Legal Decision Support Tool

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A tool to help you with your legal issues

Legal aspects of energy cooperation are perceived as complex and they may slow down or discourage your project.
The following tool is designed to lower the legal barrier and help you develop energy cooperation projects between potential suppliers and customers in industrial clusters.

If you have a basic concept of the supply and demand in your energy project, you can go straight to the tool below. It is an easy to use fill-in contract template, with explanatory notes at the side. It will help you to bring focus and to agree on the fundamentals of an energy exchange project (sales and delivery). And it generates a ready to use (simple) contract in one go.

You can also approach your project from the general introduction to the contract template, which provides more context, and use the downloads: the contract template, the guide to contract template, and the guide to EU laws.

We also have a user forum, where you can post comments and share tips and tops. We hope that this helps to further our common goal of realizing more energy cooperation projects.

Guide to contract template

1. Introduction

This Guide provides explanatory notes to the R-ACES contract template. Together the Guide and the Template form a practical and simple-to-use legal tool to support regions and organizations to decide on the required legal framework for the supply of energy in their energy cooperation.

The Template can be used as a starting point to develop a solid agreement. For more complex agreements the Guide offers a number of additional clauses.

The Template has been designed with three types of agreements in mind: District Heating, Solar and New Projects. The distinguishing features for the three types are:

District heat: volume and profile are determined by Buyers requirement. Price is usually indexed and set periodically. Typically agreements are renewed annually.
Solar: volume and profile are determined by Seller’s solar production. Price is often linked to a reference price. The agreement is usually for a fixed duration and special clauses are required to cover changes in subsidies and taxes.
New Project: usually includes minimum annual volumes to guarantee cash flows. Pricing can be quite complex and payments are due in case of early termination. Typically these agreements are for a longer duration, and delivery and acceptance sometimes require a detailed scheduling process.

The Template can also be used as a basis for other agreements than the types listed above. The Template has been designed for Business to Business transactions. The user should be aware that household consumers usually have additional protection under EU laws.

The Template has three main parts:

Articles 1 – 7 describe the normal process of the energy delivery and payment. If everything goes according to plan, these are all the sections that are actually being used.
Articles 8 - 12 concern resolution of issues with the delivery, pricing and external developments. These Articles describe how to resolve the issue, the rights of each party and the financial consequences.
Articles 13 -19 provide more or less standard legal and credit arrangements.

To promote standardization this template strives for alignment and sometimes uses identical concepts or wording as found in other generic templates.

1.1 How to use the Template

The Template can be used instantly by

selecting the appropriate default clause by ticking the box [ ],
completing details in the blanks [●],
If required copying specific additional clause from the Guide to the Template; and
attaching the relevant Annexes.

The Template is generic and uses the defined terms Energy and Unit. For specific energy and units you would have to do a ‘Find and Replace’. I.e. if the agreement is for Electricity then replace Energy with Electricity and Unit with kWh or (MWh).

Annex 1 contains the definitions and some interpretation rules. Some defined terms, like Buyer Annual Volume, have abbreviations: “BAV”. These are used in mathematical formulas to exactly define the calculations in the Template. In this way any ambiguity, sometimes present in plain language, is avoided.

2. Template key assumptions

Risk allocation: The Template is balanced in terms of risk allocation, without onerous conditions on either side. It assumes a Seller and Buyer of equal standing, unlike the implications of a Supplier and Customer sometimes seen in district heating contracts. Grace periods (to remedy breach of contract) have been set quite strict to ensure that the other party responds timely.

Delivery: The Template does not cover physical transfer of Energy as is the case in delivery of biogas or steam. For those type of agreements quality specifications needs to be defined, and the consequence of not meeting these specifications should be addressed.

Supply only: The Template covers the supply of energy. Joint development and joint investments, cost sharing or cost recovery are typically arranged in other agreements. For details, please see section 3.

Network: The energy is delivered through a system including network and connection. The Template assumes that connection has been installed and will be the contractual delivery point. The Template further assumes that the Seller is the operator of the network and there is no separate network operator. See more background and examples on networks in section 4.

The Template has no specific clauses relating to compensation for installation and/or usage of the connection other than the potential to add a fixed fee in paragraph 3.2.

Laws and Jurisdiction: The Template has been written with common legal principles of the EU in mind. As the Template is developed for Business to Business, consumer protection under EU law is not covered. Also network and access regulation is assumed not to apply. Section 4 gives a high-level overview of the EU laws that could potentially apply to the Template. Also, specific national legislation could apply, especially in the area of district heating.

Technical appendices: The Template covers the basic legal framework for the supply of energy in an energy cooperation. In some cooperation’s a large number of technical details would also need to be specified. Such details can be attached to the template in various appendices. In case of waste heat recover the ReUseheat project and the deliverable “Efficient Contractual Forms and Business Models for Urban Waste Heat Recovery” provides a good overview of some of the technical details [link].

Market Structure: The Template covers the agreement for the supply of Energy from the Seller to the Buyer. The actual market structure for the energy cooperation as a whole may be such that there are many similar agreements. In most cases the Template can be used. The table below gives an overview of the 4 major market structures.

Market Structure	Schematic	Description	R-ACES Template	Example
Bilateral “1-to-1”		Direct bilateral contract	Template can be used	Solar PPA between two parties
Tree “1- to-many”		One supplier to multiple customers	Template can be used	H₂ plant to multiple customers
Single Buyer “many to 1 to-many”		Many suppliers to Single Buyer who sells to many customers	Template can be used	District heating company that buys heat from Data centers
Multiple Suppliers “many to many”		Multiple suppliers to multiple customer	Template needs expansion with allocation and balancing	Trading and Supply at national TSO systems, including balancing and allocation rules

Single Buyer: Some District Heating networks may serve several suppliers of Heat. In these cases, usually the largest supplier acts as a single buyer and buys the heat from the other suppliers (e.g. waste heat from a datacenter) and sells it on to the customers. The Template can be used for both selling and buying of Heat by the single buyer. The Heat prices may differ to cover transmission losses and other costs that the single buyer incurs.

Multiple Suppliers: In case an energy cooperation envisages multiple Suppliers delivering simultaneously to multiple Buyers, a number of additional issues have to be addressed. These include the allocation rules of deliveries at the connection point and the balancing risk. Such a system can become quite complex and is beyond the scope of the Template. In case this is of interest, we suggest looking at the contract structure and network codes of Network System Operators (TSOs / DSOs). They cover the relevant aspects as nomination, allocation, reconciliation, balancing, and pricing.

3. Relationship between the Template key assumptions and Investment in Energy Coorperation

Energy exchange projects are often developed by a consortium, willing to invest in production facilities, networks and connections, and/or end-user-installations. Such a project may be driven by numerous business, environmental, and regulatory considerations and can be supported by various legal structures and arrangements. This section of the Guide provides guidance and information on how these joint investments may link to the Template.

The legal structure can vary. It may include a new legal entity (i.e., an incorporated entity with shareholders that carries out the investment and sales). It can also have the form of a cooperation agreement (i.e., parties agree to cooperate and one of the parties is designated as the operator who does the investment, maintenance and sales on behalf of all partners). The “Guidance on contractual issues for joint services and energy cooperation” of the S-PARCS project provides some additional information on this topic.

This Section assumes an incorporated entity with a Shareholder Agreement (usually in conjunction with the Articles of Association) but the same principles apply in case there is no legal entity and the investors use a cooperation agreement.

A capital investment project is normally based upon the expectation of long term cash-flows from supply agreements, to recover the investments. Most likely, the participants will sign long term supply and transport contracts with the new legal entity, creating a guaranteed cash-flow. The Template can be used for these supply agreements particularly through expansion of the Articles on Annual Volume (paragraph 2.3), Price (art.3) and Term and Termination (art. 5).
Correspondingly, the shareholders must agree between themselves to keep the facilities in operation for the duration of the supply agreements.

It is customary to split the two roles, the role of investor and the role of buyer, into separate agreements. This makes the purpose of each agreement much clearer and easier to understand. The Template covers the supply agreement between the new legal entity and the Buyer and the Shareholder Agreement covers the investment. The split also makes it easier to use the supply agreement for a new customer (D in the figure below) who participates in the offtake of Energy but not in the investment. It also makes it easier to assign the shareholding in the asset separately from the supply agreement.

