25.2 Substitute Waste55

25.2.1 By no later than the date which shall be [ ] Business Days before the [Planned Readiness Date] the Contractor shall submit to the Authority the Substitute Waste Plan for review under the Review Procedure.

25.2.2 The Contractor shall submit to the Authority for review under the Review Procedure within [10 Business Days of the beginning of each Contract Year following the Planned Readiness Date] an update of the Substitute Waste Plan56 to reflect the Contractor's proposals for sources of Substitute Waste.

25.2.3 In the event that paragraph 4.3 of Schedule 4 (Payment Mechanism) applies or in the reasonable opinion of the Authority is likely to apply then the Authority shall at any time thereafter be entitled to notify the Contractor ("Substitute Waste Notice"):

(a) that it considers Contract Waste in the relevant Contract Year will fall below the Minimum Tonnage for such Contract Year;

(b) the amount by which it considers there will be shortfall between the amount of Contract Waste being provided and the Minimum Tonnage ("Contract Waste Shortfall"); and

25.2.4 Where the Contractor receives a Substitute Waste Notice the Contractor shall implement the Substitute Waste Plan and use (and shall procure that its Operating Sub-Contractor shall use) reasonable endeavours to secure Substitute Waste for the Contract Waste Shortfall for the Shortfall Period at a price which is demonstrated to the Authority's satisfaction as being reasonably obtainable on market and arm's length terms for contracts of the nature and tenor proposed provided that the Contractor shall only be obliged to source Substitute Waste from creditworthy entities and that is of a composition the same or similar to Contract Waste. For the avoidance of doubt, such waste (if any) accepted by the Contractor at the Facility shall not be deemed to be Substitute Waste until Third Party Waste has been delivered in an amount equal to the difference between the Minimum Tonnage and the tonnages guaranteed in the Base Case. 57 For the purposes of this Clause 25.2.4, "reasonable endeavours" shall mean the Contractor (and the Operating Sub-Contractor) shall act as a prudent commercial waste operator (in accordance with the principles, inter alia, of the Substitute Waste Plan) would act in order to secure Waste for its own facility having the capability of the Facility. 58

25.2.5 In the event that the Contractor secures Substitute Waste 59 then:

(a) to the extent that the Substitute Waste Price is equal to or less than the Base Price per Tonne for [Base Price Band 1] then the Authority shall be entitled to and the Contractor shall pay an amount equal to the Substitute Waste Amount within [ ] Business Days after the end of each Contract Month in respect of the Shortfall Period;

(b) to the extent that the Substitute Waste Price is in excess of the Base Price per Tonne for [Band Price Band 1] then:

(i) the Authority shall be entitled to and the Contractor shall pay an amount equal to the number of tonnes of Substitute Waste provided to the Contractor in each Contract Month multiplied by Base Price per Tonne for [Band Price Band 1] within [ ] Business Days after the end of each Contract Month in respect of the Shortfall Period; and

(ii) the Authority shall be entitled and the Contractor shall pay an amount equal to the number of tonnes of Substitute Waste provided to the Contractor in each Contract Month multiplied by the Substitute Waste Price less the Base Price per Tonne for [Band Price Band 1] multiplied by [ %] within [ ] Business Days after the end of each Contract Month in respect of the Shortfall Period 60.

25.2.6 In the event that the Contractor has not complied with its obligations pursuant to Clause 25.2.4 to use reasonable endeavours to secure Substitute Waste then the Minimum Tonnage shall be reduced by an amount equal to the amount of Third Party Waste the Contractor would have secured if it had complied with its obligation and the provisions of paragraph 4.2 of Schedule 4 (Payment Mechanism) shall apply accordingly.

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55 It is recognised that the ability to comply with the Substitute Waste provisions will be driven by a number of factors such as the Contractor's ability to source Third Party Waste through existing business arrangements, the level of excess capacity proposed and the extent to which such capacity has subsidised the Unitary Charge proposed to the Authority.

56 The Substitute Waste Plan should not be a series of steps but principles commensurate with the Contractor's own efforts to secure Third Party Waste.

57 The Payment Mechanism should also ensure that excess Third Party Income is applied to refund the Authority before sharing is calculated if there is no Substitute Waste or the Substitute Waste Amount is less than the Base Price per Tonne multiplied by the Contract Waste Shortfall.

58 Please note Clause 25.2.4 is the reference for limb (b) for BTn in paragraph 4.2 of Schedule 4 (Payment Mechanism), namely the mechanism to reduce the Minimum Tonnage.

59 Please note this calculation is required because under paragraph 4.2 of Schedule 4 the Contractor will receive the amount of the Minimum Tonnage.

60 In order to incentivise the Contractor to secure the best deal possible for the substitute waste, the Contractor shall be entitled to share in the amount of the gate fee which is in excess of the gate fee for the minimum tonnage. Bidders should bid back the figure in square brackets – namely the amount of the share of the gate fee for the Authority. This sharing may also be subject to Authority claw back mechanism similar to other Third Party Income.