1. 1 Renewable Energy Purpose of the Power Purchase Agreement (PPA) Nebojsa Arsenijevic, BREP Manager

2. 2 Advisory Services (AS)Investment Services (IS) IFC Provides Advice, Including to: Businesses Public-Private Partnerships Supporting the Private Sector IFC Investing Solutions Include: Loans Syndicated Loans Equity Finance Structured Finance Risk Management Products Local Currency Financing Private Equity & Invest. Funds Trade Finance IFC – Internal Structure

3. 3 Balkan Renewable Energy Program ComponentActivities C1Regulatory framework improvements C2Support to renewable energy sponsors (Market and company level) C3Support to financial institutions (Market and bank level) B2B workshops, Support to Associations, Knowledge sharing Promotion of new technologies Designs cross-check, Business plan preparation, Finance modelling CDM projects registration Training material development Integration of Regulatory/ Budgeting/ Engineering and Risk in the Finance Manual Country Level Workshops In-depth Training for SHPPs and PF Support in First SHPP Assessment Portfolio Analysis and Recommendation ( in the second year) Align national regulation with EU; Fulfill obligations in accordance to EC Treaty of SEE; Design appropriate incentive mechanisms; Increase transparency of concessions granting procedure (credibility); Design investment promotion tools and mechanisms for SHPPs; Increase “bankability” of projects and decrease collateral requirements; Make predictable cash flow analysis and conditions for project financing.

4. 4 PPA and Common Misunderstanding Opinion of Public Stakeholders: Off-take price and subsidizing period are already defined in the law and decrees. Why to create such a long and complex contract Opinion of Private Stakeholders: Why should I bother with several contracts (PPA, GCA, etc.). All these companies are publicly owned, they should resolve all problem among themselves.

5. 5 Main Role of PPA To allocate risks among contracting parties based on the following criteria: Who is able to manage specific risk (sometimes it is only one party) If both parties can manage specific risk – who can do it with lower cost.

6. 6 Risks Public Stakeholders: Change in Law Currency risk Physical off-take (not linked with the PPA, but with the GCA) Financial off-take Private Stakeholders: Project development Financial closure Construction Operation and maintenance Risk of “fuel” availability (wind, solar irradiation, river flow, etc.)

7. 7 Change in Law (example) Change in Law that with increase or decrease development / construction / operation costs (unlike market price, FiT price is fixed, so no room for producer to express that change in product price: Introduction of balancing responsibility for RE plants Introduction of G component Discriminatory law/bylaw/rule for RE Discriminatory law/bylaw/rule for electricity producer

8. 8 Other potential improvements (no details) Additional improvements: Guarantee of payment Termination events and Termination payment Dispute resolution Direct agreement Transfer of shares Force majeure Deemed output (not part of PPA but GCA)