TRW & Co · Energy and projects
Power Purchase Agreements in the UAE: Structures, Tariffs and Risk Allocation
A power purchase agreement UAE projects rely on is usually a long-term contract with a state-owned buyer such as EWEC or DEWA, with a tariff bid in a tender. This guide explains the legal framework, how key risks are allocated, what corporate buyers can do instead of grid-based PPAs, and the drafting mistakes that cost projects money.
Key pointChange in law clauses often cover only sector-specific changes, so new general rules such as corporate tax or emissions reporting may not qualify for relief. Test the definition before you bid.
At a glance
Single state buyers
EWEC buys new capacity in Abu Dhabi and DEWA in Dubai, both through competitive tenders that come with draft PPAs bidders must largely accept.
Bankability drives the drafting
Lenders lend against the buyer's payment obligation, so curtailment, change in law, force majeure and termination compensation decide how much debt the project raises.
No open retail market
Grid-based corporate PPAs between private parties are generally unavailable, so businesses use on-site solar, leasing arrangements or certificate schemes instead.
Abu Dhabi certificates
The DoE issues I-REC based Clean Energy Certificates in 1 MWh units, with EWEC registering clean generation and offering certificates quarterly.
New contract law applies
UAE-law contracts concluded from 1 June 2026 fall under the new Civil Transactions Law, which affects force majeure and hardship analysis.
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The short answer: what a power purchase agreement UAE projects use looks like
A power purchase agreement UAE developers sign is, in almost every utility-scale case, a long-term contract with a government-owned single buyer. In Abu Dhabi the buyer is the Emirates Water and Electricity Company (EWEC); in Dubai it is the Dubai Electricity and Water Authority (DEWA). The buyer commits to pay a tariff, bid in a competitive tender, for the plant's capacity and output over a period that usually runs for decades.
The PPA is the document that makes the project bankable. Lenders lend against the buyer's payment obligation, so the contract's treatment of grid delay, curtailment, change in law, force majeure and termination compensation decides how much debt the project can raise and at what cost.
Corporate PPAs of the kind common in Europe, where a business buys power directly from a private generator over the grid, are generally not available in the UAE because there is no open retail market. Businesses that want renewable electricity rely instead on on-site generation, energy services contracts or certificate schemes.
The legal framework behind a power purchase agreement UAE buyers sign
Abu Dhabi: DoE and EWEC
Abu Dhabi's independent power producer programme dates from the late 1990s and was restructured in 2018. The Department of Energy (DoE) is now the sector regulator and grants generation licences. EWEC is the single buyer: it forecasts demand, tenders new capacity and signs the PPAs. The model has been tested through many financings, which is why its documents are familiar to international lenders.
Dubai: Law No. 6 of 2011 and DEWA
In Dubai, Law No. 6 of 2011 regulates private participation in electricity and water production. Generators need a licence from the Regulation and Supervision Bureau, DEWA may form project companies with private partners, including non-UAE investors, and partner selection follows rules adopted by the Supreme Council of Energy. DEWA buys the output and, in most projects, also holds equity in the project company.
Federal overlay
Federal law governs the general contract rules, the project company and the tax position. Since 1 June 2026, contracts governed by UAE law and concluded from that date fall under the new Civil Transactions Law, Federal Decree-Law No. 25 of 2025. Its rules on force majeure, exceptional circumstances and rescission sit beneath the PPA's own allocation and can fill gaps the drafting leaves open. Our guide to force majeure and hardship under UAE law explains the difference.
Climate regulation is also relevant. The climate change decree-law, Federal Decree-Law No. 11 of 2024, created emissions duties for most businesses from 30 May 2025, which is one reason demand for clean electricity and certificates is rising.
