Key Parts of a Power Purchase Agreement


Tariff Structure – Provides the details of how the tariff is calculated. It must be fair to all parties.

ŸRisk Allocation – Identifies all project related risks and allocates these risks to parties best able to bear the risks.

ŸConditions Precedent – Provides all the conditions precedents (CPs) which either the Buyer or Seller must satisfy before the PPA can become effective.

ŸTenor of PPA – A standard NBET PPA has a 20 year tenor. There are clauses within the PPA to handle early termination due to either a Buyer’s or Seller’s default

ŸProject Documents – All documents that are connected to the PPA such as Engineering, Procurement and Construction, Gas Supply Agreement, Gas Transport Agreement, Operations and Maintenance, Long Term Service Agreement, Financing documents etc.

ŸCommissioning & Testing procedure – Contains a set of guidelines for plant testing and commissioning.

ŸOperation & Maintenance – Contains details of the maintenance and operational obligations of the Seller throughout the tenor of the PPA.

ŸConflict Resolution – Indicates clear procedures for conflict resolution in case of disputes and/or conflicts on invoices.

ŸMetering – Sets out the rules surrounding metering. However, in case of conflicts between PPA provisions and the metering code, the metering code supersedes.

ŸLiability & Indemnification – Enumerates the parties responsible for certain failures and provides indemnification to both parties.

ŸInsurance – States the required insurance coverage to be put in place by seller and how the proceeds will be administered.

ŸScheduling Notices – Provides a methodology by which the Buyer nominates for the dispatch of Net Electrical Output to be made available at the delivery point by the Seller.

ŸForce majeure – Provides details of events to be considered as force majeure and possible payments during the occurrence of such events.