UK: Updated NBP And Beach Terms And Conditions: Key Differences Between The Old Terms And The New 2015 Terms

For many years the Short Term Flat NBP Trading Terms and Conditions 1997 (the "NBP 1997 Terms") have been the standard terms for trading gas on the UK's national transmission system for natural gas (the "UK NTS") and the Standard Terms and Conditions for the Sale and Purchase of Natural Gas for UK Short Term Deliveries at the Beach 2000 (the "Beach 2000 Terms") have been the standard terms for trading gas for delivery at entry points to the UK NTS.

While both sets of terms are used on a stand-alone basis, the NBP 1997 Terms also set out the standard physical terms used for trading gas on the UK NTS under other documentation. For example, the ISDA NBP Annex and EFET NBP Appendix are both based on the NBP 1997 Terms and enable the trading of gas on the UK NTS under, respectively, the ISDA Master Agreement and the EFET General Agreement for Natural Gas. Both the ISDA and EFET documents seek to minimise basis risk as against the NBP 1997 Terms.

Until recent weeks, the NBP 1997 Terms and the Beach 2000 Terms have each been unchanged since their original publication. From 1 October 2015, the UK's downstream gas Day is being brought into line with that prevalent in continental Europe and both sets of terms required amendment to reflect this change. As a result, updated versions of both the NBP 1997 Terms and the Beach 2000 Terms have now been published. Various companies active in the UK gas market have been involved in drafting and agreeing the new Short Term Flat NBP Trading Terms and Conditions 2015 (the "NBP 2015 Terms") and Standard Terms and Conditions for the Sale and Purchase of Natural Gas for UK Short Term Deliveries at the Beach Sub-Terminals using a 0500 hours to 0500 hours Gas Day 2015 (5:5) (the "Beach 2015 Terms").

While certain amendments that have been made to the new NBP 2015 Terms and Beach 2015 Terms stem from the changes to the United Kingdom downstream gas Day, the opportunity has been taken to update each set of terms in other ways, although the NBP 2015 and Beach 2015 (like their predecessors) each essentially remain structured as a set of standard terms applying to individual transactions rather than as a single master agreement governing all transactions of a particular type. This Client Alert highlights the key changes.

NBP 2015 Terms As a result of the changes to the United Kingdom downstream gas Day, under the NBP 2015 Terms, the definition of gas "Day" has been amended such that it has the meaning specified in the Uniform Network Code, being "the period beginning at 0500 hours on a day and ending at 0500 hours on the following day" (effective 1 October 2015). This replaces references to 0600 hours in the previous sets of terms. In addition, an "Accurate Trade Nomination" under the new NBP 2015 Terms is required to be made by a party before the time which is two hours prior to the end of the gas Day (which as at 1 October 2015 will be 0300 hours).

Another key difference in the NBP 2015 Terms is the approach to termination and the calculation of the termination amount. Under the original NBP 1997 Terms, the non-defaulting party could terminate an individual transaction following the other party becoming subject to one of the default events specified in the NBP 1997 Terms. Following the termination, the non-defaulting party was required to calculate a termination payment based on a calculation of the market value versus contract value of the transaction. Under the revised clause 10.1 of the NBP 2015 Terms, the non-defaulting party may terminate all (but not some only) outstanding transactions, where there is an insolvency event, a misrepresentation or a material adverse change in the financial standing of the other party. Under the revised clause 10.2, there remains the ability to terminate affected transactions only where there is a failure to pay, a material breach or a failure to provide or maintain security (where such events have not been remedied). The new clause 10.4 introduces a "Termination Amount" concept, being an amount equal to the non-defaulting party's "Loss" in respect of the terminated transaction plus any reasonable and documented out of pocket expenses, third party costs and fees incurred in terminating such transaction. Following the termination of all transactions pursuant to clause 10, the "Termination Amount" in respect of each transaction (together with all other amounts due and payable at the termination date between the parties in respect of such transactions), shall be netted to produce a single net amount which is to be paid by the party owing such net amount to the other party.

Other notable changes to the NBP 2015 Terms include:

  • Revised definition of "Force Majeure" additionally to include an event or circumstance beyond the reasonable control of a Party which causes National Grid to suspend or terminate processing of NBP Trades
  • New definition of "LIBOR", being "the daily Sterling one month mean interbank lending rate (expressed as a percentage per annum) as compiled by the Bank of England and quoted on its website on the due date"
  • Reference in the terms to the ability for parties to enter into confirmations by means of an electronic matching process
  • Deletion of the old (and seldom used) option "B" in clauses 4.2 and 4.3 in respect of the calculation of the amount payable for a breach of trade nomination obligations in clause 4.1 by Seller or Buyer
  • Under the revised clause 6.4, if the due date for payment is not a "Payment Banking Day" then payment shall be made on the immediately following Payment Banking Day (rather than the previous Banking Day as in the NBP 1997 Terms)
  • Introduction of the reference to VAT reverse charge in clause 5.4
  • Interest on unpaid amounts payable at a rate of LIBOR plus 3%; and
  • Deletion of ability of a party to assign to an affiliate without written consent from the other party.

