NBET’s Disbursement to Gencos, Others Hit N5trn in Seven Years

The Nigerian Bulk Electricity Trading Plc (NBET) has disclosed that between 2015 and 2022, the company paid N5 trillion as part of its function as administrator of Power Purchase Agreements (PPAs) and Vesting Contracts (VCs) in the power sector.

Statutorily, NBET acts as a link between the Generation Companies (Gencos) and Distribution Companies (Discos) through PPA and vesting contracts.

To this extent, NBET ensures that Gencos are paid through the prime source of revenue which is the payment receipts from the Discos for energy sales through vesting contracts.

Speaking in Lagos at a workshop organised for members of the Power Correspondents Association of Nigeria (PCAN), civil society and other stakeholders, the Managing Director of NBET, Dr. Nnaemeka Ewelukwa, also noted that the proper management of the N1.3 trillion Payment Assurance Facility (PAF) led to about 30 per cent increase in peak power, resulting in the highest generation ever attained.

According to Ewelukwa, this rise was from the hitherto 4,500mw, peak in February 2015, to 5,800mw in March 2021.

“The administration of PPAs & Vesting Contracts by NBET has resulted in electricity payments worth N5 trillion from February 2015 till date.

“There is also the successful and transparent management of the N1.3 trillion PAF which aided about 30 per cent increase in the highest peak generation ever attained, from 4,500mw (February 2015) to 5,800mw (March 2021), due to capacity recovery by Gencos,” he added.

Ewelukwa further stated that in the last 10 years, NBET facilitated the privatisation of generation companies through PPAs with core investors, including the $2.5 billion privatisation of Gencos and Discos in 2013.

The company, he stated, was also instrumental to the privatisation of Afam Power Plc and Afam Three Fast Power Limited for N105.3 billion and $343.6 million.

Ewelukwa added that NBET also finalised the first Project

Financed Power deal with Azura’s 450mw, which heralded an investment of close to $1 billion in gas Independent Power Project (IPP) and executed PPAs with 14 solar IPPs for 1GW.

He also listed the operationalisation of NBET as a going-concern and building the capacity to demonstrate credibility to potential developers and investors in the power sector, especially its IPP planning and procurement capabilities as part of the achievements.

NBET, he noted was also acting as the channel for the application of the $750 million Power Sector Recovery Operation (PSRO) loan proceeds, the PAF and FGN’s budgetary appropriation in addressing tariff shortfalls in the electricity market.

However, with about 214 million Nigerians and grid electricity access of 55 per cent as well as grid electricity consumption per capita of 144kWh and self-generation of 8GW-13GW by commercial/ industrial customers, according to the National Development Plan (2021-2025), Ewelukwa noted that the problems in the sector were being sorted out.

In his intervention, NBET’s Head of Strategy, Coordination and Corporate Communications, Dr. Eugene Edeoga, noted that to address the challenge of stranded power, the Nigerian Electricity Regulatory Commission (NERC) came up with the idea of implementing a phased activation of the contracted capacity under the PPAs between NBET and each of the Gencos as part of a strategy to ensure increased electric power supply across the value chain.

He added that the objectives of the partial activation of contracts was to enshrine market discipline among the sector operators through the mechanism of liquidated damages for breach of service level obligations.

This, he added was also to address the liquidity shortfall in the industry by providing an effective payment security framework to ensure that all market operators or vendors – gas suppliers, Gencos, the Transmission Company of Nigeria (TCN), and Discos – are paid all due invoices in full. Another objective of the partial activation of contracts, Edeoga noted, was to secure available generation capacity of at least 5,500MW in Phase – 1 (1st July 2022), and 6,500MW in Phase – 2 (1st July 2023).

He noted that this would also create certainty in the gas-power market segment through contracting, as a way to improve firm gas availability to power stations.

In her presentation, the Head, Guarantees and Risk, NBET, Itohan Ehiede, said the different securitisation options in the sector were introduced to ensure some level of certainty concerning the operations in the power sector.

Based on the capital intensive nature of power sector transactions, she listed the different types of securitisation options as partial risk guarantee, put/call option, letter of credit, bank guarantee as well as security trust deed.

Also speaking, an Energy Consultant and Senior Lecturer, Faculty of Law, University of Ibadan, Dr. Peter Oniemola, explained that power projects use PPAs to determine the price to be paid for electricity generated and the amount of electricity to be generated, specifying the terms and obligations of the parties within stipulated periods in the project cycle.

“There is an obligation on the purchaser or off-taker to either purchase all the electricity generated or part of it under a stipulate framework or arrangement.

“The negotiation of the terms and conditions of the contract depends on the bargaining powers of the parties, putting into consideration the stipulations of the law and the party who is well positioned to assume the particular risks,” he stated.