What happens when a PPA is breached in Turkey? A 2026 legal guide for foreign energy companies covering payment default, termination, damages, bank guarantees, parent guarantees, security enforcement, arbitration and interim remedies.

A Power Purchase Agreement (PPA) default in Turkey can expose generators, renewable energy investors, suppliers and corporate electricity buyers to substantial financial losses. The consequences may extend far beyond a single unpaid electricity invoice.

A default may affect years of expected revenue, project financing, debt-service coverage, security arrangements and the overall value of a solar, wind, hydroelectric or storage investment.

For foreign investors, the central questions are usually immediate: Does the breach justify termination? Can outstanding payments be accelerated? Can the bank guarantee or parent-company guarantee be enforced? Can future lost profits be claimed? Can the counterparty obtain an injunction preventing termination or payment under security?

Under Turkish law, the answers depend heavily on the PPA wording, nature and seriousness of the breach, applicable mandatory rules and dispute-resolution mechanism.

What Is a PPA in Turkey?

A Power Purchase Agreement establishes the commercial terms under which electricity generated by a power project is sold to an offtaker.

PPAs can take several forms, including long-term renewable PPAs, corporate PPAs, bilateral electricity sale agreements and arrangements containing market-indexed pricing mechanisms.

A typical PPA addresses:

Contracted Capacity → Electricity Delivery → Price → Metering → Settlement → Payment → Security → Default → Termination → Damages → Force Majeure → Change in Law → Dispute Resolution.

In a long-term project, these provisions can determine much of the asset’s economic value.

What Constitutes a PPA Default?

Not every contractual problem constitutes a termination event.

The agreement should distinguish ordinary breaches from defined Events of Default.

Common events can include payment default, repeated failure to purchase electricity, failure to deliver contracted electricity, failure to maintain security, insolvency, loss of required licenses, material regulatory breach and prolonged contractual non-performance.

The first step is therefore to identify the precise contractual obligation that has been breached.

Payment Default by the Offtaker

Failure to pay electricity invoices is one of the clearest PPA disputes.

Suppose a renewable generator delivers electricity every month. The corporate offtaker pays normally for two years but then stops paying invoices.

The generator should determine:

Amount Outstanding → Due Dates → Contractual Interest → Cure Period → Existing Security → Termination Rights → Debtor Assets.

The commercial response should not automatically be immediate termination.

If the offtaker possesses valuable security, enforcement of that security may provide faster recovery.

Repeated Late Payment

Repeated late payment can be almost as damaging as complete non-payment.

A generator relying on PPA revenues for project-finance repayments may face serious liquidity pressure even where the offtaker eventually pays each invoice.

A well-drafted PPA should therefore address whether repeated payment delay constitutes a separate Event of Default.

Without clear drafting, disputes can arise over whether several individually minor delays collectively justify termination.

Failure to Purchase Contracted Electricity

An offtaker may also refuse to purchase electricity it previously committed to buy.

This can occur because market prices have fallen below the contractual PPA price.

For example, an industrial buyer enters a long-term fixed-price renewable PPA and subsequently discovers that electricity can be purchased more cheaply elsewhere.

Commercial regret does not automatically permit termination.

The generator should examine minimum purchase obligations, take-or-pay provisions, termination rights and damages clauses.

Generator Default

PPAs create risks for buyers as well.

The generator may fail to construct the project on time, achieve commercial operation, deliver the contracted volume or maintain required licenses.

The buyer should determine whether the problem constitutes:

Delay → Temporary Breach → Material Default → Termination Event.

The distinction can materially affect available remedies.

Failure to Achieve Commercial Operation

Many renewable PPAs are signed before construction is complete.

The contract may establish a Commercial Operation Date and a long-stop date.

If the project fails to become operational by the required deadline, the offtaker may have rights to liquidated damages, security enforcement or termination.

Foreign developers should negotiate these provisions carefully because delays can arise from grid, licensing, construction or supply-chain issues outside the developer’s immediate control.

Cure Periods

Most sophisticated PPAs do not permit termination immediately after every breach.

The defaulting party may receive a period in which to cure the breach.

A typical mechanism can operate as:

Default → Notice → Cure Period → Failure to Cure → Event of Default → Termination.

The exact contractual procedure should be followed carefully.

A party terminating before expiry of a mandatory cure period may itself face a wrongful termination claim.

Default Notice

A default notice should identify the breach clearly.

It should normally specify the relevant contractual provision, facts constituting default, outstanding amount or obligation, applicable cure period and consequences if the breach remains uncured.

