When industrial power purchase agreements are discussed in South-East Europe, the conversation almost always starts with sustainability. Emissions reduction, green certificates, alignment with EU policy, and reputational benefits dominate both internal presentations and external communication. In many cases, these objectives are genuinely achieved. The electricity delivered under PPAs is renewable, traceable, and compliant with decarbonisation targets.
Yet a growing number of industrial buyers across SEE are discovering that their PPAs fail in a more fundamental dimension: cash flow stability.
This failure is rarely visible at contract signing. It emerges gradually, through volatile monthly settlements, unexpected margin calls, imbalance charges, and working-capital strain. By the time it becomes obvious, the contract is already locked in, and the buyer is forced to manage consequences rather than design outcomes.
The core issue is not sustainability performance. It is that most PPAs are structured to optimise average energy cost, while industrial businesses require predictable cash flows. In a volatile power system, those two objectives increasingly diverge.
Sustainability is annual; cash flow is monthly
The first structural mismatch lies in the time horizon.
Sustainability metrics are typically assessed annually. A PPA that delivers a certain number of renewable megawatt-hours over a year satisfies reporting requirements, regardless of when that power is produced or consumed. Carbon accounting smooths volatility by design.
Cash flow does not enjoy that luxury. Electricity invoices arrive monthly, sometimes weekly. Collateral requirements respond daily. Imbalance settlements can spike overnight. What matters for finance teams is not the annual average, but the worst month, the tightest week, and the largest unexpected draw on liquidity.
PPAs that look excellent in annualised cost models can be deeply uncomfortable in cash terms.
The myth of the “fixed” PPA
Many industrial PPAs in SEE are marketed as fixed-price contracts. This label creates a false sense of security.
In reality, very few PPAs fix the buyer’s total cost exposure. They typically fix only the price of energy delivered by the generator. Everything else — imbalance, profile mismatch, residual procurement, balancing services — remains variable.
As volatility increases, these residual components grow in importance. What was once a rounding error becomes a material line item.
From a finance perspective, this means that a “fixed” PPA can produce variable monthly outcomes, undermining budgeting accuracy and earnings predictability.
Margin calls: the hidden liquidity drain
One of the least discussed aspects of industrial PPAs in SEE is collateral.
As PPAs become more financially structured, counterparties increasingly require margining to manage credit exposure. When market prices move sharply, mark-to-market valuations shift, triggering margin calls.
For industrial buyers unused to commodity-style collateral management, this can come as a shock. Margin calls are not costs in the accounting sense, but they are very real cash outflows. They tie up liquidity precisely when markets are stressed.
In extreme cases, margin requirements can exceed monthly electricity invoices. For companies with limited cash buffers, this creates immediate pressure on working capital and credit lines.
The irony is that margin calls often occur during periods of high prices, when electricity costs are already elevated.
Imbalance costs and their cash impact
Imbalance charges are another source of cash-flow volatility that is frequently underestimated.
As renewable penetration rises, imbalance pricing in SEE markets has become sharper and more asymmetric. Deviations during system stress are penalised heavily, while surplus energy during low-price periods earns little.
For industrial buyers with variable PPAs, imbalance exposure fluctuates with weather, system conditions, and operational behaviour. This makes it difficult to forecast monthly settlements accurately.
From a treasury perspective, imbalance costs are problematic because they are:
- volatile
- difficult to hedge directly
- often settled after the fact
This creates a lag between operational decisions and financial consequences, complicating cash management.
Working capital strain in volatile months
The combined effect of variable settlements, margin calls, and imbalance charges is working-capital strain.
During high-volatility periods, industrial buyers may face:
- higher-than-expected power invoices
- additional collateral requirements
- increased short-term market purchases
- delayed recovery of surplus sales
All of this occurs before any adjustment can be made to contracts or operations. The buyer absorbs the shock first and adapts later.
For companies operating with tight liquidity, this can force difficult decisions: drawing on credit lines, delaying investments, or renegotiating terms with suppliers and customers.
Why this problem is growing in SEE
Cash-flow stress from PPAs is not accidental; it is systemic.
SEE power markets are characterised by:
- increasing renewable penetration without matching flexibility
- relatively thin balancing markets
- high sensitivity to outages and weather events
- growing cross-border volatility transmission
These features amplify price swings and imbalance costs. At the same time, many industrial buyers in SEE lack experience with active power risk management, having operated for years in more stable environments.
The result is a widening gap between contract design and operational reality.
The accounting blind spot
Another reason PPAs fail on cash flow is accounting treatment.
Energy procurement decisions are often evaluated on the basis of average cost savings and long-term price levels. Volatility and liquidity risk are harder to quantify and therefore receive less attention in approval processes.
In some cases, sustainability-driven incentives unintentionally reinforce this bias. Management teams are rewarded for securing green supply, not for managing cash-flow volatility.
This creates a blind spot where contracts are approved for their strategic narrative rather than their financial behaviour under stress.
The trader’s view: cash flow is the real risk
From a trader’s perspective, this outcome is predictable.
Traders focus on worst-case scenarios, tail risk, and liquidity. They understand that volatility is not symmetrical and that extreme events drive most of the financial impact.
Industrial buyers who evaluate PPAs on average outcomes effectively sell optionality to the market without being compensated for it. The market captures value during stress; the buyer absorbs the downside.
This is why traders increasingly view industrial counterparties as sources of shape and liquidity risk rather than as passive customers.
Rethinking PPA success criteria
If industrial PPAs are to succeed financially, success criteria must change.
Instead of asking:
- Is the price competitive?
- Is the energy green?
Buyers must also ask:
- How volatile are monthly cash flows under stress scenarios?
- What is the maximum collateral requirement?
- How do imbalance costs behave in extreme conditions?
- How quickly can exposure be adjusted operationally?
These questions shift the focus from sustainability optics to financial resilience.
Toward cash-flow-aware procurement
The implication is not that PPAs are flawed by nature. It is that they must be embedded in procurement frameworks that explicitly manage cash-flow risk.
This includes:
- stress-testing contracts against extreme price scenarios
- integrating treasury considerations into procurement decisions
- aligning contract structures with operational flexibility
- treating electricity risk as a financial risk, not just a supply risk
Industrial buyers who adopt this approach are better positioned to benefit from PPAs without being destabilised by them.
Transition point
In SEE, the failure of industrial PPAs is rarely about green credentials. It is about cash-flow mechanics colliding with volatile markets.
As volatility becomes a permanent feature, cash-flow-aware procurement will distinguish resilient industrial players from vulnerable ones.
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