Off-taker Covenant: How Your Credit Rating Affects Your PPA Tariff
Why a £20m revenue business pays a different PPA tariff to a £200m business — and how to negotiate when your covenant is the constraint.
How off-taker covenant affects PPA pricing
PPA providers fund their SPV with senior debt (60-70% of capex) + equity. The debt provider underwrites the off-taker's 20+ year payment stream. The stronger your covenant, the cheaper their debt, the lower the tariff they can offer you.
The five covenant tiers
| Tier | Examples | Tariff impact | Term flexibility |
|---|---|---|---|
| Investment-grade rated | FTSE 100/250, NHS Trusts | Headline tariff | 25-year flexible |
| Strong unrated | Top-50 private cos with audited accounts | +0.5-1 p/kWh | 20-year typical |
| SME with parental guarantee | Mid-size with strong parent | +1-2 p/kWh | 15-20 year |
| SME no guarantee | Most £5-20m revenue | +2-4 p/kWh or shorter term | 10-15 year |
| Sub-investment-grade | Loss-making, distressed, single-customer concentration | Usually no deal | — |
How to strengthen your covenant
- Group guarantee from stronger parent — most common workaround
- Step-up tariff (lower year 1, rising — provider takes more risk later)
- Letter of credit or cash deposit (3-6 months expected payments)
- Shorter contract term to reduce provider risk window
- Investment-grade joint guarantor (e.g., council guarantor on SME deal)
What providers actually look at
Beyond the credit rating, providers underwrite:
- 3-year revenue trajectory (declining = red flag)
- Customer concentration (top 3 customers > 60% revenue = risk)
- Industry forward exposure (energy-intensive = strength if you NEED solar; commodity-priced = risk)
- Site lease/freehold tenure (must exceed PPA term + buffer)
- Management stability + governance
See what tariff your site qualifies for
A 60-second form gives us enough to match your site to providers and return an indicative tariff range within one working day.
Get an indicative PPA tariffIf the term itself is new to you, start with what an offtaker is and what the role commits your business to.
Also worth reading
Get your site assessed for a solar PPA
Off-taker Covenant: How Your Credit Rating Affects Your PPA Tariff — tell us about your site and we'll return an indicative p/kWh tariff for it. Reply by email within one working day.