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IBRD Emission Reductions Purchase Agreement and General Conditions

IBRD Emission Reductions Purchase Agreement and General Conditions. BioCarbon Fund Training Seminar September 12, 2005 The World Bank, Washington, DC. Project Structures. IBRD. IBRD. IBRD. Intermediary. Intermediary. Sponsor. Sub-S. Sub-S. Sub-S. Sub-S. Sub-S. Sub-S. Sub-S.

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IBRD Emission Reductions Purchase Agreement and General Conditions

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  1. IBRD Emission Reductions Purchase Agreement and General Conditions BioCarbon Fund Training Seminar September 12, 2005 The World Bank, Washington, DC

  2. Project Structures IBRD IBRD IBRD Intermediary Intermediary Sponsor Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S Sub-S

  3. BioCF Kyoto risk Registration risk Approval Eligibility, compliance Baseline Baseline risk (registration and renewal) Issuance of CERs Project related risk Maintenance/permanence of ERs Project Sponsor Host Country risk Eligibility (forest definition) Project related risk Financial Compliance with Host Country laws (permits etc) Operation, management, maintenance Production of ERs Maintenance/permanence of ERs ERPA and GC Structure Risk Allocation

  4. Kyoto Risk Letter of no objection HC ratification, HC LoA and forest definition condition precedent to ERPA Baseline risk mitigation Conservative Baseline Annual purchase amount no more than 80% of expected amount Communication rights with EB Project Risk Payment on delivery Seniority Purchase 1st ERs “Sweeping” Sharing excess ERs – performance incentive Communication rights with EB Option – Fund management risk mitigation tool ERPA and GC Structure Risk Mitigation

  5. Permanence Risk Permanence strategy – fire, pest, illegal logging, weather mitigation “Remainder”/Reserve Pool “self insurance” tCER vs lCER may affect ERUs? “Hold Back” – Commercially possible? Real value? ERPA and GC Structure Risk Mitigation

  6. ERPA and GC Terms Purpose • Record the agreement • Identify responsibilities • Trustee: payment, verification, communication • Sponsor: operation of the project, implementation of the MP, creation, delivery and maintenance of ERs • Establish rights • Trustee: receive ERs, option, default remedies • Sponsor: receive $, default remedies • Manage risks – risk allocation • ERPA – project (and Fund) specific negotiable terms • General Conditions – standard, non-negotiable purchase and sale terms

  7. ERPA and GC Terms Key Provisions • What is being purchased – Verified ER • How it is delivered – transfer form • Payment – on delivery, less costs (capped) and holdback (if applicable) • Rights of communication • Governing law

  8. ERPA and GC Terms Key Provisions • Defaults • Unintentional • Transfer failure – no penalty for under delivery; decrease contract amount; increase option • Permanence failure – transfer “Remainder ERs” or it will become a “Transfer Failure”; not pay the Hold Back • Others – right to terminate and recover outstanding costs • Intentional • Right to recover costs and damages; termination

  9. ERPA and GC Any Questions?

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