The EFET agreement is a compensation-master contract that can cover an unlimited number of trades defined as “individual contracts.” Each contract includes the economic conditions of each trade (for example. B start and end date, delivery plans, contract capacity and quantity, price and total cost). EFET has commissioned legal opinions on the applicability of general power and gas agreements for many European countries, which are available to EFET members. The applicability of the general terms of sale of EFET in each country may vary according to local laws and customs. A list of countries and the cost of obtaining such legal advice are available on the EFET website (www.efet.org). EfET not only promotes regulatory measures to allow the free flow of electricity and gas in a balanced risk environment, but has also developed standard legislation for energy trade. Derivatives Documentation Limited thanks our guest blogger Ernst van den Broek, founder of Trading Lawyers (www.tradinglawyers.com), for transmitting this useful synthesis of EFET agreements. Ernst has more than 15 years of experience in the financial sector and regularly negotiates and offers training on ISDA master contracts, CSAs, GMRAs, GMSLAs and EFETs. These standardized management contracts for the supply and receipt of electricity or natural gas offer a structure similar to that of master`s contracts for OVER-the-counter derivatives published by the International Swaps and Derivatives Association Inc. (ISDA). In any event, the general agreement describes very early on the concept of the single agreement on the document (section 1.1), which means that all transactions depend on each other and that a failure of a transaction is considered a late payment for all transactions covered by the agreement.
The agreements and the EFET library associated with the complementary documentation are currently the sectoral standards used throughout Europe for the trade in physical performance and gas. There are also country-specific and trade-specific annexes, developed by the EFET to complement the terms of the general agreements, including: EFET has published two main documents: the EFET power agreements (i.e. electricity) and gas, which are standard contracts used by distributors to increase liquidity in the wholesale market by providing standardised conditions for underlying transactions. Usually, buyers and sellers who use the EFET agreement develop their own “home view” on the terms of their election paper, based on their market position. One of the most important issues to consider in developing such a position and in negotiations with counterparties is the credit risk and credit support that the parties are willing to accept or demand. Parties who do not have a credit or guarantee of a parent company are generally required to use commercial banks. Changes to the standard text should be made to the election newspaper and not to the main part of the general agreement. EFET – the European Association of Energy Traders – has approved a number of documents.
The general agreement contains a number of standard conditions for delivery conditions, payments, delivery defects and completion. These conditions apply to any underlying transaction. EfET contracts are generally processed by physical delivery different from the normal method of billing goods transactions under an ISDA management contract. Note that these documents are also available on the EFET website. The main benefits of using these documents are a reduction in trading time when few or no changes are made and the standardization of documentation in this market. The general agreement consists of 23 sections and an electoral ballot (similar to an ISDA master-convention plan) in which the agreed complements and amendments to this general agreement are made. The European Federation of Energy Traders (EFET) was established in 1999 and brings together more than 100 energy distributors in 27 European countries active in the wholesale electricity and gas market.