At a Large Independent Power Producer (IPP), months of work went into negotiating a long-term Power Purchase Agreement (PPA) worth hundreds of millions of dollars. Multiple departments—including legal, finance, and development—reviewed the agreement in detail. On the surface, it appeared secure and bankable.
However, buried deep within the PPA was a single sentence: “If Commercial Operation Date has not occurred by the Outside Date, Buyer may terminate this Agreement without liability.” During the handover process to asset management, the development team assumed that this would be an obvious milestone in the contract to meet. However, the Asset Manager had 19 projects to manage (many of them had cash shortfalls, force majeures, and liquidated damage issues), and simply missed this one compliance item in a hundred page long contract. It was unfortunate, because the market had shifted and the buyer wanted to terminate the PPA. This overlooked provision gave the offtaker unilateral authority to cancel the entire contract. The result was a forced renegotiation under unfavorable terms, jeopardizing expected revenues and financing arrangements.
Why This Matters
This case illustrates the magnitude of risk tied to compliance items hidden in complex agreements. Missing even a single clause can create exposure in three key areas:
– Revenue Loss – Cancellation or renegotiation can eliminate years of projected cash flow.
– Financing Instability – Lenders hesitate when contractual certainty is compromised.
– Operational Disruption – Projects stall when critical terms are challenged.
The Importance of Compliance Tracking
The Large IPP example is not an isolated incident. Renewable energy companies face similar risks across a wide range of documents—from PPAs and EPC contracts to O&M agreements and interconnection deals. Each contains hundreds of pages where critical compliance items may be overlooked.
Identifying, extracting, tracking, and setting reminders for compliance items is therefore essential. A robust compliance process ensures that obligations, deadlines, and risk clauses are visible and actionable, reducing the likelihood of missed language leading to cancellation or costly disputes.
Key Takeaways
– Every sentence matters in complex energy contracts.
– Systematic compliance item management reduces legal and financial exposure.
– Proactive tracking and reminders protect companies from costly oversights.
For renewable energy stakeholders, the ability to capture and act on compliance obligations is no longer optional—it is a strategic necessity.
ClauseSense by ContractPower
ClauseSense ensures that no critical obligation gets overlooked. By automatically identifying compliance items buried in lengthy contracts, it transforms them into actionable tasks that can be tracked, assigned, and reminded. Whether it’s a termination right, notice requirement, or key date, ClauseSense provides visibility and accountability—protecting projects from the costly consequences of missed language.
