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Structuring Virtual Power Purchase Agreements: Transaction Risks, Regulatory Considerations

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Wednesday, November 2, 2022

Recorded event now available

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This CLE course will discuss structuring large corporations' virtual or financial power purchase agreements (PPAs). The panel will guide counsel on the different factors when structuring virtual PPA transactions, how they compare to physical PPAs, benefits for purchasers, available risk mitigation strategies, and an overview of the shifting regulatory environment impacting these transactions.

Description

PPAs, a mainstay of the renewable energy landscape, are contracts for selling electricity and the associated renewable energy certificates (RECs) to a corporate or industrial buyer by a developer or project owner. For corporate entities, PPAs can be powerful tools in providing a long-term hedge against volatile energy prices and achieving sustainability goals.

Unlike physical PPAs, where the buyer (or off-taker) takes legal title and delivery of the energy and RECs, virtual PPAs allow the buyer/off-taker to provide financial support for the power output at a fixed price and retain the RECs without taking actual delivery of the power. The seller typically liquidates the energy at market-level pricing to a third party and transfers any net revenue generated to the VPPA buyer.

While PPA transactions are increasingly common in the marketplace and virtual PPAs may avoid some risks associated with retaining title to purchased energy, there remain significant regulatory and risk factors to address to realize these deal's financial, environmental, and transactional benefits structures.

Listen as our panel of expert practitioners offers best practices for structuring virtual PPAs, critical terms for inclusion, and the best way to mitigate the risks inherent to these transactions.

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Outline

  1. Understanding virtual PPAs
    1. Overview of PPAs generally
    2. Comparison to physical PPAs
    3. Master or umbrella PPAs with individual confirmations
    4. Typical transaction cycle
  2. Regulatory considerations
    1. Federal Trade Commission
    2. Securities and Exchange Commission
    3. Dodd-Frank and Consumer Protection Act/CFTC
    4. Department of Treasury guidance and impact of recent federal tax law changes (Inflation Reduction Act)

Benefits

The panel will review these and other relevant issues:

  • What regulatory hurdles exist to successfully closing a virtual PPA transaction?
  • What are some benefits of a virtual PPA compared to a physical PPA for corporations?
  • How will recent legislation affect these agreements?
  • How can corporate off-takers best mitigate risk in virtual PPAs?
  • How are risks evaluated and mitigated?

Faculty

Lowder, Darin
Darin Lowder
Partner
Foley & Lardner

Mr. Lowder is a partner and member of the firm’s Finance Practice. Although his practice extends to all aspects...  |  Read More

Lowther, Frederick
Frederick M. Lowther
Senior Counsel
Blank Rome

Mr. Lowther devotes his career primarily to the development of large energy and natural resource projects in the U.S....  |  Read More

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