Source: http://otcguide.click2cms.com.au/Updates-History/6-2-3-2-sample-confirmation-for-price-cap-electricity-commodity-contracts-for-cash-settlement-with-commentary
Timestamp: 2020-01-19 10:54:46
Document Index: 195110669

Matched Legal Cases: ['art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5']

> 6.2.3.2 Sample Confirmation for price cap electricity commodity contracts for cash settlement with c
6.2.3.2 Sample Confirmation for price cap electricity commodity contracts for cash settlement with c
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Following is a sample confirmation for price cap electricity commodity contracts for cash settlement, with commentary included in footnotes to the confirmation.
Sample Confirmation for price cap electricity commodity contracts for cash settlement. (Paragraph (4) of June 2006 Australian Electricity Addendum contains some definitions relevant to this type of contract.)
Commodity price cap contract - cash-settled
Termination Date: [5]
Calculation Period(s): [6] Each period of 30 minutes set out in the third column of the attachment.
[Business Days:] [8]
Fixed Amount Details:
Fixed Price Payer: [9] Party [ ]
[Fixed Price: [10] For each Calculation Period, the fixed price set out in the attachment for that period.]
[Fixed Price Payer Payment Date(s):392 [subject to adjustment in accordance with the Following/ Modified Following/ Nearest/ Preceding] Business Day Convention]
[Fixed Amount:] 392
Floating Amount Details:
Floating Price Payer:[11] Party [ ]
Cap Price:[12] For each Calculation Period, the cap price set out in the attachment for that period.
[Commodity Reference Price: [13]
Price Source: NEMMCO]
Specified Price: The spot price as at the (#) [14] regional reference node as determined under the National Rules][15]
[Commodity Reference Price:395 Spot Price
Regional Reference Node: 396][16]
[18][Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation enclosed for that purpose and returning it to us.
400[Please confirm that the foregoing correctly sets forth the terms of our agreement by sending us a Confirmation substantially the same as this Confirmation or by sending us a Confirmation in the following terms:
Fixed Price392
(A$/MWh)
[1] Participants need not include this paragraph if they have agreed the meaning of Pricing Date in part 5 of the Schedule (see the second footnote in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement").
Participants may provide for different Notional Quantities for different types of day (eg Mondays, weekdays (other than Mondays and public holidays), Saturdays, Sundays and public holidays) by incorporating different columns of Notional Quantities for each type of day. See the sixth footnote in 3.8.11 "Sample Confirmation for price cap electricity commodity contracts for cash settlement with commentary".
[7] Insert Settlement Date (ie the date when the net amount due must be actually paid). Participants need not include this item if they have agreed the meaning of Settlement Date in part 5 of the schedule (see the twelfth footnote in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement").
Another alternative is that participants may agree (particularly if either party is a participant in the physical electricity market) that the Settlement Date should correspond to the dates for settlement under the National Rules from time to time. To do this:
• in Part 5 of the Schedule to the ISDA Master Agreement add the following paragraph (this is the same clause that is recommended at the twelfth footnote in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement"):
"For each Calculation Period, the Settlement Date is the day upon which the party that is obliged to pay a Floating Amount or a Cash Settlement Amount calculated by reference to a Floating Price determined under the National Rules (or, if there are two such parties, Party [A/B]), if it were a market participant (as defined in the National Rules) under the National Rules, would be obliged to make a payment under the National Code if a statement issued under the National Rules showed that that party owed an amount in respect of electricity bought by it in that Calculation Period."
"For each Calculation Period, the day upon which the party that is obliged to pay a Floating Amount calculated by reference to a Floating Price determined under the National Rules, if it were a market participant (as defined in the National Rules) under the National Rules, would be obliged to make a payment under the National Rules if a statement issued under the National Rules showed that that party owed an amount in respect of electricity bought by it in that Calculation Period."
[9] Insert correct party description.
[10] See Section 5 of the 2005 ISDA Commodity Definitions for the meaning of these terms. This is part of the calculation of the fee or premium agreed to be paid by the purchaser for the price cap. That fee may be a lump sum or may be paid by instalments (such as for each Calculation Period).
If a lump sum is to be paid, participants need to include only the Fixed Amount and the Fixed Price Payer Payment Date(s). Under Section 3.3 of the 2005 ISDA Commodity Definitions, the Fixed Price Payer Payment Date is subject to adjustment in accordance with the Following Business Day Convention unless otherwise specified. Participants can specify a different Business Day Convention to apply by including the appropriate bracketed language next to Fixed Price Payment Date(s). With a lump sum it will not be necessary to specify the Fixed Price, and the column for Fixed Price in the attachment should be deleted or left blank.
If the fee or premium is to be paid by instalments on each Settlement Date calculated by reference to each Calculation Period, the Fixed Price is the price for each MWh agreed on the Trade Date. It will not be necessary to specify a Fixed Price Payer Payment Date(s) or a Fixed Amount.
Participants may cover different types of day (eg Mondays, weekdays (other than Mondays and public holidays), Saturdays, Sundays and public holidays) by incorporating different columns of Fixed Prices for each type of day, and by substituting the following next to "Fixed Price:"
"For each Calculation Period set out in the third column of the attachment that occurs during a type of day specified in a column of the attachment, the fixed price specified in the column for that type of day for that Calculation Period."
[11] Insert correct party description.
[12] See Section 6.2 of the 2005 ISDA Commodity Definitions. It is the cap on the Floating Price for each MWh agreed on the Trade Date.
Participants may provide different cap prices for different types of days (such as where participants provide for different Fixed Prices for different types of days (and different months)) by incorporating different columns of cap prices in the attachment for each such day. Alternatively, participants could specify the same figure as the cap price for all Calculation Periods and omit the relevant column from the attachment.
[13] This is the machinery to calculate the price per unit of Commodity prevailing on the Pricing Date. It is often otherwise referred to in the financial markets as "reference price".
The Floating Prices for electricity expressly defined in Sub-Annex A of the 2005 Commodity Definitions are not in common use in the Australian market The Floating Price or Floating Amount can be determined in a number of other ways. Some examples are:
- participants could create a Floating Price by specifying a Commodity, a Unit, a Price Source and a Specified Price;
[14] Insert location of regional reference node.
[15] Delete all the components of the Commodity Reference Price if participants use the definition of Spot Price in paragraph 4(b) of the June 2006 Australian Electricity Addendum.
[16] Delete if participants create a Floating Price by specifying a Commodity, a Unit, a Price Source and a Specified Price.
[17] Care! This Confirmation has been prepared on the following assumptions:
(a) Market Disruption Events, Additional Market Disruption Events, Disruption Fallbacks. All these issues have been pre-agreed and dealt with in part 5 of the schedule. See the third to the tenth footnotes in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement". If this is not the case, participants must cover these issues in their Confirmation. *This is very important*
(b) GST. This issue, if a concern to the parties, has been pre-agreed and dealt with in part 5 of the schedule. See the fifteenth footnote in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement". If this is not the case, the issue could be dealt with by including the paragraph in footnote fifteenth in 3.8.5 "Recommended clauses for part 5 of the Schedule to the ISDA Master Agreement".
[18] Two forms of closing have been included. The first is for when the counterparty will be asked to return the Confirmation with their agreement to the terms endorsed on it. The second is for when the counterparty will send their own Confirmation or a Confirmation note referring to the other party's Confirmation. It is optional which approach participants adopt.