Category: Legal

Step-in Rights: When the Lender Takes Over Your PPA

Lenders to PPA SPVs reserve step-in rights — meaning the funder can replace the operator if the SPV fails. What this means for off-takers.

What step-in rights are

Senior lenders to a PPA SPV reserve step-in rights — meaning if the SPV defaults on its debt, the lender can replace the operator (the SPV's management) to protect the cashflows from your kWh payments.

Why it matters to off-takers

You signed a PPA with Provider X. Three years in, Provider X's parent fund goes into distress. The lender steps in. Your contract continues — but now with a different counterparty managing day-to-day operations.

What good step-in rights look like for off-takers

• Notification requirement: you're told before step-in happens, not after
• Continuation of service: O&M, monitoring, REGO administration uninterrupted
• Performance ratio guarantees survive step-in
• Replacement operator must meet credit minimum
• Right to terminate if step-in operator fails to meet contractual standards

Watch-out clauses

• "Pay direct to lender" clauses — diverts your payments mid-contract
• "Waiver of set-off" — prevents you from offsetting performance failures
• Force-majeure carve-outs that wouldn't apply to step-in operator

Recent step-in cases

UK has seen 3-4 notable step-ins since 2022 — primarily where SPV parents over-extended into utility-scale rather than commercial. Off-taker contracts continued without interruption in all cases.