Low Emissions Investment Partnerships

Yes, third parties who are working in partnership with a mine operator may apply to the LEIP program. Queensland Treasury may request evidence of the partnership, for example, a letter of support for the project or another agreement. This is because eligible LEIP proposals must demonstrate scope 1 emissions at a Queensland metallurgical coal mine that is covered by the Safeguard Mechanism.

The LEIP program does not apply to the development or demonstration of technology outside of an operating mine site.

Generally, the replacement or upgrade of fixed plant or equipment is outside the scope of the LEIP program. This is because the abatement benefits tend to be minimal, and secondary to the primary purpose of enabling business as usual mining operations. For example, the replacement of an end-of-life coal handling plant with a newer model may deliver greater fuel efficiency, but it is not a targeted investment in emissions reduction.

However, the LEIP program is open to supporting trials of new technologies or systems that are specifically designed to reduce emissions from plant and equipment, for example, retrofitting mining trucks to displace the use of diesel.

Yes, the LEIP program is open to other types of decarbonisation projects that reduce scope 1 emissions, such as diesel displacement in mining fleets and equipment (for example, through alternative fuels or electrification) and ventilation air methane destruction systems.

No, while these activities are important steps to understanding a mine’s fugitive emissions profile, they are considered preparatory in nature. For Queensland Treasury to understand the abatement opportunity and make an assessment against the program objectives, the long-term beneficial use of the gas, beyond flaring, must be identified. For example, the capture and use of coal mine waste gas for power generation, or to supply to local markets as feedstock for industrial use.

The Safeguard Mechanism applies to facilities that emit more than 100,000 tonnes of CO₂-e of scope 1 emissions per year. Queensland Treasury will consider projects related to non-safeguard facilities where:

• the mine is reasonably expected to become a safeguard facility, for example, once full production is reached
• the facility is on the cusp of the 100,000-tonne threshold and fluctuations in production and emissions mean the application of the Safeguard Mechanism changes year-on-year.

Queensland Treasury may request emissions data or projections to inform whether the project is considered eligible.

Yes, Queensland Treasury is open to multi-party agreements. Queensland Treasury supports proponents seeking to attract and align investment efforts between the private sector (for example, Low Emissions Technology Australia) and other government sources (for example, the Australian Government’s Powering the Regions Fund).

Generally, a concept-level proposal is sufficient for an initial review under LEIP. Queensland Treasury will work with proponents to understand whether the project has potential to meet the criteria, including any gaps, the next steps for developing the project, and the potential role of LEIP investment.

Before submitting an EOI, proponents should consider the LEIP eligibility and assessment criteria which provide an indication of the level of project maturity and information needed. For example, Queensland Treasury will assess investment readiness which will generally require evidence of an achievable pathway to:

• finance the delivery of the project
• obtain all required approvals and permits required to deliver the project
• reach a Final Investment Decision within 2 years.

Queensland Treasury welcomes early engagement with proponents. If you are not sure if your project is mature enough to submit to LEIP, please contact us for a discussion.

LEIP project proposals are assessed in stages, starting with an initial EOI. At this time, Queensland Treasury only requires a high-level overview of the project to determine whether the project meets, or has potential to meet, the LEIP eligibility and assessment criteria as outlined in the LEIP Program Guidelines.

If you are invited to proceed for detailed due diligence, Queensland Treasury will need to assess your financial, technical and operational capacity, the project and its alignment with the LEIP program objectives. Queensland Treasury will issue a request for information seeking specific inputs, such as financial statements, details of business operations and ownership structures, project budget and delivery plans, and emissions forecasts.

Generally, the information should be readily available and similar to what you would provide if seeking private investment. Queensland Treasury does not require proponents to prepare a business case or commission additional major studies or analysis. Additional requests for information may be sought throughout due diligence.

Queensland Treasury understands that some of the information and project documents requested to support detailed due diligence will be commercially sensitive. To enable this information to be provided, Queensland Treasury will ask the proponent and any key project partners to execute a Mutual Confidentiality Agreement with the State. It is important that project information and discussions are kept confidential, to protect both the sensitive business, commercial and financial affairs of the proponent and the integrity of Queensland Treasury’s assessment, and to avoid prejudicing any future negotiations. LEIP’s specialist advisers are also bound by confidentiality obligations.

