If you are an interested bidder and have a question that is not addressed below or in other sections of the PAF website, please e-mail it to PAF_Secretariat@worldbank.org and it will be added here.
This page is for information only. Please see the disclaimer.
| B. Auction mechanics (Including price per ER) | |
|---|---|
| Question B.1 | Must the bidder communicate which projects he/she intends to source the emission reductions from at the time of the auction? |
| No, the bidder does not have to inform the PAF of which projects are the source of the emission reductions at the time of the auction. It is at the time of redemption that the put option owner must identify the projects and demonstrate that these projects meet the eligibility criteria. | |
| Question B.2 | What is the envisaged floor price? |
| The floor price for ERs (also known as the guaranteed price at which the PAF will purchase ERs, or the “strike price” of the put options) will be determined by the auction. This is different from the “reserve” price which in the descending clock auction is the auction’s starting point. For the first auction, the auction will start at US$8/CER. More information can be found on the Auction Parameters page. | |
| Question B.3 | What is the minimum and maximum number of put options that I can bid for? |
| The minimum and maximum number of put options a bidder can bid for can be found in the Auction Rules and is also summarized on the Auction Parameters page. | |
| Question B.4 | What is the premium that I have to pay if I win the auction, how will it be determined and do it get it refunded if I do not exercise the put options? |
| The premium is the cost of purchasing the put option. It will be paid right after the auction on a per carbon credit basis. The premium for the first auction has been announced and will be $0.30 per ton (link). As an example, buying a put option redeemable with 2,000 CERs will cost $600. The premium is not refundable should the options not be exercised, however the options are tradable. The premium amount is subject to change in future auctions. More details on the premium can be found in the Auction Rules. | |
| Question B.5 | What is the size of the deposit, do I get it back if I do not win, and when will this be announced? |
| The deposit will be refunded to those who do not win the auction. The deposit will correspond to the maximum volume of put options the bidder seeks to purchase. The size of the deposit is 20% of the premium and the due date of the deposit is July 7, 2015. Interested parties should consult the Auction Rules for more details. | |
| Question B.6 | Will the PAF accept only cash as bid deposit? |
| Yes, the PAF will only accept cash for the bid deposit. The requirements for the deposit are included in the Bidder Application Package that interested parties must request by sending an e-mail to the PAF_Secretariat@worldbank.org. The email must contain disclaimer language cut and pasted from this webpage. | |
| Question B.7 | Who can participate in the auction? |
| A wide variety of entities, public or private, direct and intermediary can participate in the auction. The World Bank Group will conduct an integrity due diligence (IDD) review of bidders that come forward to register before they are cleared to participate in the auction. Bidders will have to complete the due diligence questionnaire as part of the application process. | |
| Question B.8 | Will the IDD process review the financial standing of bidders? |
| The IDD review will not review the financial standing of bidders (see Question B.7) | |
| Question B.9 | Will bidders know what total volume is available in the first auction? And at each round? |
| The auction has a $25 million budget (link). The volume will be determined by the auction. We do not know prior to the auction the total number of put options that will be sold for this budget, as this is an auction outcome. As a hypothetical example, should the auction result in a put option strike price of $5.00 this would correspond to the PAF’s sale of put options redeemable with 5 million CERs. The 5 million put options would be divided in 5 equal shares, with 1 million put options expiring every year for 5 years. See question C2. | |
| Question B.10 | Can bidders reduce the volume they ask in successive rounds? |
| Yes, auction will allow bidders to reduce their volumes in successive rounds. More details on bidding can be found in the Auction Rules. | |
| Question B.11 | Does a bidder lose his deposit if he fails to pay the premium? |
