Geneva, 30 January 2017: Presented by AkzoNobel, LafargeHolcim, Solvay and PwC, the purpose of the new guidance is to help power-purchasing companies understand the basics of International Financial Reporting Standards (IFRS) as they relate to corporate PPAs.
The idea is to help companies identify the potential accounting and financial reporting consequences of entering into a PPA.
This is because as part of their sustainability strategies, companies across the globe buy renewable power by entering PPAs directly with renewable energy generators. Corporate PPAs have many different forms and contain their own specific contract clauses that impact accounting and financial reporting.
This guide helps keep them clear.
Corporate renewable PPAs are contracts that contain the commercial terms of the purchase of renewable energy, such as the contract period, point of delivery, delivery date, times, volume, price and product. They are often extensive contracts and include a myriad of clauses and advanced price mechanisms that can increase accounting and financial reporting complexity.
“Renewable power PPAs are economically attractive because they reduce our carbon exposure and diversify our power sourcing, reducing our risk profile” says Joost Sandberg, renewable energy development manager at AkzoNobel. “As we are entering in more renewable PPAs across the globe, the thorough analysis of accounting matters helps determine the best PPA structure.”
In addition, “PPAs are attractive for corporates to reduce their scope 2 emissions but also because they offer a competitive alternative to regular power sourcing and limit exposure to power prices volatility” says Alexis Manuel, renewables manager at Solvay.
The main tool of the guidance is a decision tree which illustrates the possible accounting treatments for PPA contracts. The decision tree helps determine what contractual elements must be evaluated to establish the most appropriate accounting of a PPA.
For energy buyers interested in corporate renewable PPAs across the world, companies are invited to refer to the related publication “Corporate Renewable Power Purchase Agreements – Scaling up globally”