OPPORTUNITIES IN THE ON-GRID RE SECTOR IN NIGERIA by Yesufu Longe Head, Power Procurement & Power Contracts June, 2016
Outline History How NBET Works Tenders & Auctions International & Local Investment Partnerships 2
History In the beginning, The National Electric Power Policy of 2000 provided for: An Autonomous Special Purpose Entity (SPE) created by the unbundling of NEPA will take over NEPA s energy purchasing obligations. The SPE will sign subsequent PPA s (subject to the specified annual limits) and will sell power to the distribution companies. Five years thereafter, The Electric Power Sector Reform Act (EPSRA) enacted in 2005: as "trading licensee holding a bulk purchase and resale license to engage in the purchase and resale of electrical power and ancillary services from independent power producers and from successor generation companies, in accordance with its licence... The Bulk Trader is to act as a broker to carry out that function of the Power Holding Company of Nigeria (PHCN) as relates to the bulk purchase of electricity from Power Producers for resale to the Distribution Companies (Discos). Its Pioneer 9 Member Board was inauguratedin August 23, 2011. 3
HOW NBET WORKS 4
Background NBET performs its functions by entering into bankable Power Purchase Agreements (PPA) with Independent Power Producers (IPP) and the now privatized Generation Companies (Gencos). Whatever energy that is bought through the PPA is resold through Vesting Contracts (VC) to the privatized Distribution Companies. PPA provides: Guaranteed payments for Capacity and Energy Mitigation of Sovereign Risks including SOEs obligations Cost reflective tariff with favourable ROI and FX protection Proper alignment of Force Majeure issues across Value Chain contracts Downstream off-take through Vesting Contracts with DisCos. Vesting Contracts guarantees each Disco a percentage of the Bulk Trader s total PPA Portfolio. NBET s PPAs (Gas, Coal, and Renewables) will serve as model for future Disco procurement. Anchor of FGN credit enhancement instruments Partial Risks Guarantee from World Bank PRG from African Development Bank 5
Transitional Market Trading Arrangement Existing Existing Existing GenCo1 GenCo2 GenCo3 New IPPs GenCo4 GenCo5 GenCo6 IPPs IPPs IPPs POWER PURCHASE AGREEMENTS PPAs BULK TRADER Additional Capacity Eligible Customers VESTING CONTRACTS DisCo 1 DisCo 2 DisCo 3 DisCo 4 DisCo 5 DisCo 6 DisCo 7 DisCo 8 DisCo 9 DisCo 10 DisCo 11 6
TENDERS & AUCTIONS 7
Competitive Procurement Going Forward, both Distribution Companies and NBET will be procuring renewable energy independently for the various Nigerian markets on an auction basis. NBET is working with GIZ on Competitive Procurement in Nigeria. The System Operator within the Transmission Company of Nigeria will generate an Annual Report highlighting the nation s power procurement requirements. NBET will then publish invitations for Expressions of Interest (EOI) in the Federal Government Tenders Journal, the World Bank procurement website and at least two Newspapers circulating within Nigeria. 8
Successful Bidders Currently, the first bidding round that shall take place will only incorporate 15 front-runner IPPs who have been negotiating with NBET in the unsolicited procurement process. Any new investors may participate through the 15 developers by providing assistance in areas such as financing, EPC, O&M, transaction advisory and governmental affairs. Upon successful conclusion of the first bidding round after which financial close is achieved, subsequent rounds will solicit for investments globally through an international RfP process. 9
Projects for First Round Bidding S/N PROJECT NAME LOCATION CAPACITY (MW) 1 Pan Africa Solar Katsina 75 Nigerian Solar Capital 2 Partners Bauchi 100 3 LR Group FCT 100 4 Motir Dusable Enugu 100 5 Nova Solar Katsina 100 6 Nova Scotia Jigawa 80 7 Green Cowrie Yobe 100 8 Middle Band Solar Kogi 100 9 Afrinergia Nasarawa 50 10 Synergents Kaduna 50 11 Quaints Solar Kaduna 50 12 Kvk Power Sokoto 100 13 Sinosun Solar Katsina 100 14 Anjeed Kafanchan Kaduna 100 15 CT Cosmos Plateau 70 10 TOTAL 1275
Solar Potential in Nigeria 11
INTERNATIONAL & LOCAL INVESTMENT PARTNERSHIPS 12
Transmission Line Expansion Plan GW Target Year Expand to 10 GW; increase network reliability 10,000 2017 Expand from 10 GW to 13 GW 13,000 2018 Expand from 13 GW to 16 GW 16,000 2019 Expand from 16 GW to 20 GW 20,000 2020 13
Partnering As a matter of practicality, NBET expects all Developers to partner with any number of local investors. This expectation is required to mitigate re-invention of the wheel. Many local investors both institutional and individual - already possess first-hand knowledge of the requirements in meeting NBET s Due Diligence as well as the prerequisites for managing the evolving Institutional framework Nigeria s power sector. More importantly, as investors commit to investing in the national grid more opportunities will be created for investment in power generation and its ancillary services. 14
QUESTIONS??? 15
THANK YOU 16