What Is An Energy Tolling Agreement

What Is An Energy Tolling Agreement

Toll agreements are a common feature of the energy industry. Through these agreements, a buyer supplies fuel to an electric generator and in return, the generator will return the electricity to the buyer. Although widely used, the United States has recently found that such a toll agreement, when entered into between companies intending to merge, violates the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (HSR Act), resulting in the imposition of significant financial penalties on the buyer. As gas prices rise and electricity prices rise, more and more companies are turning to toll agreements to finance and share the risk of building new commercial power plants, according to negotiators. Roger D. speaks Wednesday at Power-Gen International. Feldman, a partner and co-chair of the financing and project development group for Bingham Dana LLP, said the basic model seems to be that energy companies that can handle both fuel and electricity risks have the upper hand in this type of project. Project proponents are also subject to various penalties if they do not meet the toll company`s expectations, including the unsuitable construction of the facility. This has become a hot topic during the negotiations.

ORIGINAL EQUIPMENT manufacturers have problems meeting delivery deadlines. There are also problems with malfunctions or poorly assembled components, Feldman said. Many project proponents attempt to transfer some of the risks associated with the procurement of equipment to the contractor. However, a court recently ruled that such a toll agreement, when entered into between companies intending to merge, violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976, resulting in the imposition of significant financial penalties on the buyer. ORLANDO – As gas prices rise and electricity prices rise, more and more companies are turning to toll deals to finance and share the risk of building new commercial power plants, negotiators say. According to the DOJ, agreements that transfer effective ownership and are signed prior to the notification of the HSR and the expiry of the waiting period may, under the HSR Act, be equally equivalent to firearm jumps if entered into while a buyer intends to acquire the target. [5] These types of agreements allow a buyer to take control of an objective and obtain the effects of the merger before regulators have completed their antitrust review. The DOJ therefore argued that the condition sheet and the toll agreement taken together would have resulted in the elimination of Calpine as an independent competitive presence in the market and would have allowed Duke to make all highly competitive decisions for the Osprey facility from the effective date of the toll agreement and well in advance of HSR`s application. Under a toll agreement, the party to the toll delivers the fuel to a power plant operator and receives the electricity in the form of a product, which it then markets. Feldman said these deals began an important cog in the distribution of risks in the industry and are based on a different economy than the original independent power generation projects. In the restructuring of power purchase agreements and the calculation of return on equity, the volatility value represents an effective buffer for the cash reserves needed to cover debt servicing.

In August 2014, Duke Energy Corporation (Duke) and Calpine Corporation (Calpine), a competing wholesale electricity vendor in Florida, agreed to purchase the Osprey Energy Center (Osprey), a combined gas-gas-natural gas plant in Florida, in Calpine. The structure of the proposed transaction included a toll agreement that gave Duke responsibility for determining the amount of electricity to be generated at Osprey and purchasing the fuel needed to generate that electricity […].


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