Translation Of Power Purchase Agreement

There is a clear link between this range of risks and the amount of debt that can be incurred against a project; at one end of the scale, a full difference contract or toll contract offers lenders the same protection as an AEA and the amount of debt incurred (i.e. the debt ratio) will be similar, while at the other end of the scale, the market risk of selling in an electricity pool will significantly reduce the share of debt in the project`s equity. The first evolution of ppA was a “build-own-operate” (BOO) contract between private parties, with ownership of the facility remaining at the expense of its investors at the end of the term of the contract. However, it soon became apparent that a similar structure could be used for the development of public sector projects. The concept of the “Build-Operate Transfer” (BOT) contract was first developed in Turkey; It was also about electricity generation, but with the essential differences between the fact that the purchaser (buyer) of the energy would be a public entity (the state electricity supplier) and that at the end of the contract, ownership of the plant could pass from its investors to the buyer (usually at nominal or zero cost) and therefore to the public sector. Therefore, one of the essential aspects of an AEA is that the investors of the project company that builds and operates the plant do not take any risks as to the actual need for electricity to be actually produced: this risk remains for the supply company that pays the availability fee, whether or not it consumes electricity. However, the project company is responsible for the operational performance of the plant and, for some reason, is unable to produce the promised level of power, the availability charge will be reduced accordingly. These investors therefore do not take a risk of use, but only the risk of completing the plant on time and budgeting and then taking an operational or performance risk, unlike a dealer who is paid only if people use the facility. Given commercial structures, fuel suppliers are forced to accept a significant portion of the electricity price risk, leaving most of the compensation to electricity producers.

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