Payment Mechanisms

The payment mechanism is such that no revenue is available to the Project Company until the asset is complete and the transmission line is in operation. This incentivises the Project Company to complete the construction phase in the agreed time.

The Project Company base transmission revenue is set in the PPP contract, where it is referred to as the "allowed annual revenue" (RAP). The RAP is adjusted annually to take into account inflation, deductions and any other additional revenue (for example authorised expansion of the facilities). The RAP is broken down into monthly payments, and then further reviewed every five years to take into account of any scope changes requested by the Procuring Authority, any instances of force majeure and certain other changes.

The deductions to the RAP are calculated using a mechanism referred to as the "PV". The deductions are calculated on the basis of duration of any unavailability of facilities, revenue of the facilities which are out of service, and also take into account whether the outages were planned or unplanned. The deductions are adjusted monthly and their annual cumulative total is limited to 12.5% of the RAP.

The Grid Operator (rather than the Procuring Authority itself) is responsible for paying the Project Company the base transmission revenue. The issuing of monthly bills to these users is also the responsibility of the Grid Operator, which takes demand risk, and any non-payment of power bills should not affect the Project Company's revenue. The risk of non-payment of bills is low, as there is a large number of payers, and these groups are incentivised to pay their bills as failing to do so would result in a withdrawal of service.

Additional to base transmission payments, the Project Company is allowed to generate revenue from other sources by providing transmission related services to third parties, on the condition that the profits are shared with the grid users in the form of reduced bills in the following months. The payment for the transmission related services provided also comes from the users and beneficiaries of the transmission line, specifically power generating companies, distribution companies as well as certain consumers of power (such as industrial users).