided by three hundred and sixty (360). Such Default Cost of Carry Amount shall be identified in the relevant invoice; and

(iii) interest on the Default Cost of Carry Amount accrued from (and including) the Delivery Business Day following the Default Cost of Carry Calculation Period, to (but excluding) the receipt by Seller of damages for Buyer’s failure to accept Transfer, calculated at the Interest Rate specified in § 13.5 (Default Interest) of the Agreement.

(b) Where Seller fails to Transfer to Buyer the Contract Quantity in whole or in part on a Delayed Delivery Date and such failure is not excused by an event of Force Majeure, another Suspension Event or Buyer’s non-performance, Buyer’s Cover Costs shall consist of the aggregate of the following elements:

(i) Buyer’s Cover Costs, as provided in either:

(a) § 8.1(b)(i) of this Allowances Appendix; or,

(b) where an EEP applies and has arisen, § 8.1(b)(ii) of this Allowance Appendix;

in either case, reduced by

(ii) the Default Cost of Carry Amount;

provided, always, that if the number resulting from application of the applicable formula set forth immediately above in either § 8.5(a) or § 8.5(b) results in a negative number, such number shall be deemed to be zero and no damages will be owed.