| Where a bidder defaults, IBRD shall be entitled to take actions such as retaining a share of the bid deposit, as a compensation to IBRD for its administrative costs, losses and/or expenses incurred in respect of the failed or partially failed PAF Auction. Information about defaults can be found in the Bidder Application Package that interested parties must request by sending an e-mail to the PAF_Secretariat@worldbank.org. The email must contain disclaimer language cut and pasted from this webpage. | |
| Question B.12 | What is your expectation of the auction clearing price for the strike price? |
| The clearing price will be determined by the auction and the matching of supply and demand. | |
| Question B.13 | Do you expect the strike price to be higher than today’s market price? If so, why? |
| We expect the strike price to be higher than today's market price because the auction clearing price is going to be determined not on the supply and demand of already issued credits (as is the case for today’s market price), but rather based on the abatement costs of the projects to deliver credits in the future. | |
| Question B.14 | How will the PAF prevent speculative bidding? |
| Winners will be required to purchase the put options by paying a premium. The premium discourages speculation by forcing winners to put their own resources at risk, knowing they will only be able to exercise the put option should they deliver eligible emission reductions. | |
| Question B.15 | Will it become publically disclosed who participated and/or was successful in the auction, and for how many options? |
| After the auction concludes the World Bank will publically name the winning bidders. The name of the losing bidders, and the number of put options won by the winners will not be disclosed by the World Bank. | |
| Question B.16 | Can a single bidder win all the put options? |
| The auction will guarantee that no one bidder can win the full volume of put options. Bidders are not able to bid for more than the equivalent of 2,000,000 CERs in put options (see Auction Parameters page). | |
| Question B.17 | Will the online auction be open to view in real time by non-participants? |
| No, the online auction is not expected to be open for viewing by non-participants. However, the auction winners and the clearing price will be announced upon its conclusion. The PAF will share, as part of its piloting mandate, the lessons learned from the auctions. | |
| Question B.18 | Is it necessary to be a project participant (having a LoA) to participate in the auction? |
| No, an LoA is not a prerequisite. | |
| Question B.19 | What will be the minimum decrement size for the put option strike price during the auction? |
| As explained in the Auction Rules, the decrement size will be adjusted during the auction, based on supply and demand. The decrement will be between 5% and 12.5% of the prior round price. | |
| Question B.20 | Is the 25 million US$ budget only the first round or for all the future auction rounds? |
| The $25 million budget is the total allocated for the first auction. This $25 million budget is divided into five redemption periods. The first auction will therefore result in five $5 million bonds being divided and delivered to the winners, with each $5 million bond corresponding to one redemption period. | |
| Question B.21 | Who will manage the auction platform? |
| NERA Economic Consulting has been selected to prepare and manage the auction. They will use a software designed by Optimal Auctions. | |
| Question B.22 | How will the due diligence be conducted? |
| During the registration process, each bidder will be required to fulfill the Due Diligence Questionnaire (link) and undergo a due diligence check by the World Bank. There is no due diligence conducted on the projects at the time of the auction. | |
| Question B.23 | What is meant by reverse auction? |
| For details about reverse auction mechanism, please refer to the PAF videos (here). | |
| Question B.24 | When will the deposit and other auction rules be announced? |
| The deposit amount and the auction parameters have been announced and can be found on the Auction Parameters page. A detailed timeline leading to the auction has been published on this page. | |
| Question B.25 | How was the premium of $0.30 determined? What was the Baseline? |
| The $0.30 per ton was determined based on a number of consultations with interested parties and by analyzing publically available data on historic carbon credit prices. | |
| Question B.26 | Can I participate to the auction as an individual? |
| Yes. | |
