HomeIndustry SectorsFinance and PolicyNigerian gov continues to battle tariff structure with solar IPPs

Nigerian gov continues to battle tariff structure with solar IPPs

The Nigerian Bulk Electricity Trading Plc (NBET) and the Federal Ministry of Power have still not reached an agreement with the 14 solar independent power producers (IPPs) regarding the tariff structure.

According to THISDAY, the developers are unable to proceed with the projects following concerns raised by the federal government over high tariffs embedded in the PPAs.

It is reported that the IPPs are proposing to sell the generated power at 11.5 cents per kWh, however, the federal government is insisting on $0.075 cents per kWh.

Due to disagreements with the developers on a tariff structure, NBET and the Federal Ministry of Power have extended the deadline for the long-stop-date for the Put Call Option Agreements (PCOAs) till January 2019 after the initial extension expired in July 2018.

The long-stop-date is the last date by which the PCOAs must be agreed and signed by all parties given that the conditions have been met or the project would be terminated.

“It has been extended until January 2019. But NBET has informed the developers that this will be the final extension. PCOAs are now being initiated because some investors have agreed to do their projects at $0.075 cent per kWh instead of the 11.5 cent per kWh proposed in the PPAs,” a source close to the transaction revealed.

Final extension deadline

According to the media, NBET’s head of communications, Henrietta Ighomrore, confirmed that the January 2019 extension is all-inclusive, adding that the investors are expected to conclude all that was necessary to move to site.

“The extended financial close is what was given until January. It is not just the PCOAs. It is to ensure that every other condition precedent is met, and the project is good to go. Read more: Renewable Energy Association of Nigeria – reveals way forward

“It is beyond the PCOAs. It is ensuring that your EPC (engineering, procurement and construction) contract has been signed; your O&M (operation and maintenance) contract has been signed off and your financial agreement has been signed off. That is what the extension is about,” Ighomrore explained.

Solar power cost declining

According to documents seen by THISDAY, the then Minister of Finance, Kemi Adeosun, had queried the 11.5 cent per kilowatt hour cost of power approved for the projects in the PPAs.

The finance minister had insisted that the average cost of procuring solar power globally had continued to decline, adding that Nigeria was at the risk of an unhealthy sovereign risk exposure if it went ahead to approve PCOAs on 11.5 cent per Kwh for the projects.

Adeosun had also argued that with the development cost of solar power declining in the past few years, the tariffs should be reasonable.

She cited similar competitive procurements in South Africa, Zambia, Egypt and Ethiopia where prices were between five and seven cents per kWh.

Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.