3.1 Shareholder Agreements

Shareholder (and also Cooperation) Agreements are usually project specific. These types of investments are often structured through a separate legal entity, whose shares or membership interests are owned by the major participants. The agreements usually cover the following matters:

Investment plan, business plan, financing plan. The plans for the project form the basis of the cooperation and will be agreed by the participants up-front. It will cover both the development phase and the operational phase. If project financing is required, the lender will require priority collateral rights over the assets, and over any forward cashflows (i.e. supply contracts, subsidies) which need to be separated for the lender.

Ownership and Governance. The new entity will probably own the assets. The shareholders will normally also share in the risk and reward and have voting rights in the general meeting pro rata their contribution. A day-to-day management should be established with appropriate mandate. Participants should be able to join and leave the consortium under pre-agreed conditions.

Compliance, Taxation, Accounting, Subsidies. Typically, these cooperation projects are not prohibited under competition laws (anti-trust rules) but prior assurance is advised. If the cooperation includes the development of a network that is potentially regulated then a waiver for network-rules may be useful (see EU section on networks). Fiscal and accounting matters often drive the structure, for instance whether the structure should stand alone, or consolidated with the shareholder accounts and fiscal returns. Subsidy application and usage, if any, should be agreed upfront.

Additional information can also be found in “Guidance on contractual issues for joint services and energy cooperation” in section 5 and Annex 1.

3.2 Implication for the Template

There is a potential conflict of interest between the role of investor and the role of Buyer. For example, if the Energy becomes too expensive the Buyer may want to terminate the Supply contract. But then the investment may be impaired as the sales and future cashflows are reduced. It could also be the case that the Asset requires maintenance or reinvestments. If one of the investors refuses to take part, it may endanger the continuity of the Asset and the supply of the Energy. The potential commercial and legal implications and solutions can be very complex and are beyond the scope of the current Template.

However, there are several generic ways in which it may be addressed. First of all, it should be determined whether the investors are expected to remain Buyers in the long term. If so, the Agreement for Sale and Purchase of Energy and the Cooperation agreement can be linked through, for instance, the following clauses.

Cross Default Clause: Basically, this links the two agreements, the energy supply agreement and the cooperation agreement. If a party defaults under one of the two agreements, this counts as a default under other agreement, and the latter may terminate. The defaulting party may have to pay a specific termination amount as included in the agreements.

Material Reason: The energy supply agreement can state that if the cooperation agreement is terminated, this qualifies as a material reason for the Buyer and that the Seller should pay an appropriate Termination Amount. I.e. if an investors wants to terminate his participation in the cooperation agreement he may have to face the pay out of a termination amount.

In general, as it is preferable that investment and Buyers/Sellers role can be disconnected, the predictability of the cash-flows from the supply agreement is increasingly important. As explained in the general part of this Section 3, this can be addressed in the articles on Annual Volume (paragraph 2.3), Price (art.3) and Term and Termination (art. 5) of the Supply Agreement.

4. Guide on EU laws

The relevance of EU law to the Template depends on the Energy supplied. While there are laws at the EU level that regulate Electricity and Gas supply, there is no dedicated EU law pertaining to Heat Supply. Most Member States have national laws governing the supply of Heat. These national laws are to some extent based on the principles of EU Electricity and Gas laws.

The core of the EU Electricity and Gas legislation is a market-based system and the principle that networks are natural monopolies. As networks are natural monopolies, they should be unbundled to avoid any conflict of interest between network operators and producers, suppliers and customers. Anybody should be able to access a network (Third Party Access (TPA)). Networks have regulated tariffs and are licensed by the regulator.

For Suppliers the key benefit of a market-based system is that they can charge the price that they want, the key benefit for customers is that they can choose their supplier. For household customers some additional protection applies.

An energy cooperation usually involves either direct lines or a closed distribution system. These can be exempted from some of the rules in EU Electricity and Gas legislation, which is useful amongst others with regards to TPA rules. An exemption may be useful as it reduces the administrative burden and provides more contractual security. It is not recommended to restrict TPA to the system unless there is a technical reason or capacity restraint, as access restrictions are often opposed by regulators.

District heating and cooling is not regulated at the EU level as such systems operate as “isolated islands” with very limited interconnections. Heat supply is thus regulated at Member State level, and national Heat (supply) laws usually cover tariff setting, and sometimes TPA mechanisms. In the EU Renewable Energy Directive there are also certain obligations on the supplier to provide information to their customers.

Another important aspect is supplier licensing. Supplier licensing is determined at Member State level and is usually also linked to tax rules. In some cases, even in a closed distribution grid, the seller could still be considered a licensed supplier with certain obligations amongst others for invoicing. For protected customers (i.e. households) then the rules in general, and the licensing rules in particular, become stricter.

In major projects REMIT (transparency) might be relevant for large electricity connections.

More information on the EU law can be found in the Guide to EU Law document.

Contract Generator

Agreement for sale and purchase of energy for

Article 1. Parties, Definitions and Scope

1.1 Parties

This Agreement is made between:

having its registered office at , company number , (the “Seller”), and is hereunder signed for its agreement by:

_[signature] ____________________

Name:

Title:

Date of signature:

and

having its registered office at , company number , (the “Buyer”), and is hereunder signed for its agreement by:

_[signature] ____________________

Name:

Title:

Date of signature:

This Agreement may be signed electronically, and in separate documents.

1.2 Definitions and Construction

Annex 1 provides the definitions and rules for interpretation and construction of this Agreement.

1.3 Scope

This Agreement relates to the delivery of Energy:

The Energy Installation is , as further described in Annex 2.

Explanation

Article 1 is a generic introduction to the Agreement, defining the parties involved, conventions used and what the Agreement is about (scope). Definitions and interpretation rules can be found in Annex 1.

In this Template, the Parties can sign on the first page, which avoids having to copy their details to the last page, where, conventionally, signatures are located. (Users may still want to move the names and the signature blocks to the last page.) In addition, placing initials on all pages may helps identifying the final agreed document. Electronic signing is acceptable.

Exclusivity: f, by way of example, Buyer takes all the electricity produced by Seller’s roof-top solar panels, the Agreement is exclusive. This should be mentioned in the Scope. Otherwise, it is rare that sellers have restrictions on choosing their buyers, and vice versa. Exclusivity clauses are not recommended as they are sometimes looked upon unfavourably by regulators.

Article 2. Energy, Profile and Volume

Explanation

Article 2 is about the type and volume of energy delivered. Delivery and Acceptance (Transfer) will be at the Delivery Point. For District Heating this is usually the heat exchanger where the energy is transferred and measured. For Electricity the delivery point is usually the measuring point.

The time intervals used to measure and report the transferred Energy are stated in paragraph 4.2. For Electricity this is usually 15 minutes, for all other Energy 1 hour. Measured, transferred Energy is to be invoiced and paid for.

An important choice is to be made for the profile of the energy delivery. There are three default cases:

Under the ‘As measured, Buyer driven’ option, the Buyer takes the amount of energy that it requires. This is typical for Heat Supply, where the amount delivered is driven by the business processes of the Buyer and ambient temperatures.
Under the ‘As measured, Seller driven’ option, the Seller determines the amount of Energy that is delivered. This is typically the case for Solar Production where the Seller delivers all produced electricity to the Buyer.
The ‘Scheduled’ option. In some cases, e.g. district heating supply, the Seller wants to know how much Heat is to be supplied the next day. In case of high demand Seller may need to turn on additional boilers. Thus the Seller and Buyer may agree that the Buyer has to give a forecast each day of the expected demand for the next day. In the Scheduling procedure the Parties can then agree how strict this Scheduling process is, e.g. with or without confirmations or rights to deviate from the agreed schedule. The scheduling process can also include compensation payment schemes if a Party does not adhere to the agreed schedule. Potential production, transport or consumption restrictions have to described. Generically these types of Scheduling processes are used by national Electricity and Gas TSO’s to ensure their grids are in balance.

In cases 1 and 2 above there is no need for any explicit Scheduling. The meter measures the actual flow of the Electricity or Heat and that defines the Contract Quantity that is delivered.

The Parties may agree a Minimum Annual Volume. Usually this is to guarantee the Seller a minimum amount of revenue per year. There are three default options:

None: No volume commitments apply. The implication is that the Seller has no guarantee on the sales volume and thus no contractual guarantee on cash flow.
Buyer: Buyer commits to offtake a certain volume. If Buyer takes less than the minimum annual volume, Buyer must pay in full or part for the volume not delivered, i.e. pay for The Minimum Volume minus the Delivered Volume. A reduction may apply if Seller can compensate its loss of sales.
Seller: Seller commits to deliver a certain volume. If Seller delivers less than the minimum annual volume, Buyer has the right to compensation to cover the incremental costs of acquiring/generating the shortfall volume of energy. For Electricity, such compensation is usually linked to a market index.

