Similarly to under the EPC and O&M arrangements, the Project will attempt to pass as much risk through to the Operator as possible.
This is achieved through the following:
- Fixing prices in advance, or, if not feasible, indexing them in the same manner as the fuel-pass-through revenue component of the offtake price (or water, etc, as applicable)
- Any compensation for risks outside of the control of the supplier which the supplier may enjoy will typically be limited to the compensation which the project enjoys from the offtaker. This is typical for, amongst other provisions, force majeure and change in law
- Any provisions which may lead to termination of the offtake contract, or any of the project’s other contracts, will, to the extent applicable, be mirrored in the supply contract, often with a slightly more onerous threshold, so that the project can terminate the supplier before the other contract is terminated and attempt to fix the situation.
- The supplier will pay liquidated damages at a pre-defined rate per day of plant unavailability resulting from failure to supply, or, if applicable, upon failure to meet the guaranteed quality specifications of the goods supplied (e.g. calorific value of coal supplied to a coal power plant). These liquidated damages are typically capped, and usually guaranteed by either a liquid, on-demand bank performance bond or a parent company guarantee.