The Nigerian Bulk Electricity Trading Plc (NBET) had to bargain the commercial terms it accepted in 2016 with promoters of 14 utility-scale solar Independent Power Plants (IPPs).
From the renegotiation, it gathered that it was able to save the country $2.4 billion in the tariff that would be paid the IPPs when they attain commercial operations and begin to deliver electricity to the grid
It was reliably informed that the NBET also saved the federal government over $388.5 million contingent liability on the Put-Call Option Agreements (PCOAs) for the IPPs.
A document showed that the Managing Director of NBET, Dr Marilyn Amobi, wrote to President Muhammadu Buhari, to intimate him of her stewardship at the NBET between August 22, 2016, when she took up her appointment, and May 2019.
Amobi reportedly had to deal with several challenges at the NBET, including a lingering ethnoreligious conflict allegedly initiated by two of her senior subordinates.
She was also accused of corruption in statutory payments to power generation companies (Gencos) but the Nigerian Electricity Regulatory Commission (NERC) investigated and cleared her of any underhand dealings.
However, in the letter to Buhari, Amobi detailed why she had to renegotiate the commercial terms the NBET agreed for 14 IPPs which would collectively produce 1125 megawatts (MW) of electricity. The investors would also spend about $2.5 billion to build them.
She explained that in December 2017, with the approval of the chair of NBET’s board who at that time was the Minister of Finance, Mrs. Kemi Adeosun, she competitively reviewed the 11.5 cents per kilowatt-hour (KwH) tariff the NBET initially agreed with the solar IPPs investors downwards to 7.5 cents per KwH, for the reason that the global economics for solar power were becoming favourably cheaper.
According to her, the review resulted in the savings of $2.4 billion on tariffs to be paid over 20 years by Nigerians for electricity from the plants. The other $388.5 million saved from the renegotiation was on the PCOAs contingent liabilities that would have been paid by the federal government as well to the IPPs.
Furthermore, the letter showed that Amobi, informed Buhari that the renegotiation was made possible by her decision to transition the NBET from using an ‘open book’ system of negotiating Power Purchase Agreements (PPAs) to adopting a weighted average cost of the prices the NBET already has in its portfolio, as well as issuance of PPAs with energy-only condition in its package.
She said that it was not the NBET and the federal government alone that have benefitted from the new PPAs procedure, but investors who have reportedly been able to save $200,000 that they previously spent on legal fees to firms to negotiate PPAs with NBET.
Also, in the letter, she explained that the weighted average cost system would objectively and transparently determine the prices for power production, and without flexibility for manipulation, while the energy-only PPAs will ensure that the country going forward, only contract and pay for electricity generated and not for capacity declared available by Gencos.
In July 2016, the NBET signed PPAs with 14 investors to build solar power plants mostly up north to generate 1125MW of electricity to the national grid.
The agreement signalled Nigeria’s desire to mainstream solar-generated electricity into her national grid, and in pursuit of a 30 per cent target contribution for renewable energy in her energy mix by 2030.