Nontraditional Offtake Strategies for Renewable Energy: Avoiding Landmines in Contract Structuring and Financing

The steady increase in the demand for renewable energy requires alternatives to the customized traditional 20-year power purchase agreement (PPA) to meet delivery requirements. Nontraditional offtakers can meet these demands with alternative contract forms, shorter contract periods, risk shifting, and other items beneficial to the energy project company and the purchaser while still ensuring a revenue stream to support the project. Energy counsel must understand the nuances of these complex contract structures, efficient alternatives, the associated risks and mitigation strategies, and available financing approaches.

An offtake agreement is an arrangement between the project company and the party buying the energy and related products that the project will produce and deliver over time. These arrangements traditionally have been through customized PPAs with terms ranging from 20 to 25 years. The transaction costs and risks associated with these long-term contracts have forced projects, utilities, and investors to consider other methods that will lower costs, limit the risk and offer shorter terms while securing revenue. Available alternatives, such as corporate PPAs, on-bill credit purchase agreements, renewable energy certificate agreements, and other forms of agreements, energy hedge agreements, and proxy revenue swaps, must may be considered.

The effectiveness of any nontraditional offtake structure and financing hinges on a complete understanding of key terms, attributes and regulatory implications applicable to an energy project.

Listen as our panel provides an analysis of the available nontraditional offtake arrangements, financing mechanisms, key terms and provisions to minimize risks, and other items essential to the use of offtakes for renewable energy.

1. Risks and limitations of traditional PPAs
2. Alternative offtake arrangements options
3. Structuring and financing nontraditional offtakes
4. Best practices to minimize risks and ensure regulatory compliance

The panel will review these and other key issues:

• The associated risks of traditional PPAs and other long-term contracts in renewable energy
• Available nontraditional offtake arrangements for renewable energy
• Contract structures and financing mechanisms for nontraditional offtakes
• Traditional PPAs vs. corporate PPAs and other credit purchase agreements their pros and cons
• Key terms and provisions to minimize risks associated with offtake agreements