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Power Purchase Agreements - ASPAC

Everything you need to know about PPAs from a legal and up to date practice perspective

Advanced Corporate Credit – Warning Signals Training Course

A one-day course

The majority of power project financings now involve renewable energy.  This course covers PPAs for both thermal and renewable projects, and identifies the rapid changes that are seen in the agreements as the technologies evolve and the commercial viability gap is extinguished.  It also covers corporate and synthetic PPAs.

The course will enable participants to identify:

  • how the provisions of a PPA support and safeguard the revenue of the project;
  • how the PPA is an important component of the risk allocation structure of the project;
  • how PPAs 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.

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;
  • Cross-border enforcement.

Interface with Other Project Contracts

The commercial content of the PPA is significantly influenced by the content of the EPC contract and fuel supply contract.  If the development of a power plant is being developed with limited recourse financing, the exposure to a single source of cashflow renders it important to have consistency in these contracts on a variety of points.  Also, if the offtaker is of poor credit quality, the protections of a PPA are potentially invalidated.

  • Limited recourse financing -key characteristics;
  • Consequences of contractual breach;
  • Interface with Fuel Supply:
    • Volume commitments;
    • Price;
    • Liquidated Damages;
    • Exclusions;
  • Interface with Construction:
    • Delays;
    • Performance;
    • Liquidated Damages;
    • Termination;
  • Counterparty credit risk:
    • Credit enhancement options;
    • Escrow and Trust Accounts;
    • Contingency reserve accounts;
    • Deficiency guarantees;

Corporate PPAs

A rapidly developing presence, firstly in North America and more latterly in Europe are Corporate PPAs, that can take a number of different forms, and have some differences from the more traditional Utility PPAs.  The growth in corporate PPAs is expected to boom as a result of the recently-encountered uncertainty and volatility in electricity prices.

  • Utility PPAs;
  • Direct Wire PPAs;
  • Sleeved PPAs;
  • Virtual PPAs;
  • Proxy PPAs;

Key Risks Within PPAs

Before we go 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;
  • Tariff
  • Feed-in tariffs, selling forward;
  • Fixed preice, fixed escalators;
  • Feedstock Risk;
  • Transmission Interconnection Risk;
  • Heat Rate
  • Foreign Exchange exposures;
  • Regulatory Risk;
  • Political Risk;
  • Tax Change Risk;
  • Chamge in Control;
  • Force Majeure;
  • Termination & Compensation;
  • Offtaker Credit Enhancement;
  • Construction Risk – delays, performance;
  • Sponsor credibility;
  • Environment & Social Compliance

The Power Purchase Agreement

This represents the central focus of the course.  It is proposed to do a deep dive into both a thermal and a renewable Power Purchase Agreement, discussing the requirements and the flexibilities of each clause.  It will give careful consideration to the objectives and perspectives of both the generator (seller) and the distributor (purchaser).

  • A profile of the project – the parties;
  • Term;
  • Conditions subsequent;
  • Performance Guarantees;
  • SPV’s construction & development obligations;
  • Completion testing and Third-Party Verification;
  • Interconnection responsibilities;
  • Contracted capacity & energy;
  • Tariff adjustments;
  • Metering;
  • Invoicing and payments;
  • Commissioning and commercial operations commencement;
  • Representations & warranties;
  • Purchaser covenants:
  • price and payment;
  • avoided peak demand payments;
  • liquidated damages;
  • Generator Covenants:
  • assignments rights;
  • licences;
  • metering, measurement and verification;
  • indemnifications;
  • 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.

The trainer has 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 & 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: 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: 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;
  • 18 months: responsible for the ‘workout’ of a company in severe financial difficulties, being appointed as General Manager by KPMG.

For the past 20 years, the 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 a number of clients.  On the training side, he conducts training courses in Financial Modelling, Loan Documentation, Project Finance and Corporate Finance, Corporate Valuation and M&A.

The first half-day deals with 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 offtaker for both distribution and deemed distribution.

The second half-day represents a deep dive into the Power Purchase Agreement itself – working through the provisions of both a thermal PPA and a renewable PPA – observing both the similarities and the differences.

  • Working through the examples and understanding the approach to Power Purchase arrangements across different jurisdictions was great


Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS

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