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.