Capacity guarantees and shortfalls Sample Clauses

Capacity guarantees and shortfalls. Aurizon Network queries why the QCA has determined that a capacity guarantee is required to be adopted for SUFA projects, given the QCA’s view that the primary objective of SUFA is to be a financing tool24. In its 2014 report to the QCA, Xxxxx Xxxxxx states that Access Seekers have expectations about capacity outcomes and the remedy of capacity shortfalls, whereas third-party funders (whether equity or debt) will have a different perspective. The third-party funders’ primary concern, in Xxxxx Xxxxxx’x view, will be that capital expenditure  is included in the RAB and therefore results in the earning of regulated returns; and  remains within reasonable limits (i.e. the size of the third-party funding requirement does not change materially)25. Capacity outcomes are not relevant to either of these concerns. Investors in a SUFA project will receive the same return from their investment whether or not the expected capacity is delivered, since their return is dependent on the amount of RAB inclusion, which will not be affected by capacity outcomes. The introduction of a capacity guarantee is therefore not aligned with the primary objective of SUFA. Aurizon Network notes the QCA’s observation in the DD that Xxxxx Xxxxxx’x advice has highlighted that: ‘the more certainty there is surrounding construction and capacity delivered, the more attractive SUFA will become to third party financiers’26 (emphasis added). 24DD, section 5, introductory text, page 23 25Grant Xxxxxx discussion paper for the QCA, 4 March 2014, section 3.1, principle (v), pages 3 - 4 26DD, section 5, introductory text, page 23 Since the capacity outcome is unrelated to investment return, it is unclear why a rational third party financier would take this view. Aurizon Network would welcome an opportunity to gain a deeper understanding of the QCA’s thinking as to:  why greater certainty over capacity outcomes would make SUFA more attractive to third party financiers; and  how a capacity guarantee is consistent with the primary objective of SUFA. Aurizon Network notes that the capacity treatment would impose risk on Aurizon Network, as it would be required to fund capacity shortfalls and/or pay an ongoing shortfall rebate to Access Seekers affected by the shortfall. Aurizon Network is not yet clear how it is proposed that Aurizon Network would be provided with an appropriate reward for the assumption of this risk. Pricing of capacity shortfall risk falls outside the scope of the CA, since it expr...