Often a Commercial, Industrial, or Institutional Energy User contacts an EPC, Investor, Developer, or IPP requesting that they build, own, and finance a solar project and then lease the energy output monthly at an agreed discounted rate for 10-25 years to the offtaker/end user instead of buying and financing the project themselves.
Even the best companies who have a robust business today may run into unforeseen financial, labor, or market challenges which may impact their future ability to pay for the contracted output for which they originally signed up. Therefore, an energy provider may require in their PPA that the offtaker / end user purchases a performance and payment bond or solely a payment bond. In the event of contractual default, the bond will reimburse the energy provider up to a mutually agreed upon penalty sum, for sustained lost income and for a settlement in the form of liquidated damages which may include a provision for legal fees and project decommission. The project decommission feature reimburses the energy provider to disassemble the solar project and employ the usable materials on another project while being reimbursed for labor and materials that cannot be reused. All of these sums can be negotiated and settled upon, clearly delineated and inserted in the PPA. A surety bond guarantees that these payments will be made in the event that the offtaker / end user goes out of business or no longer has the ability to pay for the amount of energy for which they originally contracted.
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