Cogito

Tariff and Power Purchase Agreement

Posted in finance by qmarks on February 25, 2012

Under the PPA Tariff is usually paid by monthly. Therefore Days of Sales Outstanding should be close to 30-32.

The  tariff paid under 2 elements

Fixed Portion : Capacity Charge, Availability Charge

Variable Portion: Energy Charge, Dispatch Charge

Availability Charge

fixed portion is paid no matter what, energy is dispatched or not.

the project co will put the assets in place and make it available for the power purchaser therefore a fixed portion must be in place. that portion covers:

Fixed Operating Costs: ie land rentals, insurance premiums, scheduled maintenance and replacement of parts, fixed payments to a fuel supplier for a fuel pipeline, taxes etc. The Accounting Depreciation is not paid since it is not a cash outflow, instead CAPEX can be paid.

Debt Serivce: P + I

Equity Return: Agreed ROE, or Cash Flow Available After Debt Service prorated to the Equity Amount.

An important point is that the availability charge is normally fixed when PPA is signed therefore if there is no fixed cost-fixed term contract is in place, at an event of cost over run Project Co will bear the risk (assuming no LD, is in Place or Liability Cap of the contractor is not covering the cost overrun)

Energy Charge:

Variable cost : or fuel charge

Question: Check if PPA is take or pay and covers the fuel cost under low levels of dispatch.

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