Power Purchase Agreements

2 Part Course | Learn everything you need to know about PPAs from a legal and up-to-date practice perspective

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A one-day PPA course presented over two-half days in a virtual class from 9:30am to 1:50pm UK time

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Download: Course Category Brochure | Course Outline

PPA Training - Part One

Introductory Overview

Because the primary purpose of the PPA is to stabilise the revenue generated by the power plant for the benefit of the debt financiers, it is appropriate to start with an overview of the characteristics of limited recourse financing, of the enforcement of contractual rights, and of the features of power generation.

This power purchase agreement course explores the key characteristics of project financing:
- The project entity, limited recourse, single cashflow
- Identifying, quantifying and managing cashflow volatility
Law and Contracts:
- Elements that will be governed by local law
- The impact of Basle and the standardisation of contracts
- PPA interface with other contracts – e.g. EPC, fuel supply and the clauses that need to be harmonised
- The importance of liquidated damages
Power Generation:
- Base Load, Peaking, Non-Dispatchable
- Utility markets, bundled vs unbundled
- Merchant markets

Corporate PPAs

A rapidly developing presence, firstly in North America and more latterly in Europe are Corporate PPAs, which can take several different forms, and have some differences from the more traditional Utility PPAs. The growth in corporate PPAs has accelerated as a result of the recently encountered uncertainty and volatility in electricity prices.

Utility PPAs
Direct Wire PPAs
Sleeved PPAs
Virtual PPAs
Proxy PPAs

Law and the Enforcement of Rights

The one thing that a PPA has in common with O&M, Construction, Interconnection, and Financing Agreements is that they are all contracts. There is no point in having a contract unless we have reasonable prospects of enforcing our rights under those agreements - and this may well become an issue where the counterparties are from different jurisdictions.

If the financing is limited recourse, why litigation of disputes is unacceptable:
Alternative Dispute Resolution procedures:
- expert mediation
- arbitration
- the 1958 Convention
Sovereign power vs. contractual rights and obligations
PPA course training also looks at cross-border enforcement

Key Risks Within PPAs

Before this power purchase agreements training goes through the PPA itself in detail, we give special detailed consideration to the various risks that may be encountered in power generation projects.

Dispatch:
- Take-or-Pay, capacity charge, energy charge
- Take-and-Pay, priority dispatch, deemed dispatch
- Intermittency, reserve capacity
- Curtailment
Tariff:
- Feed-in tariffs, selling forward
- Fixed price, fixed escalators, cap-and-collar model
Feedstock Risk
Transmission Interconnection Risk
Heat Rate
Foreign Exchange exposures
Regulatory Risk
Political Risk
Tax Change Risk
Change in Control
Force Majeure
Termination & Compensation:
- Maturity, force majeure, Seller default, buyer default
- Termination for convenience
- Put and call options
Construction Risk – delays, performance
Sponsor credibility
Environment & Social Compliance
Counterparty credit risk:
- Credit enhancement options
- Escrow and Trust Accounts
- Contingency reserve accounts
- Deficiency guarantees

PPA Training - Part Two

The Power Purchase Agreement

This represents the central focus of Redcliffe's PPA training courses. We propose deep diving into a renewable Power Purchase Agreement, discussing each clause's requirements and flexibilities. It will carefully consider the objectives and perspectives of both the generator (seller) and the distributor (purchaser).

A profile of the project – the parties
Extension rights and options
Conditions subsequent
Performance Guarantees
SPV’s construction & development obligations
Interconnection responsibilities
Contracted capacity & energy
Tariff adjustments
Metering
Commissioning and commercial operations commencement
Representations and Warranties
Purchaser covenants
Generator Covenants
Insurances required
Maintenance and scheduled outages
Confidentiality
Credit enhancements (if required)
Flexibility provisions
Early Termination rights
Offtaker Step-in Rights
Change in Law
Local content
Severance clause
Transfer of ownership rights, assignments, novations
Events of Default:
- Generator/Seller
- Offtaker/Purchaser
Force majeure provisions
Grace periods
Liability & Indemnification
Disclaimers and Limitations of Liability
Law and jurisdiction
Dispute Resolution
Direct Agreements

Please Note – This course is unsuitable for participants to attend either Part 1 or Part 2 only.

This Power Purchase Agreement course is delivered by an expert with a unique blend of experience in Law, Corporate Banking, Investment Banking, Corporate Financial Management, General Management and Workout. He has gained a worldwide reputation for the quality and depth of his training courses which have been developed and presented over 20 years.

He trained as a lawyer at Cambridge and the Middle Temple and was called to the English bar.
5 years with an American bank (Chase), the world’s largest financier of oil and gas projects, as a corporate relationship manager in New York and London. In the 5 years in this role, he was exposed to the development of the North Sea projects and petrochemicals.
6 years of investment banking in Hong Kong and London (Wardley – the investment bank subsidiary of HSBC), primarily involved in mergers and acquisitions and corporate restructurings.
6 years as CFO of a public group with a joint head office in the United States and Australia. In this role he was engaged in some 35 acquisitions, over 20 equity raisings and a large number of complex financings, many of them structured on a limited recourse basis.
He was also responsible for the ‘workout’ of a company in severe financial difficulties, being appointed as General Manager by KPMG.

For the past 20 years, this PPA course trainer has acted as an independent consultant and financial trainer. On the consulting side, he has been primarily involved in the financial modelling and structuring of power generation, LNG, mining, and petrochemical projects, as well as undertaking project vetting for several clients. On the training side, he conducts training courses in Financial Modelling, Loan Documentation, Project Finance and Corporate Finance, Corporate Valuation, M&A and PPA training.

Power Purchase Agreements Training enables participants to identify:

How the provisions of a PPA support and safeguard the revenue of the project.
How they are an important component of the risk allocation structure of the project.
How power purchase agreements differ from each other according to the technology involved.
How lenders will approach the analysis of debt serviceability and the provisions that they will expect to benefit from in the agreement.
How the structure of the project and the obligations to other counterparties will influence the risk allocations within the PPA.

The majority of power project finance now involves renewable energy - this Power Purchase Agreements course covers renewable projects and identifies the rapid changes that are seen in the PPA agreements as the technologies evolve and the commercial viability gap is extinguished.

The first half-day of this Power Purchase Agreement course deals with its contract enforceability, and the interface with some of the other project contracts, to ensure consistency and protection for both Lenders and Sponsors. It also focuses on the revenue of the project, which entails mechanisms for managing the volume of dispatch and the identification of the price to be paid by the off-taker for both distribution and deemed distribution.

The second half-day of PPA training represents a deep dive into the Power Purchase Agreement itself. We will work through the provisions of a renewable PPA.