Understanding & Negotiating Power Purchasing Agreement Training



Course Overview.

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 the 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

  • Prepare a Term Sheet
  • Set Framework for Negotiations
  • Balance Buyer’s and Seller’s Needs
  • Focus on Interests not Positions
  • Reach Sustainable Agreement


  • Negotiate on Key Milestones to be Achieved & Penalties for Failures
  • Negotiate Performance Guarantees

Dispute Resolution

  • Different Types of Dispute Resolution
  • Litigation
  • Mediation
  • Arbitration
  • 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.

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