Power Purchase Agreement Template
A comprehensive power purchase agreement template covering delivery, and pricing to support long-term energy transactions.
Cpi escalation
A CPI (Consumer Price Index) escalation clause allows for the adjustment of payments or costs in a contract based on changes in the Consumer Price Index, reflecting inflation or deflation trends. It ensures that the purchasing power of the agreed payments remains stable over the term of the contract by aligning them with current economic conditions.
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5 Cpi escalation examples
- Description
MIP V has agreed to acquire its interest in the partnership for cash based on a 5.6% 2021 cash cap rate. The absolute triple net master lease between MPT and Steward was recently amended for a new 20-year term through 2041, which includes customary terms such as annual CPI escalation. Subject to market conditions, the partnership expects to raise nonrecourse secured debt of up to 55% of asset value. Total anticipated proceeds to MPT, including proceeds from the expected secured debt, will be approximately $1.3 billion.
- Description
CPI Escalation 1. CPI Calculation The PPA Price be escalated on each CPI Review Date (as defined in this Schedule) in accordance with the following formula: Pn = P1 x CPI2 / CPI1 Where: Pn = the CPI adjusted PPA Price which will apply from the CPI Review Date; P1= the unescalated PPA Price; CPI is the “All groups CPI; Australia” ABS Series ID A2325846C; CPI2 = the CPI as at the relevant CPI Review Date; and CPI1= the CPI as at 1 January 2021 (ABS December 2020 Quarter value). For the avoidance of doubt, where the ratio of CPI2 to CPI1 is less than 1 (one), the CPI ratio for the purposes of this agreement will be deemed to be 1 (one). 2. CPI Review date In respect of the PPA Price, each of the following dates which occur during the Supply Term will be a CPI Review Date: (a) 1 January 2021 for the base date of the PPA Price; and (b) each anniversary of 1 January 2021 thereafter. Where in both cases the ABS Series value from the preceding December quarter is to be used.
- Description
Effective February 22, 2021, we entered into a triple-net lease agreement with SBR Associates LP for the commercial building at 27 Castilian Dr. Goleta, CA for a term of five years, that began on April 1, 2021. The base rent for this property is $13,013.75 per month, with a CPI escalation over the initial base rent over the term of the lease. The lease expires on March 31, 2026 with the option to renew the lease with reasonable notice.
- Description
Our principal executive office is located at 27 Castilian Dr., Goleta, California. Effective February 22, 2021, we entered into a triple-net lease agreement with SBR Associates LP for the commercial building at 27 Castilian Dr. Goleta, California for a term of five years, which began on April 1, 2021. The current rent for this property is $13,673 per month, with a CPI escalation over the initial base rent over the term of the lease. The lease expires on March 31, 2026, with the option to renew the lease with reasonable notice.
- Description
Market-based Fees not subject to target return calculation but subject to CPI escalation: o Truck Loading Fee o HNDP Fee o Gas Lift Fee
What is CPI Escalation?
CPI Escalation refers to the use of the Consumer Price Index (CPI) to adjust costs in contracts or agreements to reflect inflation or deflation over time. It ensures that the real value of payments remains consistent despite changes in the economic environment. CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. By integrating CPI-based adjustments into contracts, parties can manage the risk of price changes due to inflation.
When should I use CPI Escalation?
CPI Escalation should be used in long-term contracts or agreements where inflation might significantly impact the financial terms over time. Common scenarios include:
- Long-term supply contracts: To ensure fair pricing adjustments for goods or services over an extended period.
- Lease agreements: To adjust rental or lease payments periodically in line with inflation.
- Employment contracts: To maintain the purchasing power of salaries through cost-of-living adjustments.
Employing CPI Escalation helps in maintaining the economic balance of contracts by protecting both parties from inflation risks.
How do I write a CPI Escalation clause?
To write a CPI Escalation clause, follow these steps:
Identify the specific CPI index: Clearly specify which CPI index will be used (e.g., CPI-U, CPI-W) and the geographic area it covers.
Define the adjustment period: Specify the frequency of adjustments (monthly, quarterly, annually).
Specify the calculation formula: Clearly define how the CPI changes will translate into contract adjustments. This formula might be:
“The payment shall be adjusted annually on [anniversary date] by the percentage change in the CPI-U for [geographic area] from [starting date] to [ending date].”
Include rounding and limits: Address how fractional cents will be handled and set limits for both minimum and maximum adjustment levels if necessary.
Address notification and documentation: Specify how parties will be notified of changes and provide access to official CPI publications or sources.
Which contracts typically contain CPI Escalation?
CPI Escalation clauses are typically found in the following types of contracts:
- Commercial leases: To adjust rent in line with inflation.
- Construction contracts: To account for fluctuating material and labor costs.
- Service agreements: Especially those with multi-year terms, to ensure service fees remain equitable.
- Energy supply contracts: To adjust prices based on operational and market costs which may include inflation considerations.
Including CPI Escalation clauses in these contracts enables businesses and individuals to better manage financial expectations and obligations over time, providing a hedge against inflationary pressures.
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Cumulative rights
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