The Impact of electricity on project financing of 'Greenfield' merchant power development
Article from: OGEL 3 (2003), in Electricity Law and Regulation
Summary
Electricity trading in a liberalised market is subject to high market volatility resulting in no guarantee as to sale of a plant's output and at a price which will cover the fixed and variable cost of the plant. This causes serious concern for building a new plant in that market on a project finance basis. Traditionally lenders would have been satisfied as to the power project's financial viability because of a secure long-term off-take contract, the Power Purchase Agreement (PPA). Liberalisation has seen the near disappearance of these contracts. A new breed of risks ...