In rare occasions both Buyer and Seller volume commitments apply.

The maximum capacity of the energy delivered per Scheduling Period (usually hour or 15 minutes) is usually determined by the maximum technical connection and metering capacity at the connection / metering point. This maximum is defined in paragraph 2.2. Usually, no compensation applies for deliveries above the maximum (additional volume is paid for at the energy price).

Article 2.4 is strongly related to article 3.4. Please look at the explanation of article 3.4 for more information.

Article 3. Price

Explanation

Articles 2 and 3 form the core of the Template. Articles 2 covers the volume and Article 3 the price. Together with the Term of the Agreement (Article 5), Articles 2 and 3 determine the total monetary value of the Agreement.

The pricing mechanism very much depends on the type of energy supplied and the overall size of the energy cooperation. The Template provides a choice for the 3 most common options:

Fixed price: For short term duration contracts usually, a fixed price is agreed. Optionally the fixed price can be adjusted for inflation using an agreed inflation index (e.g. Consumer Price Index). This paragraph should specify the unit-price and the applicable unit.
Indexed price: For electricity supply (e.g. from solar panels), it is customary to link the price of the electricity to the market price. In almost all EU Member States there are well established electricity markets that have hourly and daily prices. In such case it is logical to use the market as an index for the price of electricity. For Heat contracts the energy price is sometimes linked to the Gas price (as competing costs of heat). In most cases the Multiplier is 1.

There can be a surcharge or a discount depending on the specific circumstances. A surcharge may reflect additional costs that the Seller has incurred, or a discount may reflect specific subsidies that are granted to the Seller.

The generic formula reflects the possibility of a surcharge or discount and it is up to the Parties to agree the height and/or inflation correction. The Unit needs to be specified.

Set Periodically: In some district heating contracts the Seller is allowed to recover incurred costs based on specific rules. Such rules usually state which costs are allowed to be recovered and make a distinction between direct and shared (or common) costs. Reimbursable costs may also refer to grid losses, specific taxes, CO2 credits, depreciation periods, return on invested capital, and subsidies etc.

In some cases, the Seller is (semi) regulated and there is a specific regulatory authority that checks if the Price is in line with all the rules and regulations for the supply of Heat. In such case the contractual Price can be set periodically by the Seller as long has the Seller has approval from the regulatory authority. In the latter case, no detailed costs allocation scheme is necessary for the contract.

Pricing formulas can become very complex, depending on the scale and complexity of the contract.

Parties may additionally agree a Fixed Monthly Fee in paragraph 3.2; Typically, this happens in some District Heating contracts to cover fixed costs for the connection. In case of a separate network operator the optional paragraph 2.4 can be added to Article 2 (and each party pays the fees directly to the network operator). See also paragraph 3.4.

The Annual Volume Make-up Fee is linked to the minimum annual volume. If the Buyer fails to take the annual volume to which it has committed (the Buyer Annual Volume), then the Buyer pays a compensation to the Seller. In the Template the compensation (make-up fee) is a percentage of the average price times the shortfall (the BAVMF). Obviously, there is no compensation due to the extent the shortfall is caused by failure of the Seller to deliver. Likewise, if the Seller fails to supply the annual volume to which it has committed (the Seller Annual Volume), then the Seller pays a compensation. In the Template the compensation (make-up fee) is a percentage of the average price times the shortfall (the SAVMF). Obviously, there is no compensation due to the extent the shortfall is caused by failure of the Buyer to accept.

The formula for the make-up fee is not very detailed. In some instances, Parties want to elaborate on allocating the financial consequences of shortfall, like factoring in the causes of unavailability on both sides, available reasonable means to mitigate consequences, and/or use shorter time intervals.

In case the Seller is the operator of the network and a separate Network Fee is due the optional Network Fee clause can be added. It can be either a fixed fee of a capacity based fee (see paragraph 3.4 and also paragraph 3.2).

Article 4. Schedule, Delivery and Acceptance, Measurement

4.1 Schedule and Delivery and Acceptance

The Seller shall Schedule and Deliver, and the Buyer shall Schedule and Accept the Energy at the Delivery Point.

The Parties shall adhere to the technical and operational standards applicable at the Delivery Point as identified in Annex 2.

Parties shall inform each other timely of any technical or operational matters that may impact the Delivery and/or Acceptance.

4.2 Measurement

Measurement of the transferred Energy will occur at the Delivery Point.

The Unit of measurement will be . The period for measurement reporting will be .

is responsible for the Measurement.

The Party responsible for the Measurement will do so according to the industry standards and in reasonable timeframe (but at least monthly) inform the other Party in electronic format of the results and upon request provide additional documentation so that the other Party can verify the Measurement. The Parties shall take all reasonable efforts to swiftly resolve any dispute over measurements.

4.3 Seller and Buyer Costs

Seller shall bear all risks associated with, and shall be responsible for, any costs or charges imposed on or associated with Scheduling, transmission and delivery of the Energy up to the Delivery Point. Buyer shall bear all risks associated with, and shall be responsible for any costs or charges imposed on or associated with acceptance and transmission of the Energy at and from the Delivery Point.

4.4 Risk and Transfer of Rights of Title

The Energy shall be for risk of Seller up to the Delivery Point and the Energy shall be for risk of Buyer from the Delivery Point. All rights and title to the Energy, free and clear of any adverse claims thereto, shall transfer from Seller to Buyer at the Delivery Point through Delivery and Acceptance.

Explanation

This Article specifies that Seller shall deliver the energy at the Delivery Point and that Buyer shall accept the energy at the Delivery Point. Interruptions and risks before the Delivery Point are for account of Seller. Interruptions and risks after the Delivery Point are for account of Buyer.

In most cases Measurement is relatively simple. Key is to state who is responsible for the measurement installation and actual measurements. The measurement installation should be described in Annex 2. Additional detail can be added on the timeframe and format of sharing Measurements. Elaborate contracts may describe the calibration methods for the meters, and allocation of discrepancies.

Article 4.2 defines the Units of measurement and the period for measurement reporting. The actual measurement (in Units) over a Scheduling Period is defined as a Contract Quantity. The aggregate of the Contract Quantities is used for invoicing.

Potentially the standards at the delivery point should be defined (in the Definitions Annex), e.g. for Electricity that could be Voltage and Frequency, for heat it could be water temperature going in an out.

Article 5. Term and Termination

This Agreement shall come into force as of (the “Effective Date”).

This Agreement will terminate on (the “Expiration Date”), being (“Ordinary Termination”).

This Agreement will terminate on midnight on 31 December of any year if a Party has given the other Party two (2) calendar months prior written notice of termination specifying this termination date, being (“Ordinary Termination”).

This Agreement may also be terminated in accordance with Article 11 (Termination for Material Reason).

Explanation

The Template provide two options for the term (duration) of the Agreement:

Fixed Term: The agreement runs from the Effective Date until the Expiration date defined in Article 5. It is expected that Parties will discuss and potentially agree renewal before the Expiration Date, absent which the agreement will terminate on the Expiration Date. Note that there is sometimes a difference between the Effective Date (from which the agreement takes effect) and the Signing Date (placing the last signature on the document). Delivery may have started before all contract details have been put on paper, or the contract may have been signed well in advance of actual delivery. This explains the two terms: Signing Date and Effective Date.
Annual renewal: The agreement is effectively an evergreen contract, i.e. it has no fixed Expiration Date, but each Party has the right to end the agreement by giving formal notice two months prior to the 31 December. If notice is given, the agreement will end at 31 December.

In absence of a minimum annual volume, either party can stop the delivery, de facto ending the relationship. Nonetheless it is advisable to agree an initial term of the Agreement. Before the end of the term, the Parties should discuss renewal.

A cross reference is made to Article 11 that sets out how the Agreement is terminated in special circumstances, for instance if one of the Parties does not perform its obligations. Compensation may be due in such cases.

Sometimes long term contracts and a minimum annual volume are required to cover significant investments. Long term contracts are typically not permitted for sales to household customers, and regulators may query whether the term is indispensable. Please also refer to the chapters on Renegotiation and Hardship in this Guide on Article 11.

Article 6. Invoicing and Payment

6.1 Invoice

The Seller shall transmit to the Buyer, in each calendar month, an invoice setting forth the total quantities of Energy that were transferred in the previous calendar month. In connection with such invoice the Seller may state all amounts then owed, without limitation, for the sale of Energy and any fixed monthly fee, fees, charges, reimbursements, damages, interest, and other payments or credits owed between the Parties.

