Understanding Power Purchase Agreements - Version 1.2, funded by Power Africa and developed by the African Legal Support Facility (ALSF) and the Commercial Laws Development Program (CLDP) of the United States, 2014.
The power purchase agreement (PPA) is the central contract for any independent power generation project, especially in emerging markets. This handbook explains the context for the PPA and sets out the key considerations for drafting and negotiating the PPA. It was written by practitioners who have been engaged in power project development around the world for decades and is intended to provide governments, utilities, investors and other interested stakeholders with a guide to understand:
- The power market and contractual framework of a PPA that operates in that market,
- The considerations involved in securing financing for a power project,
- The tariff structure, purchase obligations and other key financial provisions of a PPA,
- Credit support and security issues for both the seller and buyer under the PPA,
- The risks associated with an independent power project and how such risks are typically allocated and mitigated under the PPA, and
- Other key provisions in the PPA, with a particular focus on provisions related to default and termination.