Power & Infrastructure · Renewables & IPPs
PPA vs Merchant: How Generators Get Paid
Contract profile comes first: how generators disclose PPA versus merchant splits, and the proxy hierarchy analysts use when no single percentage is filed.
Selborne Research · Renewables & IPPs coverage: 7 guides, 6 company profiles, a primer and Excel model
Educational analysis. This guide is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
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Contract Profile Is the First Screen
Before you touch EV/EBITDA, classify how a generator gets paid. Long-term power purchase agreements (PPAs) cap revenue volatility. Merchant sales re-rate with wholesale hub prices and capacity auction clears. The market prices that difference: contracted renewables and yieldcos sit in an ~11-15× band; merchant-heavy gas books anchor at ~6-9× (our screening convention as of Jun 2026). The contracted premium guide sets out those bands and how to build the ratio from filed figures.
No issuer files this the same way, so treat every disclosed split as one proxy among several.
The Disclosure Proxy Hierarchy
When a company does not publish a single PPA/merchant percentage, work down this ladder:
| Priority | What to use | Example |
|---|---|---|
| 1. Filed generation split | Contracted vs uncontracted GWh or MWh on a long-term average (LTA) basis | BEP: 18,736 GWh contracted vs 2,371 GWh uncontracted on 21,107 GWh total (~89% / ~11%, calendar 2025) |
| 2. Forward EBITDA or margin mix | Deck disclosure of contracted economics | VST: ~half of expected 2026 Ongoing Ops Adj. EBITDA from Retail + long-term PPAs |
| 3. Revenue or margin proxies | Non-emitting share, contract-weighted life, margin under LT agreements | CWEN: ~91% operating revenue non-emitting; ~12-year R&S weighted-average remaining life |
| 4. Qualitative model | Integrated retail + merchant, or LT-PPA / competitive-market mix | NRG: no filed split; AES: qualitative LT-PPA vs competitive-market sales |
BEP’s filed LTA split is the exception. Most of the comp set lives at priority 2-4.
What Each Representative Issuer Discloses
| Company | Contracted / merchant proxy | Source basis |
|---|---|---|
| BEP | ~89% contracted / ~11% merchant (2025 proportionate LTA GWh) | Filed generation split; management also describes fleet ~90% contracted |
| CEG | ~25% baseload clean MWh under LT agreements; 72% gas/other base gross margin under contracts (2026 forward) | Mar 2026 investor deck |
| VST | Not filed FY2025; forward ~half 2026E Ongoing Ops EBITDA from Retail + LT PPAs; ~3.8 GW nuclear under LT PPAs (AWS, Meta) | Feb 2026 deck; majority of fleet merchant per ARS |
| NRG | Not filed; integrated Texas retail paired with owned generation and hedges | FY2025 10-K model description |
| CWEN | Not filed single %; ~91% revenue non-emitting; ~12-year R&S contract life | FY2025 10-K and earnings materials |
| AES | Not filed; qualitative mix of medium/long-term PPAs and short-term competitive-market sales | FY2025 10-K |
Vistra’s retail-plus-PPA EBITDA share is not the same as a PPA-contracted generation percentage. NRG’s retail shell around fossil generation is a different integrated model again. Do not force these into one template.
Worked Example: BEP’s Filed Split
Brookfield Renewable’s calendar 2025 proportionate LTA generation:
| Category | GWh | Share |
|---|---|---|
| Contracted | 18,736 | 88.8% |
| Uncontracted (merchant) | 2,371 | 11.2% |
| Total | 21,107 | 100% |
At the planning wind/solar PPA anchor of $30/MWh (roughly the average price for US projects that came online in 2024, on contracts mostly signed in 2020-22; LBNL), contracted output alone represents roughly $562M of annual revenue at that mark (18,736 GWh × $30/MWh). The ~11% merchant slice re-prices with hub markets instead. That asymmetry is why contract profile, more than fuel type or headline GW, decides which of the two bands a fleet should be read against. See the yieldco CAFD guide for how contracted cash flows flow through to distributions.
PPA Terms That Feed the Model
Typical utility-scale PPA tenors run 10-25 years (SEIA, Aug 2024). Clearway’s renewables and storage book carries ~12 years weighted-average remaining life. Planning PPA anchors: utility-scale solar $30/MWh, onshore wind $30/MWh. That is roughly the average price LBNL records for US projects that came online in 2024, mostly on contracts signed in 2020-22, because PPAs are usually signed two to four years before a plant starts up. An operating fleet’s older contracts from the early 2010s priced far higher, and contracts signed in 2023-24 priced higher again, so treat $30 as a teaching mark, not a new-contract quote.