If a project progresses to an investment decision, the terms of the Partnership Agreement will address the use of project information. This may involve sharing high level information about how the project operates and its success. However, commercially sensitive information will remain confidential.

Generally, the proponent or a project partner will be entitled to generate SMC or ACCU in association with a LEIP funded project.

As part of its assessment, Queensland Treasury will consider whether a project is likely to generate SMC or ACCU and any potential revenue that may be earned. This will inform our financial analysis and understanding of the project’s commerciality.

The terms of the Partnership Agreement may also include conditions or limitations on how SMC or ACCU are used, sold or traded. This is to ensure that LEIP funding contributes a net benefit to the sector and is not indirectly used to offset increased emissions.

LEIP is supported by external specialist advisers to assist with technical and legal due diligence.

The role of the technical adviser is to validate the project inputs and identify any risks that could impact the project’s technical and commercial feasibility. For example, Queensland Treasury asks its technical advisers to consider whether:

• the project aligns with industry standard engineering design practice
• the project costs are reasonable and within an appropriate range
• an appropriate methodology has been used for the emissions calculations for the project.

Queensland Treasury’s legal adviser supports legal due diligence by confirming the corporate and ownership details for the proponent and key project partners, and reviewing key project documents to identify any legal or regulatory risks that could impact the project’s feasibility. They also support the development of the LEIP Partnership Agreements.

LEIP is based on a co-investment model – it will not fund 100 per cent of project costs. LEIP’s contribution will be informed by Queensland Treasury’s assessment of the project, including how it aligns with the LEIP objectives, whether it represents value for money, and the extent to which LEIP funding would help overcome investment hurdles.

A Partnership Agreement between the State and the proponent will govern the provision of funding. A side agreement may also be required between the State and any key project partners. Partnership Agreements are formed through bilateral negotiations, and each will be tailored to reflect the nature of the individual project.

Generally, grant funding will be provided at agreed milestones during the construction or upgrade phase of the project. At the agreed milestones, the proponent will need to satisfy specific conditions and provide evidence before payment can be made. Each milestone will have a target date, although the Partnership Agreement will provide flexibility for delays that are outside the proponent’s control, for example, a natural disaster.

The Partnership Agreement will remain in effect for the life of the project. Ongoing performance criteria may apply in relation to the project’s operation, for example, to ensure the intended emissions reductions are achieved.

The Partnership Agreement will provide for other standard contractual terms, such as information-sharing, record keeping, insurance and liability. This includes terms that allow the State to manage its risk in the event of a default.

LEIP funding assistance is targeted at upfront, capital expenditure such as the purchase, installation and commissioning of fixed plant and equipment, site preparation, and services to support construction such as testing, design and engineering.

Generally, it cannot be used for:

• operating expenditure
• regulatory and/or development approval costs
• financing and legal costs or statutory fees and charges
• insurance costs
• GST
• costs paid to the proponent’s related entities, including a group entity
• expenditure incurred prior to the date of the Partnership Agreement
• project development costs such as early-stage feasibility studies, business case development and due diligence.

Generally, government grants are treated as assessable income for tax purposes, unless exempted by law. Queensland Treasury is unable to provide specific taxation advice and recommends you seek professional advice to determine any tax implications that may apply.

A LEIP Partnership Agreement does not create a legal partnership business structure where the proponent and the State share liabilities.

The term ‘Partnership Agreement’ is used to reflect the collaborative nature of LEIP. The State requires some oversight of project delivery so that funding assistance can be provided in line with the agreed milestones. Queensland Treasury may also seek regular updates, once the project is operational, to confirm that the intended benefits are being achieved.

However, the proponent’s business decisions and day-to-day operations should not be impacted by LEIP.

No, Queensland Treasury is unable to share the details of mine operators or recommend particular abatement technologies. However, a list of Queensland safeguard facilities is publicly available through the national Clean Energy Regulator.