Capacity Payment Protection for Independent Power Producers (IPPs)

Many power sales agreements have pre-determined capacity payments to cover an entity’s fixed charges, including debt service payments. These fixed payments are generally subject to the project meeting its obligation to deliver power when scheduled. In some contracts, an availability target will be set for a monthly or quarterly period, when the capacity has the greatest value.

Our Long Term Outage program covers these capacity payments after a pre-specified waiting period, for example, 45 or 60 days. The Long Term Outage program can be structured in line with payment obligations, for example, having a larger payout during the summer peak season when power has greater value. Likewise, through use of dollar deductibles, waiting periods can be reduced to protect you in the event of multiple events.

PowerBacker^SM has been structured to complement this product by covering aggregate availability over a term, instead of through a waiting period mechanism. PowerBacker can also be structured to indemnify a customer with a fixed payment instead of a “market-based” payout for a short time period, compared to the Long Term Outage program which is intended for longer term events.

ACE Power Products has protected customers with a fixed indemnification when availability falls below an acceptable level through PowerBacker. For example, one customer protected its capacity payment that was heavily weighted in the summer season. For each percentage point that availability fell below 90 percent, ACE would reimburse the customer 10 percent of its capacity payment. When availability fell below 80 percent, indemnification would cover a large portion of the fixed expenses and contractual obligations (note, coinsurance was included to ensure proper incentives to maintain unit performance).

Example of this coverage:

Insured Event:	Unplanned Outage of 500 MW combined cycle unit
Indemnification:	$15/MWh for each hour
Waiting Period:	60 calendar days

Claim Settlement

Insured Event:	Unplanned Outage lasting 120 days
Claim:	500 MW Multiplied by $15/MWh * 24 hours per day * 60 calendar days       (in excess of 60 day waiting period) $10.8 million

To learn more about these customized solutions call us directly at 1 800 356 2827 or call your insurance broker.