Power purchase agreement (PPA)
The user pays only for the energy consumed, at an agreed rate. The SPV owns the plant.
A fit if demand is stable and the asset should stay off the user’s balance sheet.
02 · Structuring and finance
Who owns it, who pays for it, who buys the energy
- Structure
- 1 SPVper project, with ring-fenced risk
- Contract term
- 48–180 monthsdepending on the model
- Payments
- Trustthe user’s payments service the debt first
- Precedent
- 2009first self-supply permit for a residential development in Mexico
A plant is financeable when its cash flows are predictable and its risks sit with whoever can carry them. PMI designs that structure: the project company, the contracts around it and the package that lenders and investors review.
Ways to own and pay for a plant
The user can buy energy instead of buying the plantBuild, own, operate, transfer (BOOT)
The SPV builds, operates and collects during the term; at the end, the plant transfers to the user.
A fit if the user wants long-term ownership with no upfront outlay.
Build, own, operate (BOO)
The SPV keeps the plant for its whole life and sells energy, steam or chilled water under contract.
A fit if the user wants the service, not the asset.
Energy as a service
A monthly fee for capacity, availability and operations, with contractual performance targets.
A fit if what is being paid for is continuity.
Structure
What goes into a bankable package
What lenders and investors find in the data room01
One SPV per project
Ring-fenced assets, contracts and debt, with each investor’s stake held in that company.
02
Offtake contract
Energy, steam or chilled water sold to the user at a defined rate, term and performance targets.
03
Payment trust
The user’s payments flow into a trust that services the debt first.
04
Permits and interconnection
The path and status of each filing, documented for due diligence.
05
Construction contract
Single-point design, procurement and construction, by the group company that fits the project.
06
Financial model
Cash flows, coverage ratios and sensitivities under the agreed contract terms.
Funding sources and the payment trust
Who puts in the money, and who gets paid firstCapital stack: where the money comes from
EquityInfrastructure funds · family offices · sponsors
MezzanineSpecialized funds
Senior project debtCommercial banks · development banks
↑ More risk, more expected return↓ Paid first
Payment trust: who gets paid first
- 1Operation and maintenance
- 2Senior debt service
- 3Debt service reserve
- 4Mezzanine
- 5Distributions to equity
The user’s payments go into the trust, which pays in this order before anything reaches the sponsors.
Risk is ring-fenced in each project
The SPV holds the plant, the contracts and the debt; user payments flow through a trust that serves debt first.
Takeaway
The investor assesses one asset with its own contract and cash flow, not the user’s or the group’s balance sheet.
The user pays for energy, not for the plant: that is why your company does not need to invest.
Typical project finance structure.
Precedent: Bosque Real
Huixquilucan, State of Mexico · 2009The group was chosen as strategic partner to supply power to the entire Bosque Real mixed-use development, under the first self-supply permit for a residential and commercial development in Mexico, granted in 2009.
The group designed, built and started up a 7.5 MW plant and operated and maintained it from 2009 to 2016. The plant is still operating today and remains the residences’ electricity supply.
When a structure will not work
- Without a creditworthy buyer for the energy, there is nothing for lenders to finance.
- If the user’s demand is far below the plant’s size, the contract has to be fixed first.
- If permits are still an open question, the structure waits for them.
Frequently asked questions
What is an SPV and why is it used?
It is a company created for a single project. It ring-fences the project’s assets, contracts and debt from those of its sponsors, and it is what banks and funds require in order to finance it.
Does the user have to invest in the plant?
Not necessarily. Under a PPA, BOOT, BOO or energy-as-a-service scheme, the project company makes the investment and the user pays for the energy or the service.
How long are the contracts?
From 48 to 180 months, depending on the model.
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For funds and investors: a USD 1.5 B identified energy portfolio in the Americas, 15 projects in their own SPVs with long-term contracts. Teaser under NDA.
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Feasibility, supply architecture and cogeneration studies for data centers, industrial parks and mixed-use developments, backed by the group's work since 1983.
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