Principles of Project Finance

may seriously delay the project and affect its overall viability.

• The cost of the product or service sold under a Project Agreement is not

competitive (or is likely to become uncompetitive) with current prices for the

same product or service, or too high in relation to the ability of end-users to

pay for it. The Offtaker or Contracting Authority, squeezed between the Pro-

ject Company and the end-users, will inevitably try to find a way out of the

contract.

• A power station project depends on the state power company as Power Pur-

chaser connecting the plant to the national grid system; the Power Purchaser

is obliged to pay the Availability Charge even if the grid connection is not

made. Although this is a reasonable provision for a PPA, a “white elephant” ...