AAE professionals know that every AAE can have dozens of unique conditions. Another reason why a streamlined and standardised approach, such as that of the new EFET project, is so necessary for the AAE market in Europe. The same applies to the provisions of the EFET Framework Contract No. 12, paragraph 3, point a), which states that liability for consecutive damages under the contract is not of an indeterminate duration, but is limited to voluntary delay, fraud or acts endangering the fundamental legal or contractual rights of a contracting party. During the duration of the EFET agreement, the financial situation of the parties will vary. In the event that one party`s financial situation deteriorates significantly, also known as a material adverse change1, the other party should be able to act quickly and require a performance guarantee.2 This insurance generally has the form of additional credit support. Ultimately, the pricing formula contained in the new model is a key factor in ensuring that all commercial aspects are taken into account in each proposed AAE. It allows for comprehensive risk pricing, which, along with risk allocation, is at the heart of any viable and sustainable AAE contract. The 15th of the EFET master`s contract deals with the method of calculating variable prices and also establishes return procedures in the event of market disruption. The good thing about the new EFET model is that it takes into account the three key factors in determining the risk profile of a party to AAEs, namely volume, fixed price and sliding price.
After reading this article, you will understand how the new EFET model is structured and what its benefits are. A simple case study gives you an overview of the model and how it could be used for your PPP project. The definition of force majeure has three elements, in accordance with Article 7 of the EFET agreement: the latter is particularly important. “Long forms” are essentially models of contracts developed by the utility companies themselves. This makes sense because some utility companies have been making PPPs for many years. They therefore have their own know-how and defined criteria for the implementation of AAEs. They also have their own internal legal teams. The standardization of PPP contracts could certainly be useful. In this context, we examined the new PPP model of the European Federation of Energy Traders (EFET). This plethora of types of AAE contracts can create uncertainty and confusion for market participants.
Which PPP contract proposal is best to meet the needs of different parties? How do you do a comparative analysis between PPPs with so many different types available? This uncertainty is one of the reasons why AAEs remain a complex process. With respect to the feasibility of this new model, it should be noted that a number of major PPP contracts have been negotiated under the EFET standard on which the new model is based. Distribution companies are aware of the new proposal through their professional associations. These facts should be promised for the future adoption of the EFET for PPP contracts. In section 2.2 of the new model, it is important to define correctly. An incorrect definition can lead to a completely different AAE, so attention needs to be paid to it. In addition, Article 12, Section 4 of the EFET Director`s Contract clearly states that nothing excludes liability: in the event of a pre-defined termination, the parties would only have to choose a specific option, as they already have a clear idea of how it works. This occurs when the amount of termination is read in conjunction with Part II of the proposal, the provisions of which could relate to factors such as legislative amendments, dispute resolution, non-delivery, force majeure, etc. The agreements and the EFET library associated with it, with additional documentation, are currently the industrial standards applied throughout Europe to the trade in physical energy and gas.
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