Offtake credit quality matters for leverage. A yieldco with investment-grade counterparties and >80% contracted generation sits in the contracted multiple band. A merchant book clearing PJM capacity at spot auction prices carries recontracting risk that compresses the multiple.
What Matters Most
BEP’s ~89% filed split is unusually clean; for Vistra, Constellation, NRG, Clearway and AES you will work from forward EBITDA shares, revenue proxies or qualitative models. Misclassifying a retail-integrated merchant book as “mostly contracted” because it hedges forward will mis-state the EV/EBITDA band by several turns.
Renewables & IPPs Sector Primer
A multi-period DCF splits contracted PPA years from the merchant tail, pricing each off realised power price and term, then checks the value against a flat EV/EBITDA multiple and the CAFD payout.
- 15 sections, PPA-term cash flows and merchant tail to a discounted cash-flow value
- 45 pages
- a contracted yieldco and a merchant combined-cycle generator
- 2 worked archetypes
- contracted share, CAFD and payout, leverage, EV/EBITDA by archetype
- 6-company screen
The Excel model is the primer's two archetype builds live across 10 sheets: a multi-period DCF with a contracted-or-merchant toggle, step-down discount rates for the PPA term and the merchant tail, a spark-spread build for the merchant case and a CAFD-and-payout bridge for the yieldco. Change the realised PPA price, the contracted discount rate or the merchant spread and the value per share moves; the premium and payout sheets update alongside it. It also splits the contracted premium into the part the pipeline explains and the part contract quality explains, splits the PV between contracted years and the merchant tail, and reads EV per kW on both archetypes.
See what's in the Renewables & IPPs Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Power & Infrastructure industries
Frequently Asked Questions
- What is the difference between PPA and merchant power generation?
- A power purchase agreement (PPA) locks in a long-term price and offtaker for a defined share of output, so revenue moves with contract terms. Merchant generation sells into wholesale markets at spot or short-term prices, so EBITDA re-rates with hub energy and capacity auction clears. The valuation gap between the two models is large: contracted renewables and yieldcos trade in an ~11-15× EV/EBITDA band versus ~6-9× for merchant-heavy gas books (our screening convention, Jun 2026).
- How do you find a generator's contracted versus merchant split?
- There is no single SEC filing standard. Brookfield Renewable is the rare case with a filed proportionate split: ~89% contracted and ~11% merchant on 2025 LTA GWh. Most issuers require proxies: Vistra discloses forward ~half of 2026 Ongoing Ops EBITDA from Retail plus long-term PPAs; Clearway cites ~91% non-emitting revenue and ~12-year R&S contract life; Constellation's 2026 deck splits ~25% baseload clean MWh under LT agreements and 72% gas/other base gross margin under contracts. NRG files no PPA percentage at all.
- Why does contract profile matter before EV/EBITDA?
- Multiples screen cash-flow quality. A fleet with a high contracted share carries less revenue downside than a merchant-integrated book at similar leverage, which is why the contracted band sits several turns above the merchant band. Retail integration and nuclear or coal baseload can add contracted-like cash flow that a simple PPA percentage would miss entirely.
- What PPA price anchors should analysts use?
- For through-cycle work, our planning marks carry utility-scale solar and onshore wind PPAs at $30/MWh each. That is roughly the average price LBNL records for US projects that came online in 2024, mostly on contracts signed in 2020-22; contracts signed in 2023-24 priced higher, so treat it as a teaching mark. SEIA cites typical utility-scale PPA tenors of 10-25 years. Clearway's renewables and storage segment carries a weighted-average remaining contract life of ~12 years (CAFD-weighted, FY2025). Use planning PPA marks for valuation; spot hub prices are reference only.
Read next
The Contracted Premium in Power Multiples
Bands 11–15× vs 6–9×; +3–5 turns for contracted cash flow, and why integrated books sit between the two.
Yieldco CAFD Explained
BEP bridge to $1,264M CAFD at 90% payout; CWEN $430M at ~83% derived; 80–95% screen; sponsor pipelines off balance sheet.
Generation Capacity and Technology Mix by Company
Six power generators ranked by reported capacity in gigawatts, technology mix and each filer's own basis, owned, net, operating or gross, stated per row.
See it applied
These company profiles apply the concepts from this guide to real public companies.