Structuring Contract Incentives and Penalties

In addition to the videos I have included a set of power point slides below that describe the various contracts in project finance along with nuanced and subtle theoretical issues.  Examples of issues associated with contracts include:

  1. The tradeoff between IPP and off-taker costs in designing targets, penalties and incentives for availability and delay liquidated damages;
  2. Economic distrotions that can occur when contract heat rates are used to dispatch plants and those heat rates are different from actual heat rates that represent the use of resources;
  3. Problems from incorrectly measuring fixed and variable costs in contracts;
  4. Distortions in operating a plant when a single-price tariff is applied that covers both capital and operating costs;
  5. The meaning of indexed tariffs that results in declining real price;

The power point slides can be downloaded below.

 Power Point Slides on Details and Nuances of Project Finance Agreements

Power Point Slides that Describe Issues Associated with Contracts in Project Finance including Contract Excerpts