Under a pre-paid PPA, the purchaser of the power pays for a portion of the expected power generation up front and then pays a reduced monthly amount for the remaining power and environmental attributes. The term sheet is non-binding, and either party can end discussions at any time, for any reason, without liability to the other party.
Pre-paid PPAs are structured to take advantage of the municipalities’ ability to borrow at favorable rates to purchase power up front at a reduced rate. This allows the municipalities to improve the economics of the transaction and provide greater price stability over the life of the agreement, as well as provide greater access to renewable energy projects. In turn, a pre-paid structure allows developers like Raser to secure funding for their projects from an alternative source in challenging economic times. The pre-paid PPAs would provide Raser with greater flexibility for planning and developing its commercial geothermal power projects.
Richard Clayton, executive vice president for Raser, said, “We are excited to have signed this term sheet and be nearing completion of negotiations for this significant power purchase agreement with SCPPA. We have had productive discussions with SCPPA to date and hope to finalize the PPA in the near future.”
