Cross-border IPPs and the PPA that must survive two regulators

Independent power producers operating across jurisdictions live with a problem that the project finance community has not yet solved elegantly. The Power Purchase Agreement — the single most important document in the project's life — often has to survive regulatory review in two places: the country where the plant sits, and the country where the offtake is denominated, priced, or ultimately recovered.

The conventional approach is to draft for one regulator and edit for the other. This approach reliably produces drafts that satisfy no one. Tariff methodologies differ. Fuel supply arrangements are recognised differently. Sovereign guarantee architectures are treated differently. Force majeure allocation, currency provisions, and dispute resolution venues are all points where a regulator trained in one jurisdiction will find fault with a clause that passed review in another.

Working on a PPA from the beginning with both regulatory frameworks in mind changes the draft. Tariff is structured so that the methodology survives in either jurisdiction — typically by separating the pass-through components from the recovered capital components in a way that both regulators recognise. Fuel supply is drafted so the sovereign-risk allocation is explicit, not implied. Dispute resolution is drafted for a neutral venue that both countries' courts will enforce.

The point is not that this is easy. The point is that this work belongs at draft one, not at the diligence stage. A PPA that has already survived cross-regulatory review when lender diligence begins shortens the financing process by months. A PPA that begins that review in diligence can end the financing process entirely.