OREANDA-NEWS. Fitch Ratings has published a new special report: 'Brazilian Solar PPA Structure'. The report describes the key elements related to volume and price risks for solar PV projects in that country, and how that translates to revenue volatility.

The standard power purchase agreement (PPA) under energy reserve auctions for solar photovoltaic (PV) draft has been made public and is applicable to all regulated solar PV projects.

The report discusses the structural mechanisms present in the PPAs affecting revenue predictability and describes how annual settlement payments work when energy volumes are lower or higher than the volume sold in the PPA.

'The degree of cash flow volatility for a Brazilian solar project is mostly driven by the volume of energy sold, either at P-50 or P-90 levels, as these projects are not exposed to spot prices,' said Victor Tamega, Associate Director in the Global Infrastructure and Project Finance Group, based in Brazil.

Fitch describes the main differences between PPAs for the nascent solar PV sector in the country in contrast to wind project PPAs.

'Solar PV projects will not benefit from quadrennial measurement periods present in wind PPAs which smooth out revenues in the event of production shortfalls.' said Tamega.

In addition, the report briefly touches on how revenue and price risks in these PPAs are measured in the context of Fitch's global 'Rating Criteria for Solar Power Projects,' and how that may affect ratings assigned to solar PV project debt in Brazil.