Project Finance

In: Miscellaneous

Submitted By frankzhang1981
Words 1225
Pages 5
Lomond Power

Q1. For this captive mine power plant, what contract structures would you expect to see in the Power Purchases Agreement? (From the perspective of Lomond Power)
The Power Purchases Agreement should cover the following items to make the certainty of the contract to mitigate the market risk.
Term: the project’s output is only sold to one offtaker, Maud Gold Mine. The strength of offtaker and its technical or strategic are assessed. The term of PPA is based on the life of Maud’s Gold Mine. Hence, the term of the contract is 12 years. The condition and amount about bonuses and penalties should be including in the PPA.
Project Date: commencement and completion date. This also includes the transition during commissioning.
Quantity of the product: since App proposes to use an LM6000 aeroderivative gas turbine packages which can produce 32-36MW from the S&S package. The capacity assurance S&S guaranteed the 95% availability
Price & Payment: the price should also be included in the Power Purchase Agreement to mitigate the market risk. And the payment method should also be included, such as: ESA or annuity.
Security and default: If completion is not achieved by a fall-out date, then completion guarantees and other supports may be triggered by a default. If fail to pay the interest and repay the debt, then legal security may be exercised. The financiers have right to get indemnity from the delay-in-startup and liquidated damages insurances.
Risk taker: the PPA should also cover which party takes what kind of risks. The general rule is that the party who can deal with it should take the risk. And the Dispute resolution should be including in the PPA in order to deal with the dispute once something in the contract goes wrong. PPA should make-up method when force majeure deferral occurs.
Q2. If you were to specify the scope of work for an Independent…...

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