Nigeria releases ‘Easy Guide’ to power generation contract issues

Nigeria on Tuesday took a giant step towards simplifying for its power stakeholders the issues surrounding the contractual framework for power generation.

This was sequel to the launch and release of a handbook that would make it easier for electricity stakeholders to clearly understand the issues by the Nigerian Bulk Electricity Trading plc (NBET) in Abuja. Entitled ‘Understanding Power Purchase Agreements (PPAs),’ the handbook is expected to reduce the PPAs negotiations. It would also ensure that developers, financiers, regulators and key government stakeholders are familiar with the various considerations and choices in negotiations and project development prerequisites.

Speaking during the launch, Matthew Wonodi, managing director/CEO, NBET, however, pointed out that the handbook was not prescriptive and did not seek to provide all the answers, saying “the PPA handbook represents an attempt to document key considerations in these PPA negotiations. It is a handbook that will resonate with power project developers seeking to generate power from different energy sources. It is an important contribution to the body of knowledge on electricity generation in Africa, and is of particular importance to key stakeholders in the Nigerian electricity sector.”

“The principal benefit of the handbook is that it ensures that all stakeholders gain a clearer understanding of the myriad issues surrounding the contractual framework for power generation. It is not a prescriptive handbook, and does not seek to provide all the answers, but rather ensures that developers, financiers, regulators and key government stakeholders are cognisant of the various considerations and choices in negotiations and project development prerequisites.”

He said such issues include: risk allocation, tariff consideration, other project agreements in the electricity value chain that need to be aligned with the PPA, project finance and bankability considerations, force majeure, environmental and social issues, credit support mechanisms and termination and dispute resolution considerations.

He further said that stakeholders should expect a great reduction in the time spent on negotiations for projects going forward.

“Ultimately, the handbook should lead to reduction in the PPA negotiation timeframe as the parties are better prepared to tackle the core issues that need to be agreed on and subsequently documented in the PPA. Indeed, it is our hope that when NBET’s form PPA is published later this year that this book will help its counterparts understand that the provisions within the form provide the fairest resolution for the Nigerian electricity market. Consequently, we expect a great reduction in the time spent on negotiations for projects going forward,” he said.

In his remark, Matthew Burton, director, Economic Growth and Environment and Lead, Power Africa, US Agency for International Development (USAID), observed that PPAs were very fundamental to bringing power deals to a close.

Also speaking, Toyin Ojo, senior legal advisor, African Legal Support Facility (ALSF), disclosed that the handbook was created within a space of five working days, expressing hope that it would reduce the cost of negotiating PPAs.

In his goodwill remark, Bart Nnaji, a former minister of power, and chairman/CEO, Geometric Power Limited, described “the PPAs as the engine that drives the power programmes.”