The Energy Fee (“EF”) is determined as the sum over the month for each Scheduling Period (“SP”) of the Energy Price (“EP”) times the Contract Quantity (“CQ”):

In the first month of a calendar year the Annual Volume Make-up Fee, if any, shall be included in the invoice, as determined by Seller according to paragraph 3.3.

6.2 Payment

On or before the later to occur of (a) the twentieth (20th) day of the calendar month or if not a Business Day the immediately following Business Day or (b) the tenth (10th) Business Day following receipt of an invoice (the “Due Date”), a Party owing an invoiced amount shall pay, by wire transfer in freely available funds, the amount set forth on such invoice to the payment address or bank account provided by the other Party. Such payment shall be made, unless otherwise agreed, in EURO, and be subject to Articles 7 (VAT) and 7.2 (Other Taxes) and the remitter shall pay its own bank charges.

6.3 Invoicing and Payment of Measured Quantities

Invoicing and payment shall be based on Contract Quantities for the respective month. If Contract Quantities are not available, then Seller will make a reasonable estimate (“Estimated Quantities”) that will be used to determine the Energy Fee set out in 6.1. If data becomes available confirming the Energy transferred, invoicing and payment will be adjusted to reflect any deviations between the Estimated Quantities and Contract Quantities.

6.4 Default Interest

!!! Overdue payments shall accrue interest from, and including, the Due Date to, but excluding, the date of payment, at the rate of plus (“Interest Rate”). !!!

6.5 Disputed Amounts

If a Party, in good faith, disputes the accuracy of an invoice, it shall on or before the Due Date provide a written explanation of the basis for the dispute and shall pay:

The full amount invoiced no later than the Due Date. If any amount paid under dispute is finally determined to have not been due, such overpayment shall, at the election of the owed Party, be credited or returned to it within ten (10) days of such determination, along with interest accrued at the Interest Rate from, and including, the date such amount was paid, to, but excluding, the date returned or credited.

The undisputed amount invoiced no later than the Due Date. If any amount withheld under dispute is finally determined to have been due, such withheld amount shall, at the election of the owed Party, be credited or returned to it within ten (10) days of such determination, along with interest accrued at the Interest Rate from, and including, the date such amount was due to, but excluding, the date paid or credited.

Explanation

Invoicing and Payment is on a monthly basis after the month of delivery. Payment terms are similar to those in the EFET master agreement, i.e. payment on the 20^th of the next month.

In principle the Buyer pays for the actual measured quantities. If these are not yet available at the time of invoicing, then payment is based on an estimation.

If Set-off/Netting of amounts payable and amounts receivable under this agreement is important then the following clause can be added:

6.6 Payment Netting

If the Parties are each required to pay one or more amounts in the same currency (for which purpose all EURO currencies shall be considered a single currency) in connection to this Agreement, then such amounts with respect to each Party shall be aggregated and the Parties shall discharge their respective payment obligations through netting, in which case the Party, if any, owing the greater aggregate amount shall pay the other Party the difference between the amounts owed.

The Default Interest rate is often defined as a bench mark rate with a markup in percentage points. If not agreed the statutory default interest may apply.

For disputed invoices, a choice can be made between the principal that Invoices are paid in full, or only for the undisputed amount. After the dispute has been settled interest on the difference will be payable.

Article 7. VAT and Other Taxes, Subsidies

7.1 VAT

All amounts referred to in this Agreement are exclusive of VAT. The VAT treatment of the supply of Energy shall be determined pursuant to the VAT laws of the jurisdiction of the Delivery Point. If VAT is payable on any such amounts, the Buyer shall pay to the Seller an amount equal to the VAT at the rate applicable from time to time; provided that such amount shall only be required to be paid once the Seller provides the Buyer with a valid VAT invoice in relation to that amount.

7.2 Other Taxes

All amounts referred to in this Agreement are exclusive of Other Taxes. In the case of Other Taxes, if the cost of an Other Tax is charged or passed on by the Seller to the Buyer, the Buyer shall pay this amount of Other Tax to the Seller; provided that such amount of Other Tax is identified separately on the invoice issued by the Seller and confirmation is received by the Buyer, where applicable, that such amount of Other Tax has been duly paid or accounted for to the relevant Tax authority, as appropriate.

Where in accordance with EU and/or national legislation there is an exemption or other relief, as applicable, from Other Taxes in respect of any supplies under this Agreement, the following shall apply:

(a) the Buyer and the Seller hereby covenant that they will do all such proper acts, deeds and things as are necessary (which may include and shall not be limited to providing to the Seller all such proper, true and accurate documentation or assistance as may reasonably be required by the relevant taxing authority) to ensure that such supply is exempt from Other Taxes for the purposes of such legislation;

(b) in the event that the Buyer or the Seller fails to comply with such obligation, the non-complying Party shall indemnify the other Party in respect of any and all Other Taxes, penalties and interest incurred by the other Party as a result of the non-complying Party's failure to comply with the above covenant; and

(c) in the absence of the Buyer providing any documentation as referred to in (a) above the Seller reserves the right to charge Other Taxes.

7.3 Seller’s and Buyer’s Tax Obligation

The Seller shall pay or cause to be paid all Tax arising before the transfer of risk and title at the Delivery Point. The Buyer shall pay or cause to be paid all Tax arising after the transfer of risk and title at the Delivery Point. Subject to paragraph 7.2, the Parties shall pay all Tax arising at the transfer of risk and title at the Delivery Point in accordance with applicable local laws. In the event that the Seller is required by law to pay any Tax which is properly for the account of the Buyer, the Buyer shall promptly indemnify or reimburse the Seller in respect of such Tax. In the event that the Buyer is required by law to pay any Tax which is properly for the account of the Seller, the Buyer may deduct the amount of any such Tax from the sums due to the Seller under this Agreement and the Seller shall promptly indemnify or reimburse the Buyer in respect of any such Tax not so deducted.

7.4 New Taxes

If any New Tax is applicable to this Agreement, and the Buyer is, by the use of reasonable endeavors, able to obtain any available exemption or relief therefrom or is contractually able to pass the same through to or be reimbursed in respect thereof by, a third party, the Buyer shall pay or cause to be paid, or reimburse the Seller if the Seller has paid, such New Tax, and the Buyer shall indemnify, defend and hold harmless the Seller from and against any claims for such New Tax.

7.5 Renegotiations for New Tax

If a New Tax is imposed on a Party (the “Taxed Party”) in respect of the sale and purchase or transfer of Energy under this Agreement, and the New Tax cannot be exempted or contractually passed on to the Other Party or a third party, and shall exceed five percent (5%) of the sum for the remaining term of this Agreement of the Estimated Quantities times the Contract Price then the Taxed Party shall be entitled to require a renegotiation of this Agreement to mitigate these effects so that the New Tax does not significantly distort the economic balance of this Agreement at the Signing Date as evidenced from this Agreement.

7.6 Renegotiation for Withdrawn Subsidies

If a Party has entered into this Agreement in reliance on a Subsidy, and such Subsidy is reduced or withdrawn, and the affected Party has used all reasonable efforts to prevent this, and the value of the reduction or withdrawal shall exceed five percent (5%) of the sum for the remaining term of this Agreement of the Estimated Quantities times the Contract Price then the affected Party shall be entitled to require a renegotiation of this Agreement to mitigate these effects so that the reduction or withdrawal does not significantly distort the economic balance of this Agreement at the Signing Date as evidenced from this Agreement.

Explanation

First of all, this Article provides standard arrangements for VAT. The default assumption is that VAT is payable for the delivery of energy. In some very specific circumstances, no VAT is payable. In such cases the following clause could be used:

Where, in accordance with EU and/or national legislation, any supplies may be Zero-Rated and/or subject to the reverse charge in accordance with Articles 38, 39 or 195 of Council Directive 2006/112/EC, the following shall apply:

(a) the Buyer and the Seller hereby covenant that they will do all such proper acts, deeds and things as are necessary (which may include and shall not be limited to providing to the Seller all such proper, true and accurate documentation or assistance as may reasonably be required by the relevant taxing authority) to ensure that such supply is Zero-Rated or subject to the reverse charge for the purposes of such legislation;

(b) in the event that the Buyer or the Seller fails to comply with such obligation, the non- complying Party shall indemnify the other Party in respect of any and all VAT, penalties and interest incurred by the other Party as a result of the non-complying Party's failure to comply with the above covenant; and

(c) in the absence of the Buyer providing any documentation as referred to in (a) above, the Seller reserves the right to charge local VAT.