Beach 2000 Terms As per the NBP 2015 terms, the definition of gas "Day" in the Beach 2015 Terms has been amended to being the period beginning at 0500 hours on a day and ending at 0500 hours on the following day. The definitions of "month" and "week" have also been amended accordingly. However, due to concerns over expense and maintenance, not all of the UK Beach sub-terminals will be changing the gas "Day" to 0500 hours to 0500 hours, and many will remain as being 0600 to 0600 hours. As such, the revised Beach 2015 Terms will only apply to the Beach Sub-Terminals using a 0500 hours to 0500 hours gas "Day".

In the same manner as the NBP 2015 Terms, the termination and calculation of termination amount language in the new Beach 2015 Terms has been amended. Under clause 15 of the Beach 2015 Terms, clause 15.1 introduces the requirement to terminate all (but not some only) of the transactions where an event under clause 15.1.1 to 15.1.6 occurs. Clause 15.3 introduces the "Termination Amount" language being an amount equal to the non-defaulting party's "Loss" in respect of the terminated transaction plus any reasonable and documented out of pocket expenses, third party costs and fees incurred in terminating such transaction, as per the NBP 2015 terms.

Other notable changes to the Beach 2015 Terms include:

  • New definition of "LIBOR", as per the NBP 2015 Terms (as above)
  • Amendment to clause 7.2.1 (in respect of Shortfall Gas), meaning that, in respect of Shortfall Gas arising, the amount calculated under clause 7.2.1 (payable by Seller to Buyer (where positive)) shall be the sum of (SMBP-CP) x SG, where "SMBP" is the System Marginal Buy Price for the Day in question, "CP" is the Contract Price and "SG" is the quantity of Shortfall Gas arising for the Day in question
  • Notice to be given in clause 7.2.2 shall be no later than 1600 hours (rather than 1700 hours in the Beach 2000 Terms)
  • Under the revised clause 8.5, if the due date for payment is not a "Payment Banking Day" then payment shall be made on the immediately following Payment Banking Day
  • Introduction of the reference to VAT reverse charge in clause 8.12
  • Introduction of ability to transmit invoices by email
  • Deletion of ability of a party to assign to an affiliate without written consent from the other party; and
  • Deletion of rounding to two decimal places in old clause 14.

Along with the new NBP 2015 Terms and the Beach 2015 Terms, there have been published suggested letter agreements for implementing the new terms (the "Change Letters"). The Change Letters are drafted to take effect from 0500 hours (London time) on 1 October 2015 and under the terms of the draft Change Letters, all transactions after the later of 1 October 2015 or the date the Change Letter is entered into, shall be governed by and subject to the relevant 2015 terms. In respect of existing transactions, any transaction entered into on the old terms for a supply period commencing on or after 0500 hours (London time) on 1 October 2015 shall instead be governed by and subject to the 2015 terms. In respect of the Beach Change Letter, a list of the "5:5 Delivery Points" will need to be annexed to the Change Letter. It is acknowledged in the draft Change Letters that the gas "Day" that starts at 0600 hours on 30 September 2015 and ends at 0500 hours on 1 October 2015 consists of only 23 hours but there will be no change to the "Daily Quantity" for any transaction for that gas "Day" (which shall each be delivered in 23 hours).

We understand that both EFET and ISDA legal committees will be working towards drafting documentation relating to the new NBP 2015 Terms and the Beach 2015 Terms and the impact upon any relevant appendices or annexes.

What to do next? For those trading under the NBP 2015 Terms and the Beach 2015 Terms on a stand-alone basis, the Change Letters can be executed in order to bring the terms governing underlying transactions up-to-date. In respect of trades executed under an ISDA or EFET master agreement, and in respect of future trading under these documents, as indicated above, market participants are likely to wait for the proposed responses from the respective organisations in order to see what will be the next steps and required action. It is also worth noting that for those trading under 'NBP Amending Agreements' or similar (i.e. bespoke agreements which use the NBP 1997 Terms but amend certain clauses), such documents should be reviewed in order to assess how to incorporate the updated NBP 2015 Terms and whether the amendments made remain appropriate.

We will provide a further update when the associated ISDA and EFET documentation is published.

Read more about The 2015 NBP Terms and the 2015 Beach Terms (and the Change Letters).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.