Document background
The Physical Power Purchase Agreement (PPA) is a fundamental document in Saudi Arabia's energy sector, used to establish long-term contractual relationships between power generators and purchasers. This agreement has become increasingly important as Saudi Arabia diversifies its energy mix under Vision 2030, accommodating both conventional and renewable energy projects. The document serves as the primary commercial instrument defining the terms of power sale and purchase, including technical specifications, operational requirements, pricing mechanisms, and risk allocation. It must comply with Saudi Arabian law and ECRA regulations while addressing specific market conditions and grid requirements. The agreement is particularly crucial for project financing, as it provides the revenue security needed for large-scale power projects. Typically used for periods of 15-25 years, the PPA needs to balance the interests of power producers, off-takers, and lenders while ensuring alignment with Saudi Arabia's energy policy objectives.
