Understanding Power Purchase Agreements

The Power Purchase Agreement (PPA) is the central contract for any independent power generation project, but can be especially critical in emerging markets. Although a prerequisite to the success of a power project, the PPA is only one aspect of a power sector transaction. Prior to any attempt to attract capital to a country, the host government and offtaker should work towards creating an enabling environment. This usually includes extensive load and demand forecasts, ensuring that adequate transmission infrastructure is available or planned and establishing a predictable and stable regulatory environment favouring clear and transparent procurement processes.