Definitions

“Zero-Rated” means, in respect of a supply, a tax exempt export or tax-free export under applicable VAT Rules and “Zero-Rating” shall be construed accordingly.

In most countries Other Taxes apply to the delivery of energy too. For example, in the Netherlands the supplier has to charge “Regulerende Energie Belasting” and “Opslag Duurzame Energie”. It very much depends on the specific jurisdiction and the legal status of the Seller whether or not these taxes have to be charged. Note that in most case the Buyer also consumes the energy, so it is unlikely the Buyer will be able to pass any of these taxes on to a third party.

Critical area is the renegotiations right in case of a New Tax; The default option in the Template is that if the New Tax is more than the equivalent of 5% of the energy price, then then newly taxed party has the right to seek contract renegotiation. Parties can also agree on a different threshold, may decide to share the risk equally or agree termination rights.

Withdrawal of a Subsidy may have the same material effect as the introduction of a new tax and the Template proposes renegotiations if its value exceeds 5% of the remaining contract value. The Parties may want to specify in the agreement which subsidies are applicable to Buyer or Seller or to the delivery of energy. This may be linked to this paragraph and if such a subsidy is then withdrawn, a renegotiation may follow.

Article 8. Remedies for Failure to Deliver and Accept

8.1 Failure to Deliver

To the extent that the Seller fails to Deliver the agreed daily quantity under paragraph 2.2 (if any) and such failure is not excused by an event of Force Majeure or the Buyer’s non-performance, the Seller shall pay the Buyer as compensation for damages an amount for such quantity of undelivered Energy equal to the product of:

(a) the amount, if positive, by which the price, if any, at which the Buyer, acting in a commercially reasonable manner, would be able to purchase in the market or otherwise generate the quantity of undelivered Energy exceeds the Energy Price; and

(b) the quantity of undelivered Energy.

Such amount shall be increased by other reasonable and verifiable costs and expenses incurred by the Buyer as a result of the Seller’s failure.

8.2 Failure to Accept

To the extent that the Buyer fails in whole or in part to Accept the agreed daily quantity under paragraph 2.2 (if any) and such failure is not excused by an event of Force Majeure or the Seller’s non-performance, the Buyer shall pay the Seller as compensation for damages an amount for such quantity of undelivered Energy equal to the product:

(a) the amount, if positive, by which the Energy Price exceeds the price at which the Seller is or would be able to sell the quantity of non-Accepted Energy in the market acting in a commercially reasonable manner; and

(b) the quantity of the non-Accepted Energy.

Such amount shall be increased by other reasonable and verifiable costs and expenses incurred by the Seller as a result of the Buyer’s failure.

8.3 Amounts Payable

Amounts that are due according to this Article shall be invoiced and paid in accordance with Article 6 (Invoicing and Payment).

Explanation

Up to this Article 8, the Template has defined what happens in the normal course of events. The next clauses are about what happens if something does not go as originally planned.

Article 8 is used if Parties are scheduling on a daily basis (paragraph 2.2) and one of the Parties fails to meet the schedule. In case of scheduling Gas or Electricity with a TSO, such a deviation is called an “imbalance” and a TSO normally applies a penalty scheme.

The leading invoicing principle is that the agreed price is paid for the delivered energy. In addition, if a failure of Party has caused a mismatch between the schedule and the actual delivery, the Party that has caused the failure has to compensate the other.

If parties agree to ‘as Measured’ in paragraph 2.2, then there is never a failure to deliver or accept and this Article can be taken out.

If deemed necessary, the following clause can be added to explicitly state that each Party is responsible for arranging his own back-up and that there is no additional liability on the other Party other then stated in 8.1 and 8.2.

8.3 Complete Interruption of delivery and acceptance

Both parties must be able to withstand complete failure of delivery and acceptance, respectively.

The Buyer is responsible for alternative source of Energy in case of failure to deliver and the Seller is responsible for the disposal of Energy in case of failure to accept. There is no liability other than stated in 8.1 and 8.2.

Any payment obligation resulting for failure to Deliver or Accept are included in the regular invoicing and payment process.

Note that this Article does not relate to minimum annual volume (if any). That is covered in paragraph 3.3.

Article 9. Force Majeure

9.1 Definition of Force Majeure

“Force Majeure” means an occurrence beyond the reasonable control of the Party claiming Force Majeure (the “Claiming Party”) which it could not reasonably have avoided or overcome and which makes it impossible for the Claiming Party to perform its Delivery or Acceptance obligations.

9.2 Release From Delivery and Acceptance Obligations

If a Party is fully or partly prevented due to Force Majeure from performing its obligations of Delivery or Acceptance and such Party complies with the requirements of paragraph 9.3 (Notification and Mitigation of Force Majeure), no breach or default on the part of the Claiming Party shall be deemed to have occurred and it shall be released (and not merely suspended) from those obligations for the period of time and to the extent that such Force Majeure prevents its performance.

9.3 Notification and Mitigation of Force Majeure

The Claiming Party shall as soon as practical after learning of the Force Majeure notify the other Party of the commencement of the Force Majeure and, to the extent then available, provide to it a non-binding estimate of the extent and expected duration of its inability to perform. The Claiming Party shall use all commercially reasonable efforts to mitigate the effects of the Force Majeure and shall, during the continuation of the Force Majeure, provide the other Party with reasonable updates, when and if available, of the extent and expected duration of its inability to perform.

9.4 Effects of Force Majeure on Other Party

In the event and to the extent a Seller’s Delivery obligations are released by Force Majeure, the Buyer’s corresponding Acceptance and payment obligations shall also be released. In the event and to the extent a Buyer’s Acceptance obligations are released by Force Majeure, Seller’s corresponding Delivery obligations shall also be released.

Explanation

Force Majeure are events beyond their reasonable control that release Seller from its delivery obligations or release Buyer from its acceptance obligations. This clause is only relevant if there are firm delivery or acceptance obligations.

In some countries, e.g. the UK, it is customary to make a long list of all events that are considered Force Majeure. The list can be limitative, meaning that if something happens that is not included in the list then it is not considered Force Majeure. Or the list can give examples, so that there is more clarity on what can constitute Force Majeure. In other countries it is customary to refer to the relevant article in the law and rely on common interpretation of the law, or refer ultimately the courts.

In an ‘as measured’ contract, this FM-Article has no real impact as there are no delivery and acceptance obligations. Equally if there are no Annual Volume obligations this Article has limited impact.

Article 10. Suspension of Delivery

In addition to any other rights or remedies available to the Seller, should the Buyer default on any payment that is due under this Agreement, or should it or its Credit Support Provider fail to provide, replace or increase the amount of any Performance Assurance required pursuant to this Agreement or any Credit Support Document, the Seller shall be entitled, no earlier than ten (10) Business Days after sending a written notice to the Buyer to immediately cease further deliveries of Energy until such time as the Seller has received either the required collateral or full payment (including all applicable default interest and expenses) of all outstanding amounts owed to the Seller.

Article 11. Termination for Material Reason

11.1 Termination for Material Reason

(a) If a Material Reason (as defined below) with respect to a Party has occurred and is continuing, the other Party (the “Terminating Party”) may terminate this Agreement (“Early Termination”) by giving the other Party notice.

(b) A notice of Early Termination shall specify the relevant Material Reason for the Early Termination and shall designate a day as an early termination date (the “Early Termination Date”). The Early Termination Date may not be earlier than the day the notice is deemed to have been received under this Agreement nor later than twenty (20) days after such day. With effect from the Early Termination Date all further payments and performance in respect of this Agreement shall be released (and not merely suspended) and existing duties and obligations of the Parties shall be replaced by the obligation of one Party to pay damages for non-fulfilment to the other Party in an amount (if any) calculated in accordance with paragraph 11.3 (the “Termination Amount”).

(c) If notice designating an Early Termination Date is given, the Early Termination Date shall occur on the date so designated even if the applicable Material Reason is no longer continuing. On, or as soon as practicable after, the Early Termination Date, the Terminating Party shall calculate in a commercially reasonable manner, and shall notify the other Party of, the Termination Amount (if any) to be received or paid by it calculated as per paragraph 11.3 (Calculation of the Termination Amount).

(d) The Termination Amount shall be payable by the relevant Party to the other Party within three (3) Business Days of its notification by the Terminating Party.

(e) The right to designate an Early Termination Date under this paragraph 11.1 (Termination for Material Reason) is in addition to any other remedies available under this Agreement.

