essentially a long term offtake agreement executed with a creditworthy offtaker and having a sufficient tenor to enable repayment of debt by providing an adequate and predictable revenue stream. 10 Important Features to Include or Consider for a Bankable PPA: 1. Dispatch Risk be no limitation or additional with no access to the market and There are two structures generally approvals required to transfer funds thus should be limited to significant accepted by lenders for to offshore accounts as required. events. The agreement should mitigating the risk that the offtaker provide that if the PPA is terminated may not dispatch the generating 4. Change in Law or for any reason, then in case of facility. Change in Tax transfer of the facility to the offtaker, The agreement should explicitly the offtaker shall provide a Take or Pay: The offtaker pays a state which party takes the risk of termination payment at least equal fixed tariff comprising a capacity the law or tax regime changing to the full amount of the power charge (a fixed amount that is paid after the date of the agreement in producers outstanding bank debt, for available capacity - no dispatch such a way as to diminish the and in the case of the required) and an output charge (an economic returns of the offtakers default, a return on amount paid in respect of energy transaction for such party (e.g., equity. actually delivered). This permits the increase in taxes on power power producer to cover its fixed producers reducing the producers 8. Assignment costs with the capacity charge, returns). In order for PPAs to be The PPA should allow collateral including debt service, fixed bankable, most lenders require the assignment of the agreement to operating costs, and an agreed offtaker to take this risk. the power producers lenders with equity return. the right to receive notice of any 5. Force Majeure default and to cure such default. Take and Pay (typical for wind The agreement should excuse the Additional step-in rights are and solar): The offtaker must take, power producer from performing its generally set forth in a separate and pay a fixed tariff for all energy obligations if a force majeure event direct agreement between the delivered (no dispatch required). If (an event beyond the reasonable lenders and the offtaker. energy cannot be physically taken control of such party) prevents such by the offtaker and output is performance. The allocation of 9. Offtaker Payment Support curtailed, energy will be costs and risk of loss associated with Depending upon the size of the calculated and paid for on a a force majeure event will depend project and the creditworthiness of deemed delivered basis. on the availability of insurance and the offtaker and the development in some cases the degree of of the energy sector in a certain 2. Fixed Tariff political risk in the country/region. country, short term liquidity It is important that the revenue of instrument, a liquidity facility and/ any PPA, whether take or pay or 6. Dispute Resolution or a sovereign guaranty will be take and pay, be a fixed amount The agreement should provide for required to support the offtakers per kWh generated to adequately offshore arbitration, in a neutral payment obligations. cover the cost of operating the location, under rules generally facility, repay the debt and provide acceptable to the international 10. Transmission or a reasonable return on equity. community (e.g. UNCITRAL or LCIA Interconnection Risk or ICC). The PPA should indicate which party 3. Foreign Exchange bears the risk of connecting the In order to avoid subjecting the 7. Termination and facility with the grid and transmitting power producer to currency risk, the Termination Payments power to the nearest substation. PPA should be either denominated The PPA should set out clearly the The more significant these risks (due in or linked to an exchange rate of basis on which either party may to terrain, distance, populated the currency of the power terminate the PPA. Termination by areas), the more the lenders will producers debt, and there should the offtaker may leave the project require the offtaker to bear all or a significant portion thereof.