Last week, the Nigerian Bulk Electricity Trading Plc (NBET) and Zuma Energy signed a Power Purchase Agreement (PPA) for the Itobe Coal Power Project, located in the Kogi State.
According to The Guardian, the PPA clears the coast for financial closure and the commencement of construction work, which is expected to start in the first quarter of 2016.
Speaking at the signing, Managing Director of NBET, Rumundaka Wonodi, said: “We have just initialled the Power Purchase Agreement for the Itobe 1 Coal Power Plant located in Kogi State. The PPA is entered into between the sponsors and developers of the project, Zuma Energy and Nigerian Bulk Electricity Trading Plc., otherwise known as the Bulk Trader.”
NBET drives movement in power sector
The $5 billion coal power project is expected to generate a total of 1,200MW of coal-fired power with 300MW planned for its first 30 months in operation.
Wonodi added: “The development of this PPA is a major milestone for us. With this, we have a coal PPA for the industry so that all the coal projects have a template that they can borrow. We can use that for concluding discussions with them very quickly.
“It has taken over three years of engagement. When we started, the first thing was for Zuma Energy to demonstrate that they have a viable project. It was after that due diligence that we started the issue of negotiating a PPA.”
He added: “This PPA made consideration for the kind of technology, which is coal.
“It is quite different from gas […], especially the fact that there would be ancillary dunking yard for coal, additional transmission line and all the other things are captured in the risk allocation in this PPA and other supplementary agreements.”
Cost of the coal project
Wonodi added that the PPA pricing is based on the Multi-Year-Tariff-Order (MYTO) generation tariff, which is approved by the Nigerian Electricity Regulatory Commission (NERC), The Guardian reported.
Chairman of Zuma Energy Nigeria Limited, Innocent Ezuma, expressed: “The project cost is almost $5 billion and this first PPA revenue is in the region of $12 billion for the next 20 years. We want to give Nigerians power.
“This PPA is signed for the first stage of the first phase of the Zuma Energy 1,200MW coal power project.”
He added: “The significance of this is high. The project got to a point where it could not continue developmental activities without signing this document.
“The decision of NERC to sub-divide the licence of 1,200MW into four has necessitated this speedy attainment of the execution of the PPA.”