Checklist

The provision provides for the estimated environmental liability

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Certainty of amount to be received and immediacy of access

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Payable on demand

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Provider is authorised to provide that provision in the jurisdiction

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Provider has sufficient financial strength

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Supplementary cover for intentional acts or excess

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Supplementary cover due to illiquidity of the asset

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Supplementary cover while the provision is being accumulated

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Protection against insolvency or dissolution of the operator – first ranking charge

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Protection against insolvency or dissolution of the operator – right of regulator to call in the provision

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Parent has corporate legal capacity to enter into the agreement and is not reliant on the financial performance of the operator

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Ring fencing of cover for environmental liabilities

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Protection from investment risk

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Structure and management and governance of the provision

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Protection from devaluation

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Protection from inflation

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Commercial appeal, valuation and free from other charges or encumbrances

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Protection of the asset

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Cover in the case of insolvency/termination

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Legally binding financial provision document

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Details of the amount of cover and the cost profile

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Evidence of the authorisation of the financial institution or parent to provide the financial provision

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Evidence of membership

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Evidence of financial strength

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Evidence of supplementary cover for gaps in primary cover

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Evidence of valuation

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Evidence of insurance to protect the asset

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Key things to check for documentation specifications

Standard template or standard worded clauses

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Specification that regulator may make a demand in the case of non-renewal

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Details of cover in the case of insolvency or dissolution

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Specification of the triggering event, including insolvency/termination

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Specify who can make a demand and who payments are made to in the case of the triggering event.

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Ensure exclusions do not compromise access to the financial provision

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Specification of requirements in relation to cancellation, expiration and replacement.

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Specification that the provision is irrevocable, non-transferable and non-assignable

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Specification of requirements in relation to inflationary adjustment

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Specification of how the guarantee can be drawn down with reference to the cost profile of the operation

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Specification of reporting requirements

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Specification of joining criteria

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Specification of the management, structure and governance of the provision

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Triggering events

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Cancellation, expiration, intent to renew, renewal or non-renewal

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Developments that affect financial strength or ability to ensure provision

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Annual audited financial statements

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Annual inflationary adjustments

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Payments in

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Progress reports on cost profile and restoration etc.

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Withdrawals or demands

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Performance of institution or fund or asset value

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Maintenance of membership

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Breach of membership criteria

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Use of the asset to secure other obligations

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Ongoing insurance to protect the asset

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Annual valuation

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Expiry dates

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Environmental compliance

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The level of liability against the value of the financial provision

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Key things to check on enforcement

Making a demand on the financial provision if the triggering event arises

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Ensure financial provision is maintained/renewed

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Ensure membership of a mutual fund/pool is maintained

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Ensure financial provision is increased in line with increasing liability

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Ensure scheduled payments into cash deposits are made

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Act on declining financial health of the operator or parent or declining value of the asset or negative performance of institution or fund

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Act on failure to provide required reports

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