Project Finance Monthly.This article was prepared by lawyers from Freshfields Bruckhaus Deringer Contents UK Guidance on standardisation Noun 1. standardisation - the condition in which a standard has been successfully established; "standardization of nuts and bolts had saved industry millions of dollars" standardization of PFI PFI Pay for Inclusion (web search engines) PFI Private Finance Initiative PFI Private Finance Initiative (UK) PFI Prison Fellowship International PFI Port Fuel Injection (engines) contracts updated UK Regulatory reform Regulatory Reform concerns improvements to the quality of government regulation. At the international level, the "OECD Regulatory Reform Programme is aimed at helping governments improve regulatory quality -- that is, reforming regulations that raise unnecessary obstacles to for gas and electricity China Policy changes on levy of import duties UK Guidance on Standardisation of PFI Contracts Updated After consulting with the private and the public sector, the UK's Office of Government Commerce (OGC OGC Office of Government Commerce (UK government) OGC Open Geospatial Consortium, Inc. OGC Office of the General Counsel OGC Open GIS Consortium, Inc. ) published on 31 July 2002 the second edition of Standardisation of PFI Contracts. Practical experience had shown the need for revisions to the first edition of the guidance, published in July 1999. Partnerships UK was appointed by the OGC to lead the review for a revised edition. There has not been extensive revision to the guidance and the objectives and working assumptions to be applied remain unchanged. The key changes are in the following areas. Assignment - new clauses differentiating between central and non-central government transactions setting out the parties to whom the contract can be transferred by the authority without consent. A breach of the assignment provisions is now an authority default. Payment of compensation in instalments - drafting has been provided for local authorities or other authorities in circumstances which will provide exceptional value for money, to make termination compensation payments in instalments. Change in service - the basic structure remains the same but changes have been introduced to deliver value for money. Such changes include a provision that if capital expenditure exceeds a certain threshold the authority may require competitive tenders and a mechanism for small works changes. Compensation on termination: contractor default - the definition of 'liquid market' has been qualified and the liquid market test can be applied during the 90/120-day suspension period. If there is no liquid market the contract will terminate but if there is a liquid market the lenders can either step in and re-tender or terminate. Refinancing Refinancing An extension and/or increase in amount of existing debt. - there are changes to the definition of 'senior debt' (to encompass contingent funding liabilities such as guarantees or letters of credit in respect of deferred equity, subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". or obligations to fund reserve accounts). A new refinancing clause has also been included which incorporates the concept of a permitted rescue refinancing, ie if the project becomes distressed then, within certain parameters, a refinancing may be effected without authority consent. New material has been added as follows: change in law - a review of pricing to ensure risk sharing for capital expenditure arising from a general change in law; service commencement - providing for phased handover n. 1. The act of relinquishing property or authority etc. to another; as, the handover of occupied territory to the original posssessors; the handover of power from the military back to the civilian authorities s>. and multi-site projects; indemnities - value for money considerations for authorities; and land and property interests - guidance to authorities on structuring issues. The guidance has introduced the following process issues: commitment letters - a standard form to be provided on the appointment of a preferred bidder; due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. over subcontracts and financing documents - guidance to authorities on what they should be aware of; and insurance - a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma side letter has been introduced pending a long-term solution becoming available based on indexation of insurance costs. The OGC has also published separate guidance on certain financing issues parallel to the revised second edition. This separate guidance is available from the OGC's website (www.ogc.gov.uk) and covers a number of issues including ensuring competition in financing contracts, using the capital markets for finance and the use of internal rates of return for PFI projects. The OGC has also published best practice guidance on how to approach refinancing issues when asked to approve a refinancing by a contractor. UK Regulatory Reofrm for Gas and Electricity Earlier this year, UK energy regulator regulator, n the mechanical part of a gas delivery system that controls gas pressure that allows a manageable flow of drug vapor to escape. regulator