Key terms and how risk is allocated
Each power purchase agreement UAE procurers issue is drafted by the buyer and released with the tender, so the room to negotiate is narrower than in a private deal. Understanding the standard allocation lets bidders price risks they cannot move and focus clarification questions on the ones they can.
| Risk | Usual position | What to check |
|---|---|---|
| Tariff and payment | Fixed tariff bid in the tender, sometimes split into capacity and energy components, with defined indexation | Currency, indexation formula, payment security and late payment interest |
| Grid connection delay | Buyer or grid owner bears delay it causes, often through deemed commissioning or extension of time | Who builds the interconnection, notice requirements, and whether deemed payments cover debt service |
| Curtailment and dispatch | Buyer may curtail; compensation through deemed energy above agreed limits | Caps, measurement method and treatment of grid faults |
| Performance | Seller guarantees availability or output; shortfalls lead to reduced payments or damages | Degradation allowances and flow-down to the EPC and O&M contractors |
| Change in law | Relief for qualifying changes that affect costs, often only above a threshold | Whether tax changes and new emissions rules qualify |
| Force majeure | Natural and political force majeure treated differently; political events usually carry more relief | Definitions, interaction with statutory rules and long-stop termination rights |
| Termination | Compensation formulas differ by who defaults | Whether buyer default compensation covers senior debt and equity return |
Change in law deserves special attention. The UAE introduced corporate tax in 2023 and climate reporting duties from 2025, and the Civil Transactions Law changed in 2026. Bidders should ask whether a new tax, emissions charge or reporting cost would count as a qualifying change, and whether relief is through the tariff or through a lump sum.
Tariff mechanics also need careful reading. Some tenders evaluate a single levelised price, while the contract pays separate capacity and energy amounts, each with its own indexation and deductions. A bidder that models the levelised figure but not the payment mechanics can find that cash flow in the early years, when debt service is highest, is lower than expected. Run the model on the contract's actual payment formula, not only on the headline tariff.
Force majeure clauses should be read together with the governing law. Where the PPA is governed by UAE law, statutory rules on impossibility and exceptional circumstances may apply alongside the contract wording. Where the clause is detailed and the parties' intention clear, courts and tribunals usually start with the words agreed.
Payment security, lender rights and transfers
Lenders read a power purchase agreement UAE buyers sign with three questions in mind: will the buyer pay, can the lenders step in if the project company fails, and what happens to the debt if the contract ends early. The answers sit in the payment, direct agreement and termination provisions.
Payment security
Government ownership of the buyer is the main comfort, but lenders still look at how payment obligations are supported. Depending on the project, this may involve the buyer's own credit standing, government support arrangements or specific payment mechanisms in the PPA. Bidders should confirm what support is available at the tender stage, because it shapes the debt terms they can offer.
Direct agreements and step-in
A direct agreement between the buyer, the lenders and the project company lets lenders receive default notices, cure defaults and, if needed, substitute a new operator without the PPA being terminated. Cure periods, the conditions for substitution and the buyer's right to approve a replacement are the usual negotiation points. In Dubai, the state utility's role as both shareholder and buyer adds a layer: the shareholders' agreement must work alongside the direct agreement.
Transfers and change of control
PPAs typically restrict transfers of shares in the project company, especially before commercial operation, and require consent for changes of control. Sponsors planning to sell down after construction should check lock-up periods, the buyer's consent standard and any pre-emption rights held by the utility shareholder. These provisions directly affect exit value and the timing of capital recycling into new power purchase agreement UAE bids.
Corporate buyers: what is possible today
For a business that wants renewable power for its own operations, a power purchase agreement UAE style is usually an on-site arrangement rather than a grid-based sale. The main routes are:
- On-site solar under net metering. In Dubai, DEWA's Shams Dubai programme lets building owners connect rooftop solar to the distribution network, with exported electricity offset against consumption. Installation must be through DEWA-approved contractors.
- Solar leasing or energy services. A third party installs, owns and maintains equipment on the customer's site and charges for the electricity or the equipment. The contract looks like a PPA but is legally a private services or lease agreement; check whether the arrangement needs a licence or Central Bank approval if it resembles finance leasing.
