The Due Diligence Process
The process of assessing whether or not Positive Liability Transfer is right for your company is simple, and does not incur any initial obligation.
When a Positive Liability Transfer opportunity that will involve transfer of the asset to another entity is presented, OTEK utilise an independent professional organisation to provide information on a “commercial clean value” for the asset under consideration.
Otherwise the process begins with a desktop study where OTEK will look at any information, reports or data available with respect to the site.
Based on the desktop study, OTEK will then calculate an estimated environmental impairment value.
These figures are put into a risk indemnity model using the Rasher-Colangelo formula, and a commercial offering is provided for consideration.
ELTC Environmental Liability Transfer Price ELTC = (FMV)–(IC EL I CC R K)
FMV - Fair Market Value (for property in question)
IC - Investigative Costs (initial data evaluation)
EL - Environmental Liabilities (remediation, management, contingencies)
I - Insurance (remediation overrun, long term unforeseen, off-site claims)
CC - Carry Costs
R - Repositioning Costs
K - Return on Projected Risk (PLT Partners margin)
Subsequent research to refine the offering is possible by gathering additional environmental data which could be used to reduce the risk and improve the accuracy of the environmental impairment value determined.
The Liability Transfer
The indemnity provided under PLT is unique and covers not only on-site and off-site migrated contamination, but also past, present and future; as well as known and unknown contamination including:
Onsite Contamination
- Above Ground
- On-Ground
- Below Ground
Offsite Contamination (that has migrated through natural processes)
- Known and Unknown
- Past, Present and Future
It will also cover changes to legislation that may require further work to be done to meet any regulatory requirements.
Where applicable, compliance requirements associated with cleanup or pollution abatement notices imposed by regulatory agencies will be assumed.
Environmental Liability for contamination at your site or business can even be transferred into perpetuity.
The process provides a complete contractual indemnification, with appropriate insurance that protects you to the fullest extent possible and reduces your risk of ever having to pay anything in the future in the unlikely event that there is a thirdparty claim.
Any exclusions are minimal and include aspects such as:
- Offsite Contamination that did not naturally migrate offsite (land filled, etc.)
- Known, but undisclosed contamination
Liability Lifecycle Example
PLT your liability and risks are effectively eliminated on execution of the PLT Deed and transferred to OTEK.
This means these risks and liabilities are no longer your responsibility. OTEK and its insurers assume these on your behalf.
At the end of the remediation process OTEK and its insurer will continue to protect your company against claims that may arise as well as against changes in legislation that require additional work to be done.
Facilitation
Positive Liability transfer can be used in a number of different ways to add value to a company seeking to address environmental issues associated with a site they own.
Flexibility in the removal of environmental liability allows PLT to be used as a means to assist organisations with:
Mergers and Acquisitions 
By acquiring the associated environmental liability, PLT removes the deal barriers between interested parties.
Divestitures
The Positive Liability Transfer product simplifies divestment for organisations.
The PLT partners can purchase the contaminated holdings and provide comprehensive indemnity.
This is an efficient, proven process which provides the vendor with peace of mind so they can focus on future opportunities without the concern of past issues resurfacing.
Sale Leaseback Operations
A sale/leaseback is a means of optimising the use of property/ operational assets.
It provides flexibility to use freed up cash (if provisioned) and funds from the sale to grow the company either in country, or pursue opportunities offshore, whilst continuing to use present facility(s).
Potential immediate and long term tax advantages can be considered that may be relevant to the company as part of the deal.
Structured Settlements
Structured Settlements take a variety of forms. For example, in a fixed cost remediation scenario PLT can provide surety regarding the removal of environmental liability.
It can rectify the contaminated asset prior to transfer, which allows for optimal achievable value on the open market.
In mergers and acquisitions PLT can remove those problem sites from the equation, allowing settlement to proceed without ongoing delays and headaches negotiating these problem sites.
Management of Present Assets
Positive Liability Transfer should be considered by any organisation as a means for handling environmental exposures on their present assets.
Through sale-leaseback; fixed cost remediation; creation of special purpose vehicles; and other processes, a company can use PLT as a real means of environmental liability management in a commercially advantageous manner.
Transference of Liability
All liabilities, known and unknown, contractual and statutory are transferred through the Positive Liability Transfer product affording maximum allowable release and insulation from future liability.
Third Party Developer
PLT Transactions can provide indemnity protection and fixed cost remediation to a developer against the blow out of remediation costs associate with a site being acquired for development.
These are just some of the alternative options available that demonstrate the flexibility of the PLT process. All can help to free up cash and all offer surety on costs, while providing an indemnity for contamination whether onsite or migrated offsite.
Financing / Funding PLT Transactions
OTEK can also offer clients flexibility in financing / funding options for the transfer of environmental liability such as:
- Direct payment lump sum
- Sequential payment program; or
- The use of other assets (e.g. real estate, minerals, and securities) not associated with the liabilities being assumed.
Benefits of utilising PLT
As can be seen, Positive Liability Transfer provides a significant range of benefit in handling contaminated land transactions or contaminated sites.
If you are looking for a solution that can provide you with:
- Transference of liability
- Guaranteed cost certainty
- Elimination of compliance issues
- Can address Economic and Tax considerations; and
- That can help clean up your company’s balance sheet then you should look closely at PLT as your preferred solution.
With PLT you can turn a problem asset into one that can provide increased value and lower risk.
PLT can handle a wide range of situations including:
- Positive Liability Transaction – where your property is worth more than the cost of clean-up
- Negative Liability Transaction – where the clean-up costs exceed the realisable value of the property
- Zero Dollar Transactions – where the cost of clean and site value are equal
- Third Party Developer Transaction – to ensure that an asset being sold for redevelopment can attain the highest price for you
- Liability Transfer Only Transactions – where you wish to retain title to the Real Estate
- Sale/Leaseback Liability Transfer Transactions – where you want to continue using the site but want to remove existing environmental risks and release cash for alternate uses
- Special Purpose Vehicles Liability Transfer Transaction – where you, as the existing owner, a Developer and OTEK team up to remediate, redevelop and sell the property and all parties share in the final result.
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