11.2 Definition of Material Reason

This Agreement may be terminated at any time for one or more of the following reasons (each, a “Material Reason”):

(a) Failure to pay or perform: under this Agreement; provided, that in the case of a failure to pay, such failure is not cured within ten (10) Business Days of a written demand, or, in the case of any other failure of performance, such failure is not cured within ten (10) Business Days of a written demand;

(b) Winding-up/Insolvency/Attachment: A Party or its Credit Support Provider:

(i) is dissolved (other than pursuant to a consolidation, amalgamation or merger);

(ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;

(iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors;

(iv) institutes or has instituted against it a proceeding seeking a judgement of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation and, is not withdrawn, dismissed, discharged, stayed or restrained within seven (7) Business Days;

(v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);

(vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets;

(vii) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets;

(viii) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (vii) (inclusive); or

(ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts referred to in this paragraph 11.2.(b).

(c) Failure to Deliver or Accept: The failure of a Party to comply with its obligation to Deliver or Accept Energy, (other than, when such obligation is released pursuant to paragraph Article 9 (Force Majeure)) for more than seven (7) consecutive days or for more than seven (7) days in aggregate within a period of sixty (60) days.

(d) Force Majeure: A Party has been released from its obligations under this Agreement due to Force Majeure for more than thirty (30) consecutive days or for more than sixty (60) days in aggregate within a period of twelve (12) consecutive months.

(e) Representation or Warranty: A representation or warranty when made or repeated or deemed to have been made or repeated by a Party proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated.

The above Material Reasons shall constitute the exclusive reasons for Early Termination.

11.3 Calculation of the Termination Amount

In case the Seller is the Terminating Party then the amount (the “Termination Amount or “TA”) to be paid in accordance with paragraph 11.1 (Termination for Material Reasons) shall be the Annual Volume (“AV”) times Remaining Duration (“RD”) of this Agreement (in years) times Energy Price (“EP”) times Seller Termination Percentage (“STP”) of %

The Energy Price shall be established in a commercially reasonable manner.

In case the Buyer is the Terminating Party then the amount (the “Termination Amount”) to be paid in accordance with paragraph 11.1 (Termination for Material Reasons) shall be the Annual Volume (“AV”) times Remaining Duration (“RD”) of this Agreement (in years) times the Alternative Price minus Energy Price (“EP”) times Buyer Termination Percentage (“BTP”) of %:

The Alternative Price is the price that the Buyer will have to pay for the alternate source of Energy that replaces the Energy that would have been supplied for the remaining duration of this Agreement. The Alternative Price and the Energy Price shall be established in a commercially reasonable manner.

Explanation

Article 5 provides for ordinary termination of the Agreement, as elected at the end of its term or by notice. Article 11 covers exceptional circumstances, like failure to pay the invoices, a Party may terminate the Agreement with immediate effect. Article 11 determines under what conditions a Party can terminate the Agreement for these and other ‘Material Reasons’.

Paragraph 11.2 lists 5 categories of Material Reasons:
- Failure to Pay
- Bankruptcy
- Failure to comply with the Agreement
- Prolonged Force Majeure
- Misrepresentation

This Article (Termination for Material Reason) is designed to protect Parties under long term contracts particularly. Under such contracts it is customary that the Seller wants to ensure that a minimum annual volume must be taken by the Buyer securing a base revenue stream for the Seller. If the Seller suffers from a Material Reason (e.g. the Buyer is in prolonged Force Majeure or does not pay) then the Seller can terminate the Agreement and claim a Termination Amount from the Buyer to compensate for the future loss of revenue. The Template sets the termination amount on a percentage of the future cash flow. Parties can replace this with other calculation methods, for instance including links to investments, costs, returns, mark to market, etc.

It is also possible that the Buyer terminates for Material Reason, for instance prolonged non-delivery. Then the Buyer may be entitled to a Termination Amount.

The grace periods in this Article (and elsewhere in the Template) are set strict, in accordance with market practice, but may be manually changed.

Obviously, the value and effect of such a hardship clause are difficult to quantify at the outset, and the clause may not be enforceable in practice or at law. Note that Article 7 has a somewhat similar clause for renegotiation in case of material changes in taxation or subsidies.

The Termination Amount is to cover the financial consequences for the Party not at fault. The amount reflects how difficult it would be (what the financial impact is) for the Buyer to find an alternative source, or for the Seller to find alternative offtake. The Template uses a percentage of the value of the sales for the remaining term of the Agreement if it had not been terminated. Alternatively a table for the Termination Amount based on the year the contract is terminated can be used as follows:

Calculation of the Termination Amount

In case the Seller is the Terminating Party then the amount (the “Termination Amount or “TA”) to be paid in accordance with paragraph 11.1 (Termination for Material Reasons) shall be based on the year of termination according to the following table:

Year of Termination	Termination Amount (Euro)
2022	[ ]
2023	[ ]
2024	[ ]
2025	[ ]
2026	[ ]

In case the Buyer is the Terminating Party then the amount (the “Termination Amount”) to be paid in accordance with paragraph 11.1 (Termination for Material Reasons) shall be based on the year of termination according to the following table:

Year of Termination	Termination Amount (Euro)
2022	[ ]
2023	[ ]
2024	[ ]
2025	[ ]
2026	[ ]

A further alternative for determining the Termination Amount would be to calculate a value differential for buying or selling the Energy from a difference source following the termination. The calculations under Article 8 (Remedies for Failure to Delver and Accept) provide an example. Consideration should be given to whether there are firm volume commitments warranting termination payments.

Hardship clause: During long term contracts the commercial circumstances may change significantly. A Party may then want to terminate the Agreement but is not allowed to do so. This is sometimes referred to as a “Lock in” situation.

Often a balance must be struck between the need for a long term contract to recover investments, and the inevitable uncertainty about what the future will bring, and whether the agreed terms still make sense in the future. Sometimes specific interim termination events can be specified.

To cater for this uncertainty sometimes long term, minimum volume contracts contain a (price) renegotiation or hardship clause similar to the one below:

At any time after [●] yeas after the Effective Date, either Party may request renegotiation of the terms of this Agreement if economic conditions, external to the Party requesting the renegotiation, have changed significantly, distorting the economic balance of the Agreement existing between the Parties at the Effective Date and causing a Party to suffer substantial commercial losses under this Agreement. Such renegotiation must be conducted in good faith with a view to restoring such economic balance, but does not oblige a Party to accept a loss making position.

Article 12. Index Prices and Alternatives

12.1 Calculation of Indexed Prices

If the Energy Price is based on an index, exchange or any other kind of variable reference price (such price being an “Index Price”), the Energy Price shall be determined by the Seller according to Article 3 and included in the Invoice.

12.2 Index Price Disruption

If the Index Price is no longer available (“Index Price Disruption Event”), the Seller shall determine and use the Alternative Index Price according to the following order:
(a) Fallback Index Price: as specified here:
Alternative 1:
Alternative 2: ;

(b) Negotiated Fallback: Each Party shall promptly negotiate in good faith to agree with the other on an Alternative Index Price (or a method for determining the Alternative Index Price).

12.3 Definition of Index Price Disruption Event

“Index Price Disruption Event” shall mean the events stipulated under paragraph 12.3 (a) through (c) (the existence of which shall be determined in a commercially reasonable manner by the Seller). For purposes of this paragraph 12.3, “Price Source” shall mean any institution determining and publishing the Index Price as stipulated in Article 3.

(a) the failure of any relevant Price Source to announce or publish information necessary for determining the Index Price;

(b) the temporary or permanent objective unavailability of any relevant Index Price; or

Article 13. Limitation of Liability

13.1 Exclusion of Liability

Subject to paragraphs 13.2 and 13.3 and except in respect of any amounts payable under Article 8 (Remedies for Failure to Deliver and Accept) or paragraph 11.1 (Termination for Material Reason), a Party and its employees, officers, contractors and/or agents , are not liable to the other Party for any loss, cost, expense or damages (“Damages”), (including, without limitation, any liability due to the irregularities in the supply of Energy incurred by the other Party under or in connection with this Agreement, except where such Damages are due to gross negligence, intentional default or fraud of a Party or its employees, officers, contractors and/or agents used by such Party in performing its obligations under this Agreement.

