PPA Mechanics

Off-taker Covenant: How Your Credit Affects Your PPA

PPA providers are non-recourse lenders to your kilowatt-hours for 15-25 years. Your covenant rating directly drives the tariff they can offer.

What "off-taker covenant" means

The PPA SPV raises capital based on the certainty of your future kWh payments. The stronger your credit (the lower the chance you'll default on monthly bills), the cheaper their capital, the lower the tariff they can offer.

The covenant ladder

Tier	Examples	Tariff impact
Investment-grade rated (BBB- or better)	FTSE 100/250, NHS Trusts, major retailers, councils	Headline tariff
Strong unrated	Top-50 private companies, established mid-caps with audited accounts	+0.5–1 p/kWh
SME with parental guarantee	Mid-size with a strong UK or international parent	+1–2 p/kWh (or no deal without guarantee)
SME no guarantee	Most £5–20m revenue businesses	+2–4 p/kWh or shorter term required
Sub-investment-grade	Loss-making, distressed, or single-customer-concentration	Usually no deal

How to strengthen your covenant for the PPA

• Group guarantee from a stronger parent (most common).
• Step-up tariff in the early years (provider takes more risk later when your covenant has hopefully strengthened).
• Letter of credit or cash deposit (typically 3–6 months of expected payments).
• Take a shorter contract to reduce the provider's risk window.