Securing Performance in Power Projects

Project finance should promote not only the economic
benefits of the project participants, but should
also promote the social and economic development of
that country where it is located. Investors look for
predictable legal environment in order to make
profit at lower costs; host countries, in turn, want
to obtain assurance that the project will serve its
public interest. How can the stakeholders conciliate
their interests in a power project? Power purchase
agreement based model guarantees a stable market for
the electricity produced by the power plant. This is
of highest importance for the investors, since the
power purchaser provides the sole revenue stream of
the project. However, this model does not push the
project company to develop technology and reduce the
production cost. The merchant power model provides
incentives for that, however, it does not provide
stable revenue thereby discouraging large-scale
investments. How can this problem be solved? And -
most importantly - what kind of instruments the
project participants have got to secure the
performance of the others, upon which the entire
project depends? This work aims to answer these
questions.

Autorentext
The author has graduated at the Central European
University and gained experience in the field of project finance
working as lawyer at the European Investment Bank and Hankook
Tire Hungary Ltd.