Vague correspondence can create unnecessary disputes.

A notice simply stating “you are in breach of the PPA” may be far weaker than a notice identifying each unpaid invoice and contractual provision.

Can a PPA Be Terminated for Default?

Potentially yes.

Termination depends on the contractual termination provisions and applicable Turkish law.

A material uncured breach may support termination where the contractual and statutory conditions are satisfied.

However, termination should be treated as a major legal decision.

The terminating party should be able to demonstrate:

Valid Ground + Correct Notice + Expired Cure Period + Contractual Compliance.

If any element is missing, the other party may challenge the termination.

Wrongful Termination Risk

Wrongful termination can transform the claimant into the defendant.

Suppose a generator terminates a 15-year PPA after a relatively minor disputed payment delay.

The buyer argues that the agreement required a 30-day cure period but termination occurred after 10 days.

The buyer may then claim that the generator repudiated the agreement.

Before issuing termination, the legal team should therefore perform a detailed termination analysis.

What Happens After Termination?

Termination does not necessarily erase obligations already accrued.

Outstanding electricity invoices, default interest, damages and certain surviving contractual obligations can remain enforceable.

The PPA should specify which provisions survive termination.

These commonly include:

Payment Obligations → Confidentiality → Indemnities → Dispute Resolution → Governing Law → Certain Security Rights.

Can Damages Be Claimed?

Potentially yes.

The non-defaulting party may seek compensation for losses caused by contractual breach where the applicable legal requirements are satisfied.

The claimant must establish the breach, damage and causal connection.

The contract may also contain specific provisions governing the measure of damages.

Outstanding Electricity Payments

The most straightforward claim usually concerns electricity already delivered but unpaid.

The generator should preserve:

Meter Data → Settlement Records → Invoices → Payment History → Account Reconciliation → Default Notices.

This portion of the claim is generally easier to quantify than future damages.

Replacement Electricity Costs

An offtaker may suffer loss if the generator fails to supply electricity and the buyer must purchase replacement electricity at a higher market price.

For example:

PPA Price: 70

Replacement Market Price: 105

The buyer may seek to establish the additional cost attributable to the generator’s breach, subject to the agreement and applicable law.

The claimant should preserve actual replacement-purchase evidence.

Lost Revenue Claims

A generator may claim that wrongful PPA termination deprived it of future revenue.

This can become a high-value dispute.

However:

Future Contract Revenue ≠ Automatically Recoverable Damages.

The calculation must account for the legal requirements governing damages, causation, mitigation and certainty.

Expert financial evidence may be required.

Lost Profit Calculation

Suppose an offtaker wrongfully terminates a PPA with eight years remaining.

The generator should not simply multiply:

Annual Contract Revenue × Eight Years.

The analysis may need to consider electricity that can be sold elsewhere, future market prices, avoided costs, operating expenses and other relevant factors.

The appropriate measure is generally the actual economic loss caused by the breach rather than gross theoretical revenue.

Duty to Mitigate Loss

The non-defaulting party should take reasonable steps to limit its losses.

A generator whose PPA has been terminated may be capable of selling electricity into the market or entering another bilateral agreement.

If commercially reasonable alternatives exist but the generator deliberately ignores them, this can affect the damages analysis.

Evidence of mitigation efforts should therefore be preserved.

Contractual Penalty Clauses

Turkish PPAs may contain contractual penalty provisions covering specific breaches.

These can relate to delayed commercial operation, failure to deliver electricity, failure to purchase minimum quantities or other performance obligations.

The enforceability and potential adjustment of contractual penalties should be analyzed under the applicable Turkish-law rules and the status of the contracting parties.

Commercial agreements require particularly careful drafting in this respect.

Liquidated Damages

International PPAs often use liquidated damages structures.

For example:

Delay LDs

Performance LDs

Availability LDs

Termination Payments

The legal characterization of the clause under the governing law is important.

Simply calling a provision “liquidated damages” does not necessarily determine how a Turkish court or tribunal will legally characterize it.

Termination Payment

Long-term PPAs may contain a predetermined termination-payment formula.

The formula can depend on the reason for termination.

For example:

Offtaker Default → Generator Termination Payment

Generator Default → Offtaker Termination Payment

Prolonged Force Majeure → Separate Formula.

A clear formula can reduce uncertainty, but major disputes can still arise over the inputs used in the calculation.

Security Enforcement After PPA Default

Security can become the most important part of the entire transaction.