- Certificates. In Abu Dhabi, the DoE's Clean Energy Certificates policy created an I-REC based scheme: the DoE issues certificates in 1 MWh units, EWEC registers clean generation and offers certificates for sale on a quarterly basis.
Each route supports a different claim. On-site generation reduces purchased electricity directly; certificates support claims about the source of grid electricity consumed. Disclosures should match what was actually bought, a point covered in our guide to ESG disclosures and greenwashing risk.
Negotiating and closing the PPA: the process
- Review the draft PPA in the tender pack. Identify every provision lenders will raise: payment security, deemed energy, change in law, force majeure, termination compensation, assignment and direct agreement rights.
- Use the clarification rounds. Submit precise questions and proposed wording. Answers issued to all bidders often become part of the contract, so clarity here has lasting value.
- Price what you cannot move. Where the buyer will not change a provision, model the risk and reflect it in the tariff, the contingency or the EPC price.
- Align the project contracts. Flow PPA obligations down to the EPC and O&M contracts, matching milestones, performance guarantees and liquidated damages, and harmonise dispute resolution.
- Agree the direct agreement. Lenders need step-in and cure rights against the buyer. Negotiate cure periods, notice mechanics and the substitution process early.
- Satisfy conditions precedent and sign. Licences, land rights, insurance, corporate approvals and legal opinions are typically required before the PPA becomes fully effective and funds are drawn.
An illustrative scenario
This scenario is illustrative only. It does not describe a real client or transaction.
A consortium wins a solar tender and signs a 25-year PPA with a state buyer. Two years into operation, a new federal emissions reporting rule requires the project company to install monitoring equipment and commission annual verification. The costs are small but recurring.
The consortium reviews the change in law clause. It covers changes in UAE law that increase the seller's costs, but only above a threshold and only if the change is specific to power generation. The buyer argues the reporting rule applies to all sectors and so is not a qualifying change. Because the drafting is ambiguous, the parties negotiate, and the project absorbs the cost.
The lesson is that change in law definitions matter far beyond tax. When bidding, ask whether general laws applying to all businesses qualify, and price accordingly if they do not.
Risks and common mistakes
Assuming deemed energy fully protects debt service
Deemed energy payments compensate for curtailment or grid unavailability, but often only after an annual threshold and using an agreed estimate of what the plant would have produced. If the estimate method is conservative or the threshold high, revenue can fall below debt service even though the plant is ready. Model realistic curtailment scenarios and check how measurement disputes are resolved.
Mismatched dispute resolution across project contracts
A PPA with one arbitration seat and rules, an EPC contract with another, and a shareholders' agreement with a third can leave the project company fighting the same facts in different forums, with inconsistent outcomes. Harmonise seats and rules where possible and include joinder and consolidation provisions. Our guide to governing law and jurisdiction clauses sets out the options.
Overlooking the new Civil Transactions Law
Contracts governed by UAE law and concluded from 1 June 2026 are subject to Federal Decree-Law No. 25 of 2025. Its exceptional circumstances regime allows courts to rebalance seriously onerous obligations in defined conditions. Projects should review how this interacts with fixed tariffs and long-term obligations, and whether clauses written for the old code still work. See our Civil Transactions Law explainer.
Treating a solar lease as a simple supply contract
On-site solar agreements often run for many years and depend on property rights the seller does not control. If the building is sold or the tenant leaves, the contract may fall away unless it binds successors. Some structures also resemble finance leasing, which can trigger licensing questions. Draft for change of ownership, removal and reinstatement, and check regulatory characterisation before signing.
The cross-border angle
Sponsors and lenders in UAE projects are often international, so the PPA sits inside a web of foreign law documents. Financing and EPC contracts are frequently governed by English law, while the PPA and land documents are governed by UAE and emirate law. Make sure security, assignment and step-in rights work under both systems.
Currency risk is reduced by the dirham's long-standing peg to the US dollar, which suits dollar-denominated debt and equipment supply. Sponsors from Bangladesh, India, China or Europe still need to manage the conversion into their own reporting currency and any home-country rules on outbound investment and dividend repatriation.