see reducing valve. Ofgem published its review of the first year of the new electricity trading arrangements (Neta). Although commentators contest some of the economic conclusions drawn by Ofgem, the report contains a useful analysis of the current electricity market, the regulatory structure, the roles and performance of the system and transmission operator (National Grid national grid Noun Brit & NZ 1. a network of high-voltage power lines linking major electric power stations 2. the arrangement of vertical and horizontal lines on an ordnance survey map Company) and of Elexon (which manages the electricity and trading arrangements of England and Wales England and Wales are both constituent countries of the United Kingdom, that together share a single legal system: English law. Legislatively, England and Wales are treated as a single unit (see State (law)) for the conflict of laws. ), and a review of current regulatory developments in this market. This report coincides with an increasing focus on the role of smaller generators in the electricity market and the impact of Neta on them, the implementation of the renewables obligation The Renewables Obligation (RO)[1] is designed to incentivise the generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form (the Renewables Obligation (Scotland)) in Scotland in April to support the development of renewable energy Renewable energy utilizes natural resources such as sunlight, wind, tides and geothermal heat, which are naturally replenished. Renewable energy technologies range from solar power, wind power, and hydroelectricity to biomass and biofuels for transportation. resources, reforms to climate change levy The Climate Change Levy (CCL) is a tax on energy delivered to non-domestic users in the United Kingdom. Its aim is to provide an incentive to increase energy efficiency and to reduce carbon emissions, however there have been ongoing calls to replace it with a proper carbon tax. legislation to improve benefits for developing energy-efficient combined heat and power schemes, and potentially a significant review of the roles and responsibilities of distribution network operators. In the gas market, debate continues on the outcome of Ofgem's consultation on changes to gas trading that will set additional requirements or incentives to balance gas supply and demand for periods shorter than the current 24 hours. The reports earlier this year from the performance innovation unit and a joint DTI/Ofgem working group on security of energy supply have been followed by increased market activity on the disposal of gas storage facilities as well as renewed consultation on the transfer by Transco of its LNG LNG (liquefied natural gas): see under natural gas. storage facilities. Security of supply issues were highlighted recently by a breakdown in the Bacton/Zeebrugge gas interconnector and are an important factor in the debate about the future of nuclear power and the current structure of nuclear generators in the UK. China Policy Changes on Levy of Import Duties Foreign investors engaged in large infrastructure projects will need to cope once again with a major change in the regulatory framework for investing in China. This time, the amendment is likely to have a significant impact on the cost incurred by foreign-funded projects importing raw materials and equipment into the PRC. On 13 September 2002, the Ministry of Finance issued a statement altering the policy on import preferential pref·er·en·tial adj. 1. Of, relating to, or giving advantage or preference: preferential treatment. 2. duties, rules that administered favourable tariff treatment on certain goods and materials imported for use in foreign-funded infrastructure projects. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the announcement, all raw materials and 20 kinds of imports falling under a State Council approved 'non-exemption' category will now be subject to tariff. Under the previous regulatory regime, these imports were, in real terms, tariff-exempt. The administration of these tariffs appears to be weighted by two factors: percentage of goods exported; and commencement date of operation in the PRC. The tariffs will first be levied on newly-approved foreign-funded projects whose goods are to be exported directly and not sold domestically. These projects will only have the duty reimbursed over five years conditional on all production having been exported. Projects approved earlier will continue to import some 'non-exemption' products duty-free but only after authorities determine exemption validity, again based on the project's export situation. This new policy will take effect on 1 October 2002. The information and opinions contained in this article are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. [c] Freshfields Bruckhaus Deringer 2002 www.freshfields.com Freshfields Bruckhaus Deringer 65 Fleet Street London EC4Y 1HS UNITED KINGDOM Tel: 2079364000 Fax: 2078327001 E-mail: mary.friel@freshfields.com URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : www.freshfields.com (c) Mondaq Ltd, 2002 - Tel. +44 (0)20 7820 7733 - http://www.mondaq.com |
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