Understanding & Negotiating Power Purchasing Agreement Training
A Power Purchase Agreement (PPA) is a legally binding contract between the energy producer and an end user (often a big electricity user) that specifies the terms under which the end user agrees to purchase energy from the developer at a specified price. A Power Purchase Agreement (PPA) may be thought of as the selling of a project and its natural elements, since it is a binding agreement that enables a generator to evaluate the project’s profitability, risk and make an investment choice accordingly.
This hands-on training focuses on enhancing expertise in understanding how Power Purchase Agreements (PPA’s) work; their challenges and opportunities; their contractual arrangements and a particular focus on strengthening negotiation skills – with special emphasis on multilateral negotiation with and within international organizations and companies.
Expected Training Outcomes.
Understand the concepts of power purchasing and contracting
Learn common terminology used in the agreements and their negotiation
The different project structures and models for a PPA
The roles and responsibilities of the seller and buyer under a PPA
The essential contractual clauses necessary
Risk management strategies
Guarantees and warranties
Pricing, tariffs and take or pay obligations
Contract compliance and penalties
Avoiding common errors and mistakes in negotiating a PPA agreement
Adopting risk management strategies and the allocation and limitation of liability between seller and
buyers
Examine typical payment structures and mechanisms
Learning Modules
Introduction to Power Markets and Power Purchase Agreements (PPAs)
Overview of the international power sector
Introduction to Energy Industry and the role of the Power Purchase Agreement
Concepts in power purchasing and trading
Different Project Structures & Business Models
Market structures
Licenses
Metering, Measurement and Verification
Indemnifications
Purchaser Covenants
Price and Payment
Avoided Peak Demand Payments
Liquidated Damages
Essential Clauses in a Power Purchase Agreement
Term and Extension
Performance Guarantees
SPV’s Construction & Development Obligations
Contracted Capacity & Energy
Representations & Warranties
Insurances Required
Maintenance and Scheduled Outages
Commissioning and Commercial Operations Commencement
Early Termination Rights & Events of Default
Off-taker Step-in Rights
Force Majeure Provisions
Disclaimers and Limitations of Liability & Indemnification
Subsidies
Change in Law
Transfer of Ownership Rights, Assignments, Novation’s
Law & Jurisdiction
PPAs in the Context of Power Project Development
Types of power purchase agreements
Parties and project contract mix
Project structures and timeline
Case study
Commercial Aspects of a Power Purchase Agreement
Price, Volume & Tariffs
Metering
Take or Pay Obligations
Shape or Profile Risk
Balancing Risk
Credit Risk
Tenor Risk
Managing Lender Expectations
Prices: Tariffs, Quantities, Escalation, Payment
Quantities and delivery
Contract price
Outages, metering, invoices
Risk Assessment in a Power Purchase Agreement
Liquidated Damages – Delay and Performance
Performance Bonds
Retentions
Variation Orders and Cost Overruns
Dealing with Political Risk
Dealing with Currency Exposures
Minimum & Maximum Delivery Obligations
Buyer Default
Seller Default
Sovereign Risk
Change in Tax Law
Negotiation of a Power Purchase Agreement & Dispute Resolutions in PPA
Negotiate the Best Power Purchase Agreement
o Prepare a Term Sheet
o Set Framework for Negotiations
o Balance Buyer’s and Seller’s Needs
o Focus on Interests not Positions
o Reach Sustainable Agreement
Negotiation
o Negotiate on Key Milestones to be Achieved & Penalties for Failures
o Negotiate Performance Guarantees
Dispute Resolution
o Different Types of Dispute Resolution
o Litigation
o Mediation
o Arbitration
o Expert Determination
When Things Go Wrong – Force Majeure, Damages, Termination, Disputes
Case study – force majeure clauses
Default and termination
Dispute resolution
Case study: Power plant explosion and fire
Way forward After the Training
Participants will develop a work plan through the help of facilitators that stipulates application of skills
acquired in improving their organizations. ASPM will monitor implementation progress after the training.
Training Evaluation:
Participants will undertake a simple assessment before the training to gauge knowledge and skills in the field and another assessment will be done after the training in-order to monitor knowledge gained through the training.
