A Review of the Nigerian Energy Industry

NBET signs PPA for $1.5bn Zuma coal power project


*Project moves to financial closure, construction begins in Q1 2016

07 September 2015, Abuja – The Nigerian Bulk Electricity Trading Plc, NBET, which is also known as the ‘bulk electricity trader,’ has finally signed its first Power Purchase Agreement, PPA, on coal-to-power with Zuma Power for the construction of a 300 megawatts, MW, coal power plant in Itobe, Kogi State.

Following this development, as well as its expected ratification by the Nigerian Electricity Regulatory Commission, NERC, and attainment of a financial closure with its investors, construction is expected to start on the plant in the first quarter of 2016.

The 300MW plant is the first phase of an entire 1200MW generation licence which Zuma holds but NERC decided to break it into four parts of 300MW each, two months ago for ease of execution.

The Chairman of Zuma Power, Dr. Innocent Ezuma, told journalists when his company signed the PPA with NEBT at the weekend in Abuja that work on the 300MW plant would be completed within 30 months from the day it is commenced.

He also noted that the 20-year PPA has a revenue value of $12 billion, adding that subsequent works on the balance of 900MW generation license will be done consecutively.

“This is the first PPA that is signed for the first phase of the Zuma Energy 1200MW coal-to-power project. This first phase is 300MW and it has reached advanced stage.

“What we have done now is to sign the PPA which is required for the project to reach financial close because the PPA is the singular source of revenue for the project,” Ezuma said.

He further noted: “The significant of this is crucial because the project has reached a point where it could not continue with its development activities without signing this documents and by the decision of the NERC to subdivide the 1200MW generation license into four, we can say that it has resulted to the speedy realisation of the PPA.”

Ezuma explained that: “As soon as this is completed, we will get approval from the NERC and other relevant government agencies and after that, we are going to reach our financial close and mobilise to site by the first quarter of 2016.

“Construction will take 30 months for the first units and others will take six months subsequently. What is important is that the revenue that this project will generate over the next 20 years is in the neighbourhood of $12 billion and you can imagine adding that into the Nigerian economy and its ripple effects. All these revenues are monies for costs of transmission, fuel and all others in the 300MW phase.”

While speaking on the sustainability of fuel supply to the plant when completed as well as its impacts on the environment going by reported misgivings about coal power plants, Ezuma said: “Continuous exploration of coal is being undertaken by us as the most equipped coal exploration industry in Nigeria. Our idea is to get between two to three billion tonnes of coal within few years.

“I want you to know that this project is being developed and implemented with the best clean coal technology in the world today, we are using the Circulating Fluidised Bed (CFB) technology; one of the technologies that is listed and meets the World Banks carbon standard, so we are using the best and will bring the best in Nigeria.”

He said on the cost: “This project will cost us about $1.5 billion to build and that includes interests during construction, jetties, roads to be constructed and so many other auxiliary infrastructure.

“You will however understand that the cost of this first phase will be much higher than other phases because many of the costs that will be incurred in the first phase will not be repeated in other phases, like the transmission lines which is to be built for the entire 1200MW, however, the total 1200MW will cost up to $5 billion.”

The Managing Director of NBET, Rumundaka Wonodi said in his remarks that it took both parties up to three years to negotiate the PPA.

He added that the PPA represents the first of its kind in the country’s power sector and that its pricing components were negotiated based on the Multi Year Tariff Order (MYTO) framework of the NERC.
*Chineme Okafor – Thisday

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