Common PPA security structures include:

Bank Guarantee

Letter of Guarantee

Parent Company Guarantee

Cash Collateral

Security Deposit

Corporate Guarantee

Share or Asset Security in Project-Finance Structures.

The creditor should examine security immediately after default rather than waiting until the end of litigation.

Bank Guarantees

A bank guarantee can provide substantial protection against counterparty default.

The beneficiary should examine:

Guaranteed Amount → Expiry Date → Demand Requirements → Documents Required → Governing Law → Guarantee Type.

Timing is critical.

A valid claim can become commercially worthless if the creditor allows the guarantee to expire.

On-Demand Guarantees

Some guarantees are structured to be payable upon a compliant demand without requiring the beneficiary first to obtain a final judgment proving the underlying PPA breach.

This can provide powerful protection.

However, the exact guarantee wording controls.

The beneficiary should comply strictly with documentary demand requirements.

Can the Defaulting Party Stop Payment of a Bank Guarantee?

The defaulting party may attempt to obtain interim judicial protection preventing payment.

Whether such an attempt succeeds depends on the guarantee structure, underlying facts and applicable legal principles.

Foreign investors should therefore prepare for possible emergency proceedings when making a high-value guarantee call.

The beneficiary should preserve evidence demonstrating why the demand complies with the guarantee.

Parent Company Guarantee

Where the offtaker is a thinly capitalized project company, a parent guarantee may be critical.

The creditor should verify:

Identity of Guarantor → Covered Obligations → Maximum Liability → Duration → Enforcement Conditions → Governing Law → Jurisdiction.

A guarantee should also be reviewed for amendments made to the underlying PPA.

Material amendments can create disputes concerning whether guaranteed obligations continue to be covered.

Security Deposit

Some PPAs require cash collateral.

The agreement should explain when the beneficiary can apply the deposit against unpaid amounts and when the defaulting party must replenish it.

Failure to replenish security can itself constitute an Event of Default.

Letter of Credit

International energy transactions may also use letters of credit.

The creditor should distinguish the letter of credit from the underlying contractual payment obligation.

Documentary compliance becomes particularly important.

Project Finance and PPA Default

A PPA can be a central finance document for a renewable project.

Banks may rely on long-term contracted revenue when assessing debt-service capacity.

Termination can therefore trigger consequences under financing documents.

The project company should immediately review:

Loan Agreement → Security Documents → Direct Agreement → Cross-Default → Mandatory Prepayment → Lender Consent.

A bilateral dispute can quickly become a project-finance crisis.

Lender Step-In Rights

Project-financed PPAs may include direct agreements giving lenders an opportunity to cure project-company defaults before termination.

An offtaker should therefore check whether lenders must receive notice before terminating.

Failure to respect lender step-in rights can create additional disputes.

Insolvency of the Offtaker

If the buyer becomes insolvent, ordinary contractual remedies may not be enough.

The generator should investigate whether the counterparty has applied for restructuring or concordat protection or is facing bankruptcy proceedings.

Security enforcement, creditor ranking and insolvency rules can become more important than the PPA’s ordinary termination clause.

Insolvency of the Generator

The reverse situation is also possible.

An industrial offtaker may depend on a renewable generator that becomes financially distressed.

The buyer should determine whether the agreement allows termination, replacement procurement or enforcement of performance security.

Long-term supply security can be commercially more important than damages.

Precautionary Attachment

Where a PPA default produces a due and payable monetary claim and the statutory requirements are satisfied, the creditor may consider precautionary attachment against assets in Turkey.

This can be especially important where the counterparty appears to be disposing of assets.

A successful arbitration or lawsuit provides limited commercial benefit if no assets remain available for enforcement.

Interim Injunctions

Some PPA disputes require protection other than attachment.

A party may seek interim relief concerning security, contractual performance or another urgent issue where the applicable legal requirements are satisfied.

The precise remedy depends on the right requiring protection.

Arbitration in PPA Disputes

International PPAs frequently contain arbitration clauses.

A PPA may specify institutional or ad hoc arbitration, governing law, seat, language and tribunal composition.

Before commencing proceedings, the claimant should establish:

Is the arbitration clause valid?

Which disputes does it cover?

Where is the seat?

Which rules apply?

Can emergency relief be requested?

Where are the counterparty’s assets?

The last question is particularly important.

Winning an arbitration is not the same as collecting the award.

Turkish Court Jurisdiction

Where the PPA contains no arbitration clause, commercial courts may have jurisdiction depending on the contractual and procedural framework.

