The acting Managing Director of the Nigerian Bulk Electricity Trading Plc (NBET)), otherwise known as the Bulk Trader, Waziri Bintube, has said that the essence of Power Purchase Agreement (PPA) was to enable the power companies raise funding for their projects.
Bintube disclosed that PPA, a document that would give assurance that there would an off-taker for the electricity product, would ensure that there would be continuous payments for their product without interruptions.
According to him, PPA had been backed up “with a put call option agreement to give them an assurance that should there be a major force majeure in Nigeria or expropriation, that the developer can get reimbursed for the entire amount he has invested and the government of Nigeria can take over.”
NBET boss explained: “If, on the other hand, for some security reasons, the government wants to have total control of the power plant, it can also buy over the plant and reimburse the entire amount for the plant. So, it is a complex document. But looking at existing remittance challenges you are having with Discos, are you very capitalised to take on this and cover the new solar plants”
He stated that NBET had a working capital up to $350 million, which it got under the Euro bond facility, while the Federal Government had given the agency N50 billion from its privatisation proceeds from Egbin.
Bintube said: “When we are buying power, the main source of payment is remittance from the Discos. They also give us letters of credit from their banks, and it is like a guarantee from their banks to say that should they fail to pay us, their banks will pay us.
“Out of the 11 Discos, about eight have given us that guarantee and it is just that we have not called on them because we are very sensitive to the impact it might have on the banking industry. But we have formed a structure and assigned our rights on those guarantees to the Gencos who can now call their banks and make them pay if the Discos fail.
“So, there are three levels of the waterfall. The first one is the cash collection from the consumers, which the Discos are supposed to pay and if they fail, there is the LCs from their banks.
“Then third level is the World Bank partial risk guarantee, though, it is not all the Gencos that have it, but what it does for the Gencos that have it is that if NBET and the Discos fail to pay them, then the World Bank through that structure pays them. That is why it is called partial risk guarantee and not full but kicks in when the need arise.
“NBET has a working capital; up to $350 million was given to us under the Euro bond facility and we have that amount in our kitty, which we can deploy in exceptional situations.
“In addition, the government has given us N50 billion from its privatisation proceeds from Egbin, which we have put in our escrow account. The purpose of that is to breach the time difference when the Gencos want their money and when they can be paid.
“In addition, there are some off-the-line supports like the Central Bank’s Nigerian Electricity Market Stabilisation fund that was granted by the CBN to cover obligations in the market from the date of privatisation. That was another form of support to the market.
“We are currently negotiating with the CBN again to come in with a second tranche. They have some amount that they are yet to disburse but even after that, we are looking at getting the board to approve another second tranche on top of the N213 billion that has already been approved. We are looking at about N180 billion,” he stressed.
Source: News Herald