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Consultation Paper on the Design and Structure of Long Term Energy Service Agreements Awarded Under the Electricity Infrastructure Roadmap

On 9 August 2021, the Department of Planning, Industry and Environment released a consultation paper outlining the proposed design concepts and structural elements of long term energy service agreements (LTSEA).

The Department is accepting written submissions, addressing one or more of the key terms and conditions, and the design structure in general, of the proposed long term energy service agreements by 10 September 2021. The proposed types of LTSEAs are as follows:

a. Generation;

b. Long duration storage.

The terms and conditions for each proposed LTSEA are discussed broadly under the following two categories:

a. Price terms – the structural and commercial features that directly impact the calculation of settlement cashflows such as the derivative put option structure, fixed price, option length, repayment mechanism, and contract volume and shape;

b. Legal and project terms – terms that impact the weighted average cost of capital, risk allocation and project development such as pre-financial close interim milestones, conditions precedent, sunset dates, bonding, sharing of project cost reductions and change in law.

The Department is also keen to hear views on key considerations on the firming LTESA design which is not considered in detail in the Consultation Paper. 

We at Hamilton Locke are already engaged with our clients in relation to this inquiry and we will be assisting in preparing submissions to the Department in the coming weeks. We are also very interested to hear from other stakeholders in the sector on any of the items raised above. Please get in touch with our Energy, Infrastructure and Resources lead, Matt Baumgurtel, should you wish to discuss.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, construction, including the buying and selling of development and operating projects.

Matt Baumgurtel leads the New Energy sector team at Hamilton Locke which specialises in renewable energy, energy storage and hydrogen projects and transactions as part of the firm’s Energy, Infrastructure and Resources practice.

Andrew Smith is a lawyer in the Hamilton Locke Energy Infrastructure and Resources team and specializes in renewable energy projects including wind, solar, energy storage and hydrogen.