Power Plant
Chineme Okafor examines the potentials of the first-ever power purchase agreement (PPA) consummated between the Nigerian Bulk Electricity Trading Company and Azura Power West Africa in the country’s emerging power sector.
The Nigerian Bulk Electricity Trading Company (NBET) has recently consummated its first-ever power purchase agreement (PPA) upon which it will assume the responsibility of an off-taker of power to be generated by Azura Power West Africa from its 450 megawatts (MW) Azura-Edo IPP Open Cycle Gas Turbine (OCGT) power station.
The project will be the first phase of a 1000MW power plant facility that is being developed near Benin City, in Edo State.
The agreement which came into being after about 18 months of detailed negotiations between NBET and Azura Power was also recently ratified by the government at the presidential power sector reform transaction signing ceremony conducted by President Goodluck Jonathan in Abuja.
For the NBET, the agreement had materialised to signify government’s intention to drive investments into Nigeria’s power sector with a verve consisting of shared responsibilities in benefits and risks.
The PPA according to the Managing Director of NBET, Rumundaka Wonodi, has in itself become a template upon which subsequent PPAs with upcoming Independent Power Producers (IPPs) can ride on to push investments into Nigeria’s emerging electricity market all in line with Nigeria’s plan to improve her electricity generation to about 20,000MW by 2016.
“The PPA we signed with Azura Power to a large extent represents the government’s offer to doing what is to the minimum necessary to attract private investment in the sector. We have been working with Azura for the past 18 months, going through the necessary documents and processes to come to where we are.
"What we’ve been doing all that while is to try to first identify all the risks within the operations of an IPP and of course the Bulk Trader. We looked at all the risks associated with bringing a new power plant to life, financing it and then we began to put the risks in different pockets identifying where and who is capable of mitigating a particular risk; in that regard, that person will bear the risk and whatever is related to government, for instance, transmission, NGC (Nigerian Gas Company), security of lives and properties and all the things you call sovereign risks, payment of the power is all that is put and made the obligations of the Bulk Trader,” Wonodi said in his explanation of the significance of the PPA with Azura," he said.
He stated that the NBET would further leverage lessons drawn from formalising the model PPA to encourage other IPPs to cash into Nigeria’s emerging electricity market, adding that the potentials could become boundless with the right systems as being promoted by the government.
Simply put, a PPA is a long-term contract between the producer and buyer or off-taker of electricity to buy electricity generated from a particular power plant for resale and distribution to consumers through a distribution network.
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