Mandatory mediation requirements may also apply to qualifying commercial monetary claims before litigation.

Jurisdiction clauses should therefore be reviewed before filing.

Force Majeure Versus Default

A party accused of default may invoke force majeure.

Typical events can include natural disasters, major grid events or other circumstances defined by the contract.

The analysis should determine:

Was the event actually covered?

Did it prevent performance?

Was notice given on time?

Could the consequences have been mitigated?

How long did the event continue?

A commercial difficulty or unfavorable electricity price does not automatically constitute force majeure.

Change in Law

Long-term PPAs should also distinguish default from regulatory change.

A new electricity-market rule may materially affect project economics without either party breaching the contract.

A well-drafted PPA may contain change-in-law mechanisms providing renegotiation, adjustment or termination rights.

Without such provisions, disputes can become significantly more complicated.

Curtailment and PPA Default

Curtailment creates another difficult issue.

If the generator cannot deliver electricity because of a grid instruction, is that a generator default?

The answer should be addressed in the PPA.

The agreement may classify curtailment as an excused event, allocate the risk to one party or provide deemed-generation treatment.

Foreign investors should review this carefully before signing long-term PPAs.

Metering and Settlement Disputes

A buyer may refuse payment because it disputes the amount of electricity delivered.

Before declaring default, the generator should distinguish genuine settlement disagreement from straightforward refusal to pay.

Where only part of an invoice is disputed, the PPA should ideally require payment of the undisputed portion.

This prevents a minor calculation dispute from becoming justification for withholding the entire invoice.

PPA Price Disputes

Long-term agreements can contain complex pricing formulas.

A formula may incorporate:

Market Reference Price

Inflation Adjustment

Foreign Exchange Component

YEKDEM Component

Floor or Cap

Indexation

A payment dispute can therefore actually be a pricing-interpretation dispute.

The claimant should reconstruct the formula before alleging default.

Foreign Currency Issues

PPAs involving foreign investors require careful examination of Turkish rules governing foreign-currency-denominated contractual obligations.

The legality of a particular pricing structure depends on the parties, transaction and applicable exemptions.

Foreign investors should not simply copy a EUR-denominated PPA used in another jurisdiction into a Turkish transaction.

PPA Due Diligence in Power Plant Acquisitions

A foreign investor buying a renewable plant should review every material PPA.

The buyer should identify:

Remaining Term → Offtaker → Creditworthiness → Price → Payment History → Security → Defaults → Termination Rights → Change of Control → Assignment → Arbitration → Outstanding Disputes.

A project with excellent generation performance can still be a poor acquisition if its principal offtaker is financially unstable.

Historical Payment Defaults

Buyers should request a complete payment history.

Repeated late payment can indicate future problems even if no invoice remains outstanding at closing.

The buyer should compare:

Invoice Date → Due Date → Actual Payment Date.

This simple analysis can reveal counterparty credit deterioration.

Change-of-Control Provisions

A power plant acquisition can itself affect the PPA.

Some agreements require consent or notification if control of the project company changes.

The buyer should determine whether closing without required consent could trigger a contractual default.

This issue should be resolved before completion of the acquisition.

Assignment Restrictions

Asset transactions require particular attention.

A PPA may prohibit assignment without the offtaker’s consent.

Buying the physical power plant therefore does not necessarily mean that the purchaser automatically acquires the project’s PPA.

Contract transfer mechanics should be incorporated into closing conditions.

PPA Default as an SPA Risk

If the target company is already involved in a PPA dispute, the acquisition agreement should allocate that risk.

Possible mechanisms include:

Specific Indemnity → Escrow → Purchase Price Retention → Condition Precedent → Deferred Consideration.

The buyer should avoid paying full value for contracted future revenue that may disappear immediately after closing.

Example: Offtaker Stops Paying

A 100 MW solar project has a ten-year corporate PPA.

After three years, the industrial offtaker stops paying invoices and accumulates substantial arrears.

The generator should immediately review payment security, cure periods, termination rights, debtor assets and lender requirements.

The objective should be to preserve both the outstanding receivable and the long-term economic value of the project.

Example: Buyer Refuses Electricity Because Market Prices Fall

A corporate buyer agreed to purchase renewable electricity at a fixed price.

Spot market prices subsequently decline substantially.

The buyer refuses further purchases and claims that the PPA has become commercially unreasonable.

Unless the contract or applicable law provides a valid basis for relief, unfavorable market economics alone do not automatically release a party from its contractual obligations.

