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⚡ Demystifying Power Purchase Agreements in Cambodia: A Strategic Guide for Energy Investors

As Cambodia accelerates its transition toward clean and reliable energy, Power Purchase Agreements (PPAs) have become the cornerstone of bankable energy infrastructure. Whether you’re developing a solar PV farm, wind park, LNG facility, or battery energy storage system (BESS), securing a well-structured PPA is essential to unlocking financing, mitigating risk, and ensuring long-term project viability.

But what exactly is a PPA in the Cambodian context? How is it negotiated, structured, and enforced? And what role does it play in the broader investment and regulatory landscape?

This guide breaks down the PPA process in Cambodia—from legal foundations to negotiation strategies—to help foreign investors navigate the energy market with confidence.

🧾 What Is a Power Purchase Agreement (PPA)?

A Power Purchase Agreement (PPA) is a long-term contract between a power producer (the investor or project company) and an offtaker (typically Électricité du Cambodge (EDC), Cambodia’s state-owned utility). The PPA defines the commercial terms under which electricity will be sold, including:

Tariff structure (capacity and energy charges)
Contract duration (usually 20–25 years)
Delivery obligations and penalties
Payment terms and currency
Risk allocation and dispute resolution

In Cambodia, the PPA is often paired with an Implementation Agreement (IA) signed with the Royal Government of Cambodia (RGC), represented by the Ministry of Mines and Energy (MME) and the Ministry of Economy and Finance (MEF). Together, these agreements form the legal and financial backbone of the project.

🏛️ Who Are the Key Stakeholders?

Understanding the institutional landscape is crucial. The main players involved in the PPA process include:

EDC – The primary offtaker and grid operator
MME – Oversees energy policy and project approvals
MEF – Provides fiscal oversight and sovereign support
CDC – Issues investment licenses (QIP status)
Developers and IPPs – Independent Power Producers (foreign or local)
Lenders and Investors – Banks, DFIs, and equity partners

Each stakeholder plays a role in shaping the PPA’s structure, risk profile, and enforceability.

📋 Key Components of a Cambodian PPA

Let’s break down the core elements of a typical PPA in Cambodia:

1. Contract Duration

Most PPAs in Cambodia span 20 to 25 years, aligning with the asset life of solar, wind, and thermal plants. This long-term horizon provides revenue certainty for investors and lenders.

2. Tariff Structure

PPAs typically include two pricing components:

Capacity Charge – A fixed payment for making generation capacity available, regardless of actual dispatch.
Energy Charge – A variable payment based on the amount of electricity delivered.

Tariffs are usually denominated in USD and may include indexation clauses to adjust for inflation or fuel prices (for LNG or hybrid projects).

3. Take-or-Pay Clause

EDC often commits to purchasing a minimum amount of electricity, even if it’s not dispatched. This take-or-pay mechanism ensures a stable revenue stream for the developer.

4. Performance Guarantees

The PPA may include penalties for:

Delays in commercial operation
Underperformance or low availability
Breach of technical standards

These clauses protect the offtaker while incentivizing operational excellence.

5. Force Majeure and Termination

The agreement outlines procedures for handling unforeseen events (natural disasters, political unrest, etc.) and conditions under which either party can terminate the contract.

6. Dispute Resolution

Most PPAs include international arbitration clauses, often under the Singapore International Arbitration Centre (SIAC), to reassure foreign investors and lenders.

📈 Why PPAs Matter for Project Bankability

A well-structured PPA is not just a legal formality—it’s a financial instrument that underpins the entire project. Here’s why:

Revenue Certainty – Predictable cash flows enable debt servicing and equity returns.
Risk Mitigation – Allocates technical, market, and political risks between parties.
Financing Access – Lenders require a bankable PPA before committing capital.
Regulatory Compliance – Aligns the project with national energy planning and procurement frameworks.

In short, the PPA is the linchpin of project finance in Cambodia’s energy sector.

🔄 The PPA Process in Cambodia: Step-by-Step

Here’s how a typical PPA is developed and executed:

1. Project Proposal and Feasibility

The developer prepares a detailed proposal, including technical specs, financial model, and environmental assessments. This is submitted to MME and EDC for review.

2. Letter of Intent (LOI) or Memorandum of Understanding (MoU)

EDC may issue a non-binding LOI or MoU to express interest in purchasing power from the proposed project.

3. Negotiation of PPA and IA

Once the project is deemed viable, the developer enters into negotiations with EDC (for the PPA) and MME/MEF (for the IA). This stage involves:

Tariff discussions
Risk allocation
Legal drafting and review

4. Government Approvals

The draft PPA and IA are submitted to the Council of Ministers for final approval. This may involve inter-ministerial consultations and legal vetting.

5. Signing and Financial Close

Once approved, the agreements are signed, and the developer proceeds to secure financing, finalize land acquisition, and begin construction.

🌍 Cambodia’s Evolving PPA Landscape

Cambodia’s approach to PPAs is evolving in response to global trends and domestic needs:

From Bilateral to Competitive Procurement – The government is increasingly using international tenders for solar and wind projects to ensure transparency and cost efficiency.
Integration of Energy Storage – New PPAs may include provisions for Battery Energy Storage Systems (BESS)to enhance grid stability.
Hybrid Models – Some projects combine solar, biomass, or LNG with storage or backup generation, requiring more complex PPA structures.
Cross-Border Power Trade – Cambodia is exploring regional power integration with Thailand, Vietnam, and Laos, which may lead to multi-party PPAs in the future.

🤝 How I Support Investors in Securing Bankable PPAs

As a Cambodian investment advisor with deep experience in energy, infrastructure, and regulatory navigation, I help foreign investors:

Engage with EDC and MME to initiate PPA discussions
Structure commercially viable proposals aligned with national energy priorities
Negotiate tariff terms that balance investor returns with affordability
Coordinate legal reviews to ensure bankability and compliance
Align PPA timelines with land acquisition, licensing, and financing milestones

Whether you’re developing a solar PV project in Kampong Chhnang, a wind farm in Mondulkiri, or a BESS facility near Phnom Penh, I ensure your PPA is not just signed—but structured for long-term success.

📚 Additional Resources

📩 Ready to Structure a Bankable PPA in Cambodia?

Cambodia’s energy sector is open, ambitious, and evolving. With the right guidance, you can secure a PPA that not only meets regulatory standards but also unlocks financing and long-term profitability.

Let’s connect to explore how I can support your investment journey—from feasibility to execution.

🔗 Contact Me