13.2 Consequential Damage and Limitation of Liability

Subject to paragraph 13.3, the liability of a Party under or in connection with this Agreement:

(a) does not include liability for any indirect and/or consequential Damages, including, without limitation, loss of profit, goodwill, business opportunity or anticipated saving; and

(b) is limited to an amount equal to the amounts payable for Energy supplied and to be supplied by a Party under this Agreement provided that such limitation shall not apply to payments under Article 8 (Remedies for Failure to Deliver and Accept) and paragraph 11.3 (Calculation of the Termination Amount).

13.3 Intentional Default, Fraud

Nothing in this Agreement operates to exclude or limit a Party’s liability for:

(a) intentional default, or

(b) fraud;

of a Party or its employees, officers, contractors and/or agents used by such Party in performing its obligations under this Agreement.

13.4 Duty to Mitigate Losses

Each Party covenants that it will use commercially reasonable efforts to minimise any Damages it may incur under or in connection with this Agreement, to the extent the other Party is or may be liable for such Damages.

Article 14. Guarantees and Credit Support

14.1 Credit Support

To address the Sellers risk relating to the creditworthiness of the Buyer, and to secure the prompt fulfilment of all obligations resulting from this Agreement, the Parties may agree, on or at any time after the Effective Date, upon the circumstances in which Credit Support Documents may be required to be provided for the benefit of Seller, including, the form of Credit Support Documents, the amount of credit support, and the identity of one or more acceptable Credit Support Providers.

At any time and from time to time, when the Seller believes in good faith that a Material Adverse Change has occurred in respect of the Buyer, the Seller shall be entitled to require, by written notice, that the Buyer provide to it or increase in amount: (a) a Letter of Credit; (b) cash; or (c) other security (including a bank or parent guarantee), in a form and amount reasonably acceptable to the Seller (each a “Performance Assurance”). Upon receipt of such written notice, the Buyer shall within seven (7) Business Days provide to the Seller the Performance Assurance required.

14.2 Material Adverse Change

Means any event, condition or change which materially and adversely affects or could reasonably be expected to materially and adversely affect the assets, liabilities, financial results of operations, financial conditions, business or prospects of the Buyer causing reasonable doubt on such Party’s ability to perform its obligations under this Agreement.

14.3 Provision of Financial Statements

If requested by a Party, the other Party shall deliver within four months following the end of each fiscal year, a copy of such other Party’s annual report containing audited consolidated financial statements for such fiscal year.

Article 15. Confidentiality

15.1 Confidentiality Obligation

Subject to paragraph 15.2 (Exclusions from Confidential Information), neither Party shall disclose the terms of this Agreement (“Confidential Information”) to a third party.

15.2 Exclusions from Confidential Information:

Confidential Information shall not include information which:

(a) is disclosed with the other Party’s prior written consent;

(b) is disclosed by a Party to Affiliates, agents, professional advisers, bank or other financing institution, rating agency or intended bona fide assignee;

(c) is disclosed to comply with any applicable law, regulation, or rule of any exchange, system operator or regulatory body, or in connection with any court or regulatory proceeding; provided that each Party shall, to the extent practicable and permissible under such law, regulation, or rule, use reasonable efforts to prevent or limit the disclosure and to give the other Party prompt notice of it;

(d) is in or lawfully comes into the public domain other than by a breach of this Article 15; or

(e) relates to capacity and delivery profile and to the extent reasonably required in connection with network operations or network, supply or demand development.

15.3 Expiration:

A Party’s obligation in respect of this Article 15 shall expire one (1) year after the expiration of this Agreement.

Article 16. Assignment

16.1 Prohibition

Neither Party shall be entitled to assign its rights and obligations under this Agreement to a third party without the prior written consent of the other Party. Such consent shall not be unreasonably delayed, refused or withheld.

16.2 Assignment to Affiliates

Each Party shall be entitled to assign its rights and obligations under this Agreement without the prior written consent of the other Party to an Affiliate of an equivalent or greater creditworthiness, subject to customary know your counterparty requirements. Such Assignment shall only become effective upon notice being received by the other Party and provided that any Credit Support Document issued or agreed on behalf of the assigning Party has first been reissued or amended to support the obligations of the Affiliate for the benefit of the other Party.

Article 17. Representations and Warranties

Each Party hereby represents and warrants to the other Party upon entering into this Agreement as follows:

(a) it is an entity duly organised, validly existing and in good standing under the laws of its jurisdiction of incorporation or organisation;

(b) the signing and the entering by it into of this Agreement, and any Credit Support Document to which it is a party shall not violate any provision of its constitutional documents;

(c) it has the power and is authorised to execute, deliver and perform its obligations under this Agreement and any Credit Support Document to which it is a party and has taken all necessary action to authorise that execution, delivery, performance and its entry into this Agreement and its execution, delivery and the performance of this Agreement and any Credit Support Document do not violate or conflict with any other term or condition of any contract to which it is a party or any constitutional document, rule, law or regulation applicable to it;

(d) no Material Reason for termination as outlined in paragraph 11.2 (Definition of Material Reason), with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement;

(e) it has all governmental and regulatory authorisations, approvals and consents necessary for it to legally perform its obligations under this Agreement and any Credit Support Document to which it is party;

(f) it has negotiated, entered into and executed this Agreement and any Credit Support Document to which it is a party as principal (and not as agent or in any other capacity, fiduciary or otherwise);

(h) it is acting for its own account (and not as advisor, agent, broker or in any other capacity, fiduciary or otherwise), has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgement, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of, and understands and accepts, the terms, conditions and risks of this Agreement;

(j) it is not relying upon any representation made by the other Party other than those expressly set forth in this Agreement or any Credit Support Document to which it is a party;

(n) it is not insolvent, and there are no pending or threatened legal or administrative proceedings to which it is a party which to the best of its knowledge would materially adversely affect its ability to perform this Agreement or any Credit Support Document to which it is party, such that it could become insolvent.

Article 18. Governing Law and Dispute Resolution, Expert

18.1 Governing Law

This Agreement shall be construed and governed by the substantive law of the .

18.2 Dispute Resolution

Any disputes which arise in connection with this Agreement and which can not be resolved amicably, shall be referred for resolution to (subject to appeals in accordance with the applicable rules).

18.3 Expert

The matters specified below in this paragraph 18.3 shall be exclusively settled by Expert determination. Absent agreement between the Parties within fourteen (14) days following a notice by either Party seeking appointment, the Expert shall be appointed by the president of dispute resolution institute referred to in paragraph 18.2. The Expert shall be tasked to render decision within 6 weeks from appointment, and the decision of the Expert shall be final.

Matters for expert determination are:

Article 19. Miscellaneous

19.1 Notices and Communications

Except as otherwise provided herein, all notices, declarations or invoices sent by one Party to the other shall be in writing, be delivered by letter (overnight mail or courier, postage prepaid), or by electronic means as provided in the notice details in Annex 4. Each Party may change its notice details by five (5) days prior notice to the other. Notices, declarations and invoices shall be deemed received and effective:

(a) if delivered by hand, on the Business Day delivered or on the first Business Day after the date of delivery if delivered on a day other than a Business Day;

(b) if sent by first class post, on the 2nd Business Day after the date of posting, or if sent from one country to another, on the 5th Business Day after the day of posting, provided an electronic copy is send on the date of posting; or

(c) if sent by electronic means and a valid report confirming good receipt is generated, on the day of transmission if transmitted before 17.00 hours (recipient’s time) on a Business Day or otherwise at 09.00 hours (recipient’s time) on the first Business Day after transmission.

19.2 Amendments

Any amendments or additions to this Agreement shall be valid and binding only if made in writing signed by both Parties.

19.3 Partial Invalidity

If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable, in any respect, under the law of any relevant jurisdiction, neither the legality, validity nor enforceability of the remaining provisions of this Agreement shall be in any way affected or impaired thereby. The Parties undertake to replace any illegal, invalid or unenforceable provision with a legal, valid and enforceable provision which comes as close as possible to the invalid provision as regards its economic intent.

19.4 Survival of terms

In the event of Ordinary Termination, this Agreement shall remain legally binding on the Parties until, but only in respect of, all rights and obligations already created or existing under this Agreement prior to the date of the Ordinary Termination are fully performed by both Parties.

19.5 Third Party Rights

The Parties do not intend that any third party shall have any rights under or be able to enforce this Agreement and the Parties exclude to the extent permitted under applicable law any such third party rights that might otherwise be implied.

19.6 Entire Agreement

This Agreement consists of pages and Annexes, which contain the entire agreement of the Parties in respect of its subject matter.