The generator may investigate termination and damages.

Example: Generator Misses Commercial Operation Date

A wind project suffers construction delays and misses the contractual COD.

The PPA gives the buyer a cure period followed by termination rights and delay damages.

The generator should determine whether the delay is excused by force majeure, grid delay or another contractual relief event before accepting liability.

Example: Bank Guarantee Is About to Expire

An offtaker owes substantial amounts, but negotiations continue.

The bank guarantee expires in 12 days.

The generator should not allow settlement negotiations to distract from the guarantee deadline.

Preserving valuable security may be more important than continuing informal negotiations.

Example: Foreign Buyer Acquires a Project With a PPA Dispute

A foreign infrastructure fund agrees to buy a wind farm based partly on a 12-year PPA.

Before closing, due diligence reveals that the offtaker has disputed the pricing formula for six months and threatened termination.

The buyer should not value the PPA as undisputed contracted revenue.

The dispute should be reflected in valuation and SPA protection.

Major PPA Default Red Flags

Foreign investors should investigate immediately where there are repeated late payments, unpaid invoices, disputed pricing formulas, expiring guarantees, declining offtaker creditworthiness, requests for payment extensions, failure to replenish security, threatened termination, missed commercial-operation deadlines, insolvency indicators, lender notices or unexplained attempts to renegotiate a previously profitable PPA.

These signs can indicate that a contractual problem is becoming a material investment dispute.

PPA Default Strategy in Turkey

A practical response should generally follow:

Identify Default → Preserve Evidence → Review Notice Requirements → Calculate Cure Period → Examine Security → Notify Lenders if Required → Investigate Counterparty Assets → Quantify Existing Loss → Assess Termination → Enforce Security → Consider Interim Protection → Commence Mediation, Litigation or Arbitration as Applicable → Quantify Future Damages.

The sequence may need to change where security is about to expire or assets are being transferred.

Speed can be decisive.

Frequently Asked Questions

1. Can a PPA be terminated for non-payment in Turkey?

Potentially yes, where the contractual and legal requirements for termination are satisfied. Notice and cure-period provisions should be followed carefully.

2. Can the generator claim unpaid electricity invoices after terminating the PPA?

Termination generally does not automatically eliminate payment obligations that accrued before termination.

3. Can future lost profits be claimed?

Potentially, subject to the applicable contractual and damages rules and proof of causation and loss. Gross future PPA revenue should not automatically be treated as recoverable damages.

4. Can a bank guarantee be enforced after PPA default?

Potentially yes. The wording, demand requirements and expiry date of the guarantee must be reviewed.

5. Can the counterparty try to stop payment under the guarantee?

It may seek interim judicial relief. Whether relief is available depends on the circumstances and legal structure of the guarantee.

6. What happens if the PPA contains an arbitration clause?

The merits of the dispute may need to be resolved through arbitration. Interim asset-protection measures and eventual enforcement should be planned separately.

7. Can precautionary attachment be obtained against the defaulting party?

Potentially, where the statutory requirements are satisfied and the creditor has a qualifying monetary claim.

8. Does force majeure automatically excuse a PPA default?

No. The event must fall within the contractual or applicable legal framework and satisfy the relevant requirements.

9. Should a foreign investor review PPA defaults before buying a Turkish power plant?

Yes. Payment history, existing defaults, security, termination rights and offtaker creditworthiness can materially affect project valuation.

10. What should be done first after a serious PPA default?

Check the notice period, cure period, security expiry dates and counterparty asset position immediately. Missing any of these can significantly weaken an otherwise strong claim.

Legal Support for PPA Defaults in Turkey

A serious PPA default requires more than sending payment demands. The response must coordinate the PPA, electricity-market rules, security package, project-finance documents, termination procedure and dispute-resolution mechanism.

Firat Fesih Kaya Law Office assists foreign investors, renewable-energy developers, generators, suppliers and international energy companies with Power Purchase Agreement disputes in Turkey. Firat Fesih Kaya can assist with PPA defaults, termination strategies, damages claims, bank and parent-company guarantee enforcement, precautionary attachment, commercial litigation, arbitration and energy-project acquisition disputes.

The central rule for a non-defaulting party is simple: protect security before it expires, follow the termination procedure precisely and preserve evidence capable of proving both existing receivables and future economic loss.

Phone: +90 312 434 22 22
Mobile Phone: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yildirim Tower, Balgat, Cankaya / Ankara, Turkey