Energy News – Power Purchase Agreements in Bulgaria

Energy News – 82nd Issue-Power Purchase Agreements in Bulgaria

  1. Editor’s note
  2. MOU on the coupling of DAM of North Macedonia, Greece, Albania and Kosovo by Blerta Topore
  3. Power Purchase Agreements in Bulgaria by Apostolos Christakoudis

The Power Purchase Agreements (PPA) is a legally binding contract that sets out the
conditions under which a power plant sells electricity directly to a buyer for a certain period
of time. This article presents some of the main terms of such PPAs in Bulgaria.

According to the Bulgarian Energy Trading Rules, PPAs may be concluded between different
parties such as electricity producers, power exchange operators, district network
operators, and energy consumers. The object is the sale, purchase, delivery, and
acceptance of electricity.

Some of the main terms are:

Conditions precedent (CPs): PPAs typically contain some conditions that must be met in
order for such agreement to be fully effective, such as testing, or concluding an access
agreement with a network operation. Other CPs may be related to construction,
commissioning, financing, licensing, etc. Subsequently, the responsibilities of the parties
and termination conditions in case of failure to meet the CPs are regulated

Electricity price: In the Republic of Bulgaria, the electricity prices in the PPAs may, in
general, be regulated by the State Energy and Water Regulatory Commission (EWRC); or
be the result of free negotiation; or be set by methods approved by EWRC. At freely
negotiated prices, the parties may choose a fixed price, or a price determined according
to a formula that can be linked to market prices.

Duration of the contract typically covers 10 to 25 years and is often tailored to the duration
of the seller’s project financing conditions.

Mitigation of contractual risks particularly applies to the following:

Regulatory and policy changes: Changes in government policies, and regulations,
combined with changes in market dynamics, can affect the financial viability of the
project during the term of the agreement. In such cases, the parties may wish to
include in the PPA the possibility of renegotiating the price or other conditions so
that such events do not make the PPA inoperative;

Contractual non-compliance: Non-compliance with PPA terms and conditions may
cause penalties, legal disputes, or even termination of the agreement; and

Force majeure: Unforeseen events, such as natural disasters, may disrupt the
operation of the power plant or the ability of the electricity buyer to pay and/or
accept the quantity supplied, leading to potential conflicts. It may be advisable for                                                                                                                                                      
the PPA to include clauses allowing both parties to claim force majeure relief if the
events are beyond the control of the seller preventing it from producing electricity;
or in case the buyer uses reduced quantities or fails to pay the price.

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