Enforcement matters too. An arbitral award against a project counterparty is only useful if it can be enforced where the assets are. The UAE is party to the New York Convention, and our guide to enforcing foreign arbitral awards in the UAE explains the process.
What to do next: a checklist
- Confirm the buyer, the regulator and the governing law for your project's emirate.
- Read the draft PPA with a lender's eye and list every bankability issue before the first clarification round.
- Test the change in law clause against tax, emissions and contract law changes since 2023.
- Map PPA obligations to the EPC and O&M contracts and close any liability gaps.
- Agree a direct agreement template with lenders before bid submission.
- For corporate buyers, choose between on-site generation, leasing and certificates based on the claim you need to make.
In a tender, the most valuable legal work happens before submission. Once the tariff is bid, every unresolved ambiguity in the PPA becomes a cost to the project company. Treat each power purchase agreement UAE buyers issue as a fixed price for a risk package, and make sure your model prices the package you will actually sign.
TRW & Co advises developers, investors and corporate buyers on power purchase agreement UAE structuring and negotiation, working with locally licensed advocates where court representation is needed. See our power purchase agreements practice, or contact us at info@trw.co or +971 58 942 1012.
Frequently asked questions
01Who buys electricity from independent power producers in the UAE?
In Abu Dhabi, the Emirates Water and Electricity Company (EWEC) is the single buyer and procures new generation capacity through tenders, with the Department of Energy as regulator. In Dubai, DEWA buys the output of private plants developed under Law No. 6 of 2011 and usually holds equity in the project company. Other emirates have their own utility arrangements, so the buyer depends on where the plant connects.
02How long does a UAE power purchase agreement last?
Utility-scale PPAs are long-term contracts, typically running for several decades so that the tariff can repay project debt and provide an equity return. The exact term is set in each tender and should be matched by the land right, the generation licence and the financing. Developers should confirm the term, any extension rights and the end-of-term transfer or decommissioning obligations before bidding.
03Can a UAE company sign a corporate PPA with a solar developer?
Not in the European sense of buying power over the public grid from a private generator, because the UAE does not have an open retail electricity market. Companies can install on-site solar, sign a solar leasing or energy services agreement for equipment on their premises, or buy certificates such as Abu Dhabi's Clean Energy Certificates. Each supports a different sustainability claim, so choose based on what you need to report.
04What happens if the grid connection is late?
Most UAE utility PPAs allocate delay caused by the buyer or grid owner to the buyer, usually through extensions of time and deemed commissioning or deemed payments. Relief often depends on the seller giving notice and not contributing to the delay. Check whether deemed payments cover debt service, how long they last and who builds which part of the interconnection.
05Is a UAE PPA governed by UAE law?
PPAs with government utilities are usually governed by UAE and emirate law, while financing and EPC documents may use English law. Since 1 June 2026, UAE-law contracts concluded from that date are subject to the new Civil Transactions Law. Disputes under the PPA are commonly referred to arbitration. Align governing law and dispute resolution across all project contracts to avoid parallel proceedings.
06Does a change in tax law allow a PPA tariff adjustment?
Only if the contract says so. Change in law clauses often distinguish between discriminatory or sector-specific changes, which qualify for relief, and general changes applying to all businesses, which may not. Thresholds may also apply. Since the UAE introduced corporate tax and climate reporting duties in recent years, bidders should test the definition against these changes and price any gap.
Sources and official materials
- Dubai Law No. 6 of 2011 Regulating Participation of the Private Sector in Electricity and Water Production — Licensing and DEWA project companies in Dubai
- Abu Dhabi DoE Regulatory Policy for Clean Energy Certificates — I-REC based certificate scheme for corporate buyers
- DEWA Shams Dubai — Net metering for rooftop solar in Dubai
- Abu Dhabi Department of Energy: legislation and compliance — Regulator of Abu Dhabi's electricity sector
- Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects — Federal emissions duties driving clean power demand
- UAE Energy Strategy 2050 — National clean energy targets
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
