What security does a PPA producer ask from the buyer?

Sooner or later in a PPA talk, the producer asks for your annual accounts. It can feel like a test. It is really about the bank behind the plant, and knowing what they look for makes the talk shorter.

Why the producer asks

A new solar or wind park is mostly paid for with a loan, and the bank lends against the PPA. Your payments are what the bank expects to be repaid from. So the bank wants to know that you can pay for every year of the contract, not just the first one. A large electricity supplier is easy to judge. A company that buys for its own use raises more questions, especially without a credit rating, so the producer often asks for security.

What they look at

• A credit rating, if you have one.
• Your annual accounts: equity, debt and how stable the earnings are.
• How long the contract runs. The further out, the harder your credit is to judge.
• How much is at stake: the volume, and what the producer would lose if it had to sell elsewhere.

The usual forms of security

• A parent company guarantee. A stronger company in your group answers for your payments. It is a common answer when the buying company itself has a low rating or none.
• A bank guarantee or letter of credit. Your bank promises to pay if you don’t. The producer will want a bank with a good rating. It costs you a fee to the bank and uses part of your credit lines.
• Nothing at signing, with a trigger. A strong buyer may provide no security at first, but has to if its rating or key figures fall below an agreed level.

The amount is negotiated. It is normally measured in months of expected payments, not the value of the whole contract.

Four ways to need less security

1. A shorter term. Fewer years for the producer to be exposed to you. See how long a PPA should be.
2. A plant that is already running. Its financing is in place, so there is no bank asking for a long, secured contract.
3. A share instead of the whole plant. In a pool each buyer is assessed on its own share. See pooled PPAs.
4. A supplier in the middle. When an electricity supplier signs the PPA and passes the power on, the producer’s exposure is to the supplier. You deal with the supplier on its usual terms instead.

What to settle in the contract

• Which form of security, and from whom.
• How large it is, and whether it changes as the contract runs.
• What triggers a call for more security, and how long you have to provide it.
• That the producer’s own obligations are secured too, for example if the plant is late.

The ten terms every Nordic PPA has to settle lists the usual options for each.

Where Symbolon fits

Symbolon is a PPA broker in the Nordics. We raise the question of security early, and match you with plants and structures where it fits your balance sheet, before anyone has spent months on price. It is free for buyers. See how Symbolon works for buyers.