• May 26, 2022

Basics of a Purchase Power Agreement in Pensacola, FL

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When a purchase power agreement in Pensacola, FL is signed between a biomass-fueled electric generation plant owner and the wholesale energy purchaser, it is referred to as a long-term arrangement. Using a PPA, the facility owner can guarantee an income stream from the project, which is essential to finance the construction.

Risks for Both Parties

Both sellers and buyers are exposed to risks connected with the other party’s creditworthiness. Buyers frequently insist on some type of credit enhancement from sellers to protect themselves against anticipated losses in case a project fails to fulfill development milestones or does not become commercially viable by the agreed-upon date.

Credit enhancement can take various forms, including guaranties from creditworthy affiliates, cash collateral or escrow accounts, standby letters of credit, and performance bonds, among other things. The PPA will almost always mandate that the seller maintain specified insurance policies at the seller’s expense, with the purchaser named as an extra insured on those policies.

Negotiating and Securing the Deal

When establishing a biomass-fueled electric generating plant, negotiating and securing an appropriate power purchase agreement is a crucial step that should not be undertaken without the assistance of qualified legal representation. PPAs contain a slew of important terms and conditions that go far beyond the price of the energy provided by the project.

When negotiating a purchase power agreement in Pensacola, FL, parties should consult with legal advice from a firm such as Beggs & Lane – Attorneys & Counsellors at Law to verify that the PPA terms and conditions are appropriate for the individual project. 

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