Start with who owes what
A power purchase agreement defines a commercial relationship, not just a tariff. Identify buyer and seller, the delivery point, contracted capacity or energy, start conditions, settlement, currency and payment security.
Check whether delivery obligations depend on availability, actual generation, a schedule or minimum quantities. Those differences can change the project’s downside exposure. Record which party carries grid constraints and whether curtailed output is compensated.
Read the diagram as text
Project: Rights · resource · stage → Commercial: Offtake · delivery · costs → Evidence: Model · permits · diligence → Capital: Mandate · terms · closing
Five linked review areas
| Price and settlement | Tariff, indexation, currency, invoicing, taxes and adjustment mechanics. |
| Delivery and dispatch | Metering point, losses, scheduling, availability and curtailment. |
| Credit and security | Buyer payment history, guarantees, letters of credit and cure procedures. |
| Change and termination | Force majeure, change of law, default, termination payment and dispute resolution. |
| Financing interfaces | Assignment, lender step-in, consent requirements and direct agreements. |
Connect the contract to the model
Map the pricing and delivery provisions to model inputs. If the tariff escalates annually, verify the base date, formula and cap. If payment is delayed, model the cash and working-capital effect rather than changing only annual revenue.
A termination formula should be understood in the context of debt, equity and unpaid amounts. Do not assume that a model’s book value equals the compensation under the contract.
A review worksheet
Create columns for clause, economic effect, model input, downside case, responsible adviser and open question. For every material uncertainty, identify the document or decision required to close it.
This is a reading framework. Actual contract interpretation requires appropriate legal and financial advisers and the law governing the agreement. No standard checklist makes every PPA bankable.
Sources & further reading
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