19.7 Business Ethics

The Parties undertake, in connection with this Agreement, to comply with all applicable laws and regulations, including without limitation the laws and regulations relating to anti-bribery and corruption. The Parties undertake to adhere to the highest standards of business ethics including the UN Global Compact Principles.

Annex 1: Definitions and Interpretation

1. Definitions

Capitalized terms used in this Agreement shall have the following meanings:

“Accept” means taking, or in case of insufficient delivery: being ready to take, the Energy at the Delivery Point, Acceptance may be effected on behalf of Buyer by another Person;

“Affiliate” means with respect to a Party, any entity controlled, directly or indirectly, by that Party, any entity that controls, directly or indirectly that Party or any Entity directly or indirectly under the common Control of a Party;

“Agreement” means this agreement including its Annexes;

“Alternative Index Price” has the meaning specified in paragraph 12.2 (Index Price Disruption);

“Annual Volume” means agreed minimum annual volume, or in absence thereof the reasonably expected annual volume, established in a commercially reasonable manner;

“Business Day” means a day (other than Saturday or Sunday) on which commercial banks are open for general business at the places where each Party has its registered office;

“Buyer” is the Party identified as such in paragraph 1.1;

“Central European Time” or “CET” means Central European Time and shall include Central European Winter Time and Central European Summer Time as applicable;

“Confidential Information” has the meaning specified in paragraph 15.1 (Confidentiality);

“Contract Quantity” means the amount of Energy transferred in a Scheduling Period;

“Credit Support Documents” means, without limitation, a parent guarantee, bank guarantee, letter of awareness, letter of credit or any credit support agreement;

“Damages” has the meaning specified in paragraph 13.1 (Exclusion of Liability);

“Deliver” means having available for Acceptance at the Delivery Point;

“Delivery Point” is defined in Annex 2;

“Due Date” has the meaning specified in paragraph 6.2 (Payment);

“Early Termination” has the meaning specified in paragraph 11.1 (Termination for Material Reason);

“Early Termination Date” has the meaning specified in paragraph 11.1 (Termination for Material Reason);

“Effective Date” has the meaning set out in Article 5;

“Energy” means the energy that is being sold and purchased under this Agreement;

“Energy Price” has the meaning specified in paragraph 3.1 (Energy Price);

“EU” means the European Community as it exists from time to time;

“Force Majeure” has the meaning specified in paragraph 9.1 (Definition of Force Majeure);

“Interest Rate” has the meaning specified in paragraph 6.5 (Default Interest);

“Index Price Disruption Event” has the meaning specified in paragraph 12.3 (Definition of Index Price Disruption Event);

“Letter of Credit” means an irrevocable standby letter of credit payable on demand in a form and substance satisfactory to the Requesting Party and issued by a financial institution whose Credit Rating is at least the rating ;

“Material Adverse Change” has the meaning specified in paragraph 14.2 (Material Adverse Change);

“Material Reason” has the meaning specified in paragraph 11.2 (Definition of Material Reason);

“New Tax” means any Tax enacted and effective after the Effective Date, or that portion of an existing Tax which constitutes an effective increase (taking effect after the Effective Date) in applicable rates, or extension of any existing Tax to the extent that it is levied on a new or different class of persons as a result of any law, order, rule, regulation, decree or concession or the interpretation thereof by the relevant taxing authority, enacted and effective after the Effective Date;

“Other Tax” means any energy Tax or excise duty but not including Taxes targeted at end users;

“Party” means a party to this Agreement;

“Performance Assurance” has the meaning specified in paragraph 14.1 (Credit Support);

“Price Source” has the meaning specified in paragraph 12.3 (Definition of Index Price Disruption Event);

“Schedule” shall mean those actions necessary for a Party to effect its Delivery and Acceptance obligations, which may include nominating, scheduling, notifying, requesting and confirming to the other Party, their respective designated agents and authorized representatives the scheduled quantity per Scheduling Period:

“Scheduling Period” means the time interval specifically agreed as such, or in absence of such specific agreement, the period for measurement reporting as defined in paragraph 4.2;

“Seller” is the Party identified as such in paragraph 1.1;

Signing Date: the last signing date in paragraph 1.1. is the signing date of this Agreement;

“Subsidy”: subsidy, grant or other financial support to be provided by a public authority or publicly controlled or supervised institution, or out of public means;

“Tax” means any present or future tax, levy, impost, duty, charge, assessment royalty, tariff or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority (whether or not for its benefit) in respect of any payment, nomination and allocation under this Agreement. For the avoidance of doubt, Tax shall exclude; (i) any tax on net income or wealth; (ii) a stamp, registration, documentation or similar tax; and (iii) VAT;

“Taxed Party” has the meaning specified in paragraph 7.5 (Renegotiations for New Tax);

“Terminating Party” has the meaning specified in paragraph 11.1 (Termination for Material Reason);

“Termination Amount” has the meaning specified in paragraph 11.1 (Termination for Material Reason);

“Unit” means the unit of measurement and basis for financial settlement under this Agreement as defined in paragraph 4.2;

“VAT” means any value added tax or any tax analogous thereto but excluding any statutory late payment interest or penalties.

2. Interpretation and Construction

In this Agreement:

Title and Headings. The title and topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular Article.

Derivatives. A capitalized derivative or other variation of a defined term will have a corresponding meaning and be construed accordingly.

Singular and Plural. Reference to the singular includes a reference to the plural and vice versa.

Gender. Reference to any gender includes a reference to all other genders.

Article, paragraph, Annex. Unless otherwise provided, reference to any Article, paragraph or an Annex means an article, paragraph or annex of this Agreement.

Include. The terms “include”, “including”, “in particular”, “for example” or any similar expression shall be construed without limiting the generality of the description preceding such term and are used in an illustrative sense and not a limiting sense.

References to Time. References to time shall be to Central European Time (CET).

‘In writing’ includes through email and other electronic means customarily used in business for information exchange and record keeping.

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Guide to contract template

1. Introduction

1.1 How to use the Template

2. Template key assumptions

3. Relationship between the Template key assumptions and Investment in Energy Coorperation

3.1 Shareholder Agreements

3.2 Implication for the Template

4. Guide on EU laws

Article 1. Parties, Definitions and Scope

1.1 Parties

1.2 Definitions and Construction

1.3 Scope

Article 2. Energy, Profile and Volume

2.1 Sale of Energy

2.2 Profile, Capacity

2.3 Minimum Annual Volume

2.4 3rd Party Network

Article 3. Price

3.1 Energy

3.2 Fixed Monthly Fee:

3.3 Annual Volume Make-up Fee

3.4 Network Fee

Article 4. Schedule, Delivery and Acceptance, Measurement

4.1 Schedule and Delivery and Acceptance

4.2 Measurement

4.3 Seller and Buyer Costs

4.4 Risk and Transfer of Rights of Title

Article 5. Term and Termination

Article 6. Invoicing and Payment

6.1 Invoice

6.2 Payment

6.3 Invoicing and Payment of Measured Quantities

6.4 Default Interest

6.5 Disputed Amounts

Article 7. VAT and Other Taxes, Subsidies

7.1 VAT

7.2 Other Taxes

7.3 Seller’s and Buyer’s Tax Obligation

7.4 New Taxes

7.5 Renegotiations for New Tax

7.6 Renegotiation for Withdrawn Subsidies

Article 8. Remedies for Failure to Deliver and Accept

8.1 Failure to Deliver

8.2 Failure to Accept

8.3 Amounts Payable

Article 9. Force Majeure

9.1 Definition of Force Majeure

9.2 Release From Delivery and Acceptance Obligations

9.3 Notification and Mitigation of Force Majeure

9.4 Effects of Force Majeure on Other Party

Article 10. Suspension of Delivery

Article 11. Termination for Material Reason

11.1 Termination for Material Reason

11.2 Definition of Material Reason

11.3 Calculation of the Termination Amount

Article 12. Index Prices and Alternatives

12.1 Calculation of Indexed Prices

12.2 Index Price Disruption

12.3 Definition of Index Price Disruption Event

Article 13. Limitation of Liability

13.1 Exclusion of Liability

13.2 Consequential Damage and Limitation of Liability

13.3 Intentional Default, Fraud

13.4 Duty to Mitigate Losses

Article 14. Guarantees and Credit Support

14.1 Credit Support

14.2 Material Adverse Change

14.3 Provision of Financial Statements

Article 15. Confidentiality

15.1 Confidentiality Obligation

15.2 Exclusions from Confidential Information:

15.3 Expiration:

Article 16. Assignment

16.1 Prohibition

16.2 Assignment to Affiliates

Article 17. Representations and Warranties