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Power Purchase Agreement (PPA)

Definition. A long-term contract between a power generator and a buyer specifying that the buyer will purchase the plant's output at agreed prices over a specified term — typically 10-25 years.

Anatomy of a PPA

A typical PPA specifies:

  1. Term. 10-25 years. Microsoft-Crane is 20. Amazon-Susquehanna is through 2042.
  2. Quantity. Fixed MWh per year, or "all output of plant X."
  3. Price structure. Can be fixed $/MWh, indexed (to inflation, gas, or wholesale power), or a hybrid.
  4. Delivery point. Physical settlement at the plant bus bar, or financial settlement (CFD/contract-for-difference) against a hub price.
  5. Attributes. Energy, capacity, emissions-free attributes (RECs/EACs). Hyperscaler 24/7 PPAs specifically bundle all three.
  6. Curtailment and force majeure. What happens if the plant trips or the buyer's load disappears.

Why hyperscalers love them

Hyperscalers are not in the business of speculating on wholesale power prices. A 20-year PPA gives them:

  • Cost certainty for a data-center investment with a multi-decade economic life.
  • Carbon attributes that count toward 24/7 carbon-free goals (matched hourly with consumption — much harder than annual REC matching).
  • Optionality on grid access — increasingly, hyperscalers co-locate behind the meter or contract for delivery to specific substations, sidestepping interconnection queues.

Why generators love them

For an asset owner like CEG:

  • Cash flow visibility for decades, which can be levered or used to underwrite restart capex (e.g., Crane / TMI Unit 1 restart).
  • Premium pricing — hyperscaler 24/7 PPAs are estimated to clear $80-110/MWh in PJM, vs. spot wholesale prices of $40-60. The premium is for the attributes, not just the energy.
  • Strategic moat — once a hyperscaler is contracted to a nuclear plant, that plant is locked out of the next deal. Scarcity compounds.

How to read the disclosures

PPAs are usually announced via press release and are described in 10-Ks under "Business" or "Strategy" sections. Specific pricing is rarely disclosed, but you can sometimes back into it from total commitment values or from EPS guidance changes. Watch for:

  • "Long-term contract" without price disclosure → assume premium pricing, but treat carefully.
  • "Indexed to wholesale market" → less attractive than fixed pricing.
  • "Subject to regulatory approval" → execution risk.

Watch outs

  • Counterparty credit. A 20-year contract is only as good as the buyer's solvency. Microsoft / Meta / Amazon are investment-grade; smaller cloud players are not.
  • Termination clauses. Many PPAs have "out" clauses tied to changes in law or material adverse change. Read the disclosures carefully.
  • Inflation indexation. A fixed-price 20-year PPA is a real-terms haircut over time if not indexed. CPI-indexed PPAs are increasingly common but not universal.

Examples in the lab

  • Microsoft – CEG Crane (TMI Unit 1): 20-year PPA, signed Sept 2024, supports a ~835 MW restart. $1.0B DOE loan guarantee backs the restart capex.
  • Meta – CEG Clinton: Long-term PPA for output of ~1,080 MW Clinton nuclear plant.
  • Amazon – TLN Susquehanna: Expanded to 1.92 GW through 2042, supplying AWS data centers in PA.

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