| Question B.27 | With respect to the Bid Deposit, if I want 5 annual amounts of 100,000 CERs each, this is 250 PAFERNs or 50 Bid Units in total, and thus my deposit is 50 x $600 = $30,000? And should I become a successful bidder for the 50 Bid Units I would owe $150,000 to purchase all 250 of the PAFERNs, to which my $30,000 deposit would be applied, so I would need to top-up $120,000 prior to the Payment Deadline? |
| Yes, this is all correct. | |
| Question B.28 | If I am worried that my Internet connection may fail during the auction what are my options? |
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It is the bidder’s responsibility to ascertain the systems needed to minimize the chance that technical difficulties will impair its ability to bid in the auction. For instance, a bidder could consider securing access to a secondary Internet Service Provider (ISP) such as through a wireless card, or having a team member in a secondary location that does not rely on the same internet access. Bidders experiencing technical difficulties should contact the Auction Manager immediately to submit a backup bid by phone. A backup bid only counts when submitted and verified by the Technical Assistant in the bidding phase and processed by the Auction Software, and not when it is called in. Should a bidder not be able to submit a bid before the end of a round, but has extensions remaining, an extension will be placed automatically on behalf of the bidder and the round will be extended by 10 minutes. A bidder will be assigned a default bid if it does not bid and does not have any extensions remaining. A bidder may also elect to use Proxy Bidding. Proxy Bidding is an option where the software can place Bids on behalf of a Bidder. Under Proxy Bidding, a Bidder specifies a Proxy Payment, which is a minimum Payment determined by the Bidder prior to round 1. If the Going Payment falls below the Proxy Payment, then the Bidder is deemed to have withdrawn all Bid Units at the Proxy Payment. If Bidder elects to use Proxy Bidding, then Bidder cannot submit Bids using another method throughout the auction. |
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| Question B.29 | Can you summarize the upfront costs to participate in the PAF auction as well as the costs that need to be paid by the put option holder? |
| A bidder must pay a refundable deposit that corresponds to the maximum number of PAFERNs the bidder seeks to purchase; the size of the deposit is 20% of the issue price (i.e., $0.06 per CER) and the due date is July 7, 2015 (See question B.5). If a bidder wins the auction and becomes a successful bidder he must purchase the PAFERNs at their issue price. The issue price is $600 per PAFERN (each giving the right to deliver 2,000 Qualifying CERs), i.e. $0.30 per CER. The deposit balance will be applied to this purchase amount. The deposit is refundable to unsuccessful bidders. (Example: If a bidder is interested to purchase PAFERNs to deliver 100,000 CERs a year for 5 years, he would owe $30,000 in a deposit, if he won that amount of PAFERNs, he would owe $150,000 to purchase them, however since the $30,000 was previously paid as a deposit, he would only owe an additional $120,000.) The cost of CDM verification and issuance, as well as the cost of the EHS & Integrity audit are also the responsibility of the PAFERN holder. Project owners and option holders are encouraged to make their own estimates of their costs to participate in the PAF auction (See C.12 and C.14). | |
Disclaimer:
THE FOLLOWING IS A SUMMARY OF THE WORLD BANK’S PROPOSED PLAN TO ISSUE PILOT AUCTION FACILITY EMISSION REDUCTIONS NOTES (“PAFERNS”). IT IS NOT AN OFFER TO SELL PAFERNS OR AN INVITATION TO OFFER TO BUY PAFERNS. THIS SUMMARY IS SEPARATE FROM, AND SHOULD NOT BE READ IN COMBINATION WITH, ANY FUTURE OFFER OR SALE OF PAFERNS, WHICH WILL BE MADE IN COMPLIANCE WITH APPLICABLE LAWS AND UNDER ENTIRELY SEPARATE LEGAL DOCUMENTATION AND OFFERING MATERIALS. THIS SUMMARY IS VERY HIGH LEVEL FOR SIMPLICITY AND LEAVES OUT MATERIAL INFORMATION AND THE LEGAL DOCUMENTATION THAT IS EXPECTED TO GOVERN THE PAFERNS. FURTHER, IT IS CURRENT ONLY AS OF THE DATE OF POSTING TO THIS WEBSITE AND IS LIKELY TO BECOME OUTDATED AS THE PAFERNS LEGAL DOCUMENTATION IS DEVELOPED. THE STRUCTURE, TIMING AND MECHANICS OF THE ACTUAL PAFERNS, IF AND WHEN THEY ARE ISSUED, ARE SUBJECT TO CHANGE. POTENTIAL INVESTORS MUST OBTAIN A COPY OF THE COMPLETE LEGAL DOCUMENTATION PURSUANT TO WHICH THE PAFERNS WILL BE ISSUED, INCLUDING THE WORLD BANK’S MAY 2008 PROSPECTUS RELATING TO ITS GLOBAL DEBT ISSUANCE FACILITY AND THE FINAL TERMS FOR ANY ISSUANCE OF PAFERNS. POTENTIAL INVESTORS SHOULD NOT RELY ON THIS SUMMARY. BEFORE MAKING ANY INVESTMENT DECISION, POTENTIAL INVESTORS MUST REVIEW THE COMPLETE LEGAL DOCUMENTATION (ONCE AVAILABLE).
Last update -- June 11, 2015
