Forest Carbon Partnership Facility ERPA General Conditions FCPF - PowerPoint PPT Presentation

Forest Carbon Partnership Facility ERPA General Conditions FCPF Participants Committee Meeting (PC17) Lima, Peru, July 2-4, 2014

Overview I. Roadmap to PC Endorsement of General Conditions for the Emission Reductions Payment Agreement (ERPA) II. Structure of ERPA • Commercial Terms • General Conditions III. Next Steps 2

I. Roadmap to PC Endorsement of ERPA General Conditions 3

Time Action Process of Endorsing ERPA General Conditions December 8-9 CF8 meeting in Paris; approval of the MF December 12, 2013 Pre-PC16 Workshop (Geneva, Switzerland) on Implications of MF on ERPA GCs December 13-15, 2013 PC16 (Geneva, Switzerland) on Implications of MF on ERPA GCs April 9-11, 2014 CF9 meeting in Brussels June 16-19, 2014 CF10 meeting in Bonn July 2-4, 2014 PC17 (Lima, Peru); presentation on ERPA GCs August-October 2014 (Potentially) additional follow-up sessions on ERPA GCs November 2014 PC18 (tbd); endorsement of ERPA GCs by PC 4

II. Structure of ERPA 5

Structure of ERPA • Negotiated during ERPA Commercial Terms negotiations • Based on ERPA template = ERPA PLUS • Non-Negotiable General Conditions • To be endorsed by PC 6

ERPA Negotiations REDD Country / Trustee of FCPF ERPA Negotiations of authorized entity Commercial Terms , e.g. Carbon Fund (Seller) (Buyer) Conditions Unit Advance Volume Option Costs of Sale and Payment Price Purchase PLUS General Conditions (non-negotiable) 7

Commercial Terms General Conditions (negotiable) (non-negotiable) • Contract ER Volume • Transfer & Payment • Unit Price • Title to ERs • Advance Payment • Costs • Conditions of Sale and Purchase • ER Program Operation & Management • Options • Benefits & Benefit Sharing • ER Program Buffer • Events of Default & Remedies • Dispute Resolution • Governing Law 8

General Conditions - Transfer & Payment - ER Program ERs (generated & measured) ER Program ER Monitoring Buffer Report ERs (verified) Verification Transfer Form Report Transfer Seller Buyer Contract ERs $$ (Unit Price) (minus Cost Recovery Discount 9 and Advance Payment(s), if any)

General Conditions - Title to ERs - Seller demonstrates ability Prior to ERPA Signature to transfer title to ERs ERPA Signature Seller demonstrates ability Prior to ER to transfer title to Transfer (verified) ERs ERPA ER Transfer If validity of transfer of title to (verified) ERs is contested, After ER ER Program Buffer or Transfer remedies needed 10

General Conditions - Allocation of Costs - • ‘Costs’ include costs and expenses incurred during…  ER Program preparation  ER Program implementation/supervision • Costs incurred by Seller to be borne by Seller  To be covered through, e.g., own resources, external funding, FCPF ERPA payments, future (other) ERPA payments • Costs incurred by Buyer  FMT recommends ‘Cost Recovery Discount’ approach 11

General Conditions - ER Program Operation & Management - Buyer Seller responsible for ER ERPA Program Operation & Management Seller ER Program Seller may use Sub- Sub- Operation & Entities to operate and Arrangement Management manage ER Program Sub-Entity 12

General Conditions - Benefits - Non- Monetary & Carbon Non-Monetary Benefits Benefits ER Program Priority To be Non-Carbon shared Safeguards Plans(s) Benefits To be Benefit reported To be Sharing Plan reported To be Interim Progress Report reported & ER Monitoring Report 13

General Conditions - Benefit Sharing (Example) - Feedback & Grievance Redress Buyer Beneficiary or Other Mechanism Reporting Beneficiary on Benefit $$ ERPA Sharing Benefit Seller Sharing Plan Monetary & Non-Monetary Benefits Beneficiary Beneficiary 14

General Conditions - ER Program Buffer - ERPA Term Remaining Reporting Reporting ER Volume Period 1 Period 2 Buffer ER Buffer ERs Reserve ER Volume Estimate for ER Program Contract ERs Buffer Guidelines ER Program (as per ERPD) ERPA Contract ER Volume for Buffer ERs ERPA Term ER Program Buffer Guidelines ER Program Contract ERs Buffer 15

General Conditions - Events of Default & Remedies (1) - ER Transfer Material Delay Failure in ER Program Adverse Change Development in Status of Seller Events of Default Engagement in Reversal Sanctionable (Seller) (unless cured through Practices Reversal Management Mechanism) Failure to Implement Material Reversal Management Breach ER Title Transfer Failure Mechanism, Safeguards (unless cured through Plans, Benefit Sharing Plan, ER Program Buffer) etc. 16

General Conditions - Events of Default & Remedies (2) - Events of Default (Buyer) Material Breach Payment Failure 17

General Conditions - Events of Default & Remedies (3) - Event of Default Default Notice Cure Action Plan Period (with time (90 days) period) Delay in ER Other Transfer Intentional Program Events of Failure Breach Development Default • • Volume Reduction/ • • Volume Reduction/ Termination Termination Call Option • • Call Option Advance Payment Advance Payment • Termination recovery recovery • Advance Payment • Liquidated Damages 18 recovery

General Conditions - Dispute Resolution & Governing Law - ERPA Dispute Governing Law Resolution Bilateral Settlement English Law UNCITRAL Conciliation UNCITRAL Arbitration 19

III. Next Steps 20

Next Steps • At PC17, PC members are asked to reach out to FMT on any questions • Prior to PC18, FMT will make (revised) version of ERPA General Conditions available to PC members • Between PC17 and PC18 (November 2014), FMT is available for any questions • The FMT will aim at endorsement of ERPA General Conditions at PC18 in November 2014 21

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