Book contents
- Frontmatter
- Contents
- Preface to the Third Edition
- Preface to the Second Edition
- Preface to the First Edition
- PART ONE AN INTRODUCTION TO PROJECT FINANCE
- PART TWO RISK IDENTIFICATION, ALLOCATION, AND MITIGATION
- PART THREE PROJECT FINANCE STRUCTURES
- PART FOUR TECHNICAL, POLITICAL, AND ECONOMIC FEASIBILITY
- PART FIVE PROJECT FINANCE DOCUMENTATION
- CHAPTER TWELVE AN OVERVIEW OF PROJECT DOCUMENTATION
- CHAPTER THIRTEEN REPRESENTATIONS AND WARRANTIES IN PROJECT FINANCE CREDIT AGREEMENTS AND CONTRACTS
- CHAPTER FOURTEEN PRELIMINARY HOST-COUNTRY AGREEMENTS
- CHAPTER FIFTEEN CONSTRUCTION CONTRACTS
- CHAPTER SIXTEEN INPUT CONTRACTS
- CHAPTER SEVENTEEN OPERATION AND MAINTENANCE AGREEMENTS
- CHAPTER EIGHTEEN PROJECT FINANCE OFF-TAKE SALES CONTRACTS
- CHAPTER NINETEEN POWER SALES AGREEMENTS
- PART SIX CREDIT ENHANCEMENT
- PART SEVEN DEBT AND EQUITY FINANCING
- PART EIGHT COLLATERAL
- PART NINE PROJECT SPONSOR AND INVESTOR AGREEMENTS
- PART TEN SPECIAL TOPICS IN PROJECT FINANCE
- Appendix A A Checklist of Due Diligence Considerations for a Project Financing
- Appendix B UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects
- Project Finance Terms, Abbreviations, and Acronyms
- Select Bibliography
- Index
CHAPTER NINETEEN - POWER SALES AGREEMENTS
from PART FIVE - PROJECT FINANCE DOCUMENTATION
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface to the Third Edition
- Preface to the Second Edition
- Preface to the First Edition
- PART ONE AN INTRODUCTION TO PROJECT FINANCE
- PART TWO RISK IDENTIFICATION, ALLOCATION, AND MITIGATION
- PART THREE PROJECT FINANCE STRUCTURES
- PART FOUR TECHNICAL, POLITICAL, AND ECONOMIC FEASIBILITY
- PART FIVE PROJECT FINANCE DOCUMENTATION
- CHAPTER TWELVE AN OVERVIEW OF PROJECT DOCUMENTATION
- CHAPTER THIRTEEN REPRESENTATIONS AND WARRANTIES IN PROJECT FINANCE CREDIT AGREEMENTS AND CONTRACTS
- CHAPTER FOURTEEN PRELIMINARY HOST-COUNTRY AGREEMENTS
- CHAPTER FIFTEEN CONSTRUCTION CONTRACTS
- CHAPTER SIXTEEN INPUT CONTRACTS
- CHAPTER SEVENTEEN OPERATION AND MAINTENANCE AGREEMENTS
- CHAPTER EIGHTEEN PROJECT FINANCE OFF-TAKE SALES CONTRACTS
- CHAPTER NINETEEN POWER SALES AGREEMENTS
- PART SIX CREDIT ENHANCEMENT
- PART SEVEN DEBT AND EQUITY FINANCING
- PART EIGHT COLLATERAL
- PART NINE PROJECT SPONSOR AND INVESTOR AGREEMENTS
- PART TEN SPECIAL TOPICS IN PROJECT FINANCE
- Appendix A A Checklist of Due Diligence Considerations for a Project Financing
- Appendix B UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects
- Project Finance Terms, Abbreviations, and Acronyms
- Select Bibliography
- Index
Summary
INTRODUCTION
In a power project, a power sales agreement, or power purchase agreement as the purchaser calls it, is the linchpin of an energy project financing. This agreement sets forth the obligation of the project company to produce power for sale and for the power purchaser to buy it. It is from this transaction that the funds flow to pay debt service, operating costs, and an equity return. It must fulfill, therefore, the dual role of financing document and operating document.
The funds, of course, will not flow unless the power purchaser is creditworthy; that is, the power purchaser must have sufficient cash to pay its bills, as proven by past, present, and expected future financial performance. To the extent that this is not present, credit enhancement, such as a guarantee by a creditworthy central government or multilateral support, is needed.
REVENUE CONTRACTS IN TRANSNATIONAL PROJECTS
In some countries, a project financing, which is based on the underlying cash flow from the revenue-producing power contracts of the project is a new concept. Project finance contract provisions that are standard in the United States and Great Britain are either not yet developed, or relatively recent in concept, in these countries. An example of this type of provision, considered essential to a successful energy project financing, is a definitive obligation for a utility's purchase of the project's energy output at a defined price.
- Type
- Chapter
- Information
- The Law and Business of International Project FinanceA Resource for Governments, Sponsors, Lawyers, and Project Participants, pp. 222 - 242Publisher: Cambridge University PressPrint publication year: 2007