Glossary: 60 terms in energy, mining and public tenders

The same word can mean slightly different things in oil, power and mining. These definitions describe normal usage. A contract has its own definitions section, which overrides this list.

• Associated gas. Natural gas that comes out of an oil well with the crude. It can be sold, reinjected, burned for power or flared.
• Availability payment. A periodic government payment to a private partner for keeping an asset or service available at an agreed quality, whatever the usage.
• BESS. Battery energy storage system. It stores electricity when it is cheap and releases it when the grid needs it.
• Bid security. A bank guarantee that a bidder will sign the contract if it wins. Some rulebooks accept a signed declaration instead.
• BOT. Build-operate-transfer. A private company builds an asset, runs it for a period and hands it to the state.
• Brownfield. A project built on or next to an existing site, as opposed to bare ground.
• CAPEX. Capital expenditure. Money spent to build or buy an asset, and later to extend or replace it.
• Capacity factor. The share of its maximum possible output a plant actually produces over a period.
• Carried interest. A project share held by a partner, often the state oil company, whose costs others pay and recover from later output.
• Change in law. A contract clause saying who pays when a new law or tax raises project costs after signing.
• Concession. A state right to explore, build or operate for a fixed term. In oil and mining the holder usually owns the output and pays royalties.
• Cost oil. In a production sharing contract, the production the contractor keeps to recover approved costs before profit is split.
• Curtailment. An order to a power plant to produce less than it could, usually because of grid congestion or low demand.
• DBFOM. Design, build, finance, operate and maintain. A PPP model giving one private party all five functions.
• Deemed energy. Electricity a plant could have delivered but the buyer did not take. Many PPAs make the buyer pay for it anyway.
• Definitive feasibility study. The most detailed pre-construction study, used by lenders and boards to decide whether to proceed.
• EPC. Engineering, procurement and construction. One contractor designs and builds a facility and hands it over ready to run.
• ESIA. Environmental and social impact assessment. A study of what a project changes for nature and local people.
• Expression of interest. A short reply saying a firm wants to be considered for work. For consulting contracts it feeds the shortlist.
• FID. Final investment decision. The moment a company's board commits the money to build.
• Financial close. The date all financing documents are signed and conditions met, so lenders can release funds.
• Force majeure. An event beyond a party's control that excuses or delays performance. Contracts list which events count.
• Greenfield. A project on previously undeveloped land with no existing facilities.
• IPP. Independent power producer. A privately owned generator selling electricity to a utility or other buyers.
• IRR. Internal rate of return. The discount rate at which a project's future cash flows equal what was invested.
• Joint venture. Firms that bid or operate together. In World Bank tenders partners are jointly and severally liable for the whole contract.
• LCOE. Levelised cost of energy. The average cost per unit of electricity over a plant's life, including build and fuel.
• Letter of credit. A bank's written promise to pay a named party if conditions are met. Common as payment security in power contracts.
• LNG. Liquefied natural gas. Gas cooled into a liquid so ships can carry it where pipelines do not reach.
• Liquidated damages. A fixed sum, agreed in advance, that a party pays for a specific breach such as late completion.
• MW and MWh. A megawatt measures power at one moment. A megawatt-hour measures energy delivered over an hour.
• Mineral reserve. The part of a resource shown by study to be economically mineable, after mining, processing, legal and environmental factors.
• Mineral resource. A concentration of minerals with reasonable prospects of eventual extraction, graded from inferred to measured by confidence.
• NPV. Net present value. Future cash flows discounted to today's money, minus the amount invested.
• Non-recourse. Debt that lenders can recover only from the project's own assets and income, not from the shareholders' other assets.
• OCDS. Open Contracting Data Standard. A common format for publishing procurement data from planning to implementation.
• Offtaker. The buyer who agrees to purchase a project's output, such as a utility.
• OPEX. Operating expenditure. The cost of running an asset once it works, such as fuel, labour, maintenance and insurance.
• Performance security. A guarantee that the winner will deliver. World Bank rules normally cap it at 10 percent of the price for works and plant.
• Preliminary economic assessment. An early mining study testing whether a deposit might be worth developing, with wide margins of error.
• Prequalification. A first stage in which a buyer judges firms on experience, finances and capacity before inviting full bids.
• Procurement plan. A list of contracts a project expects to tender, with methods and timing. The best advance view of opportunities.
• Production sharing contract. An agreement in which the state keeps title to the resource and the contractor recovers costs and takes a share of production.
• Profit oil. In a production sharing contract, the output left after royalty and cost oil, split between state and contractor.
• PPA. Power purchase agreement. A long-term contract in which a buyer pays a producer for capacity, energy or both.
• PPP. Public-private partnership. A long-term contract in which a private party bears significant risk and is paid according to performance.
• Request for bids. The tender document for goods, works and plant, where price mainly decides among compliant bids.
• Request for proposals. The tender document for services such as consulting, where quality is scored as well as price.
• Royalty. A payment to the state or owner based on production or revenue, due before costs and whether or not the project profits.
• Sovereign guarantee. A national government's promise to pay if a state entity fails to meet its obligations.
• SPV. Special purpose vehicle. A company created only to build and run one project, keeping its debts apart from its sponsors.
• Stability clause. A contract term that fixes tax or legal conditions for the project, or compensates the investor if they change.
• Standard bidding documents. Model tender documents a development bank requires borrowers to use in large international tenders.
• Standstill period. A pause between announcing an intended award and signing, when losers can complain. World Bank rules set ten Business Days.
• Sustaining CAPEX. Money spent to keep a mine or field producing at current levels, such as replacing equipment.
• Take-or-pay. A contract term: the buyer pays for a minimum quantity whether or not it takes delivery.
• Tailings. Ground rock and process water left after minerals are extracted, stored in a dam or similar facility.
• Tariff. The price schedule for electricity, gas or water, or a regulated charge for using a network.
• Upstream, midstream and downstream. The oil and gas chain: finding and producing, then transporting and storing, then refining and selling.
• Value for money. A procurement principle seeking the best overall result, including quality and life-cycle cost, not only the lowest price.

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