The MRRT will have a significant impact on pricing of projects and security positions. Financiers and funds will need to be aware of:
- core mining project interest identification provisions, particularly in the case of joint venture arrangements, passive JV investors, farm-in arrangements and offtake arrangements
- concessions that certain miners may claim that have the impact of eliminating allstarting base value and MRRT deductions, impacting on value for funding and security enforcement
- transfer of MRRT loss provisions and impact on project valuation
- treatment of expenses, in particular, financing expenses, lease expenditure, hire purchase fees, hedging expenses and security deposits
- ensuring tax sharing agreements are appropriately updated to remove the risk of joint and several liability for tax liability across entities within a MRRT consolidated group
- issues for financing M&A activity.
Financiers and funds will also need to consider the impact of carbon pricing on projects and investment, particularly:
- identifying entities that will be required to surrender emissions units in respect of emitting activity, including through operator and control provisions
- understanding liability criteria and impacts of failure to comply
- understanding carbon price path
- anticipating development of derivatives following the fixed price period.