16 September 2016, Lagos – Ten out of 11 Independent Power Producers that executed Front-Runner Solar Power Purchase Agreements have posted development securities, the Nigerian Bulk Electricity Trading Plc has said.
A development security is a bond payment required by the government to secure the firm commitment of companies to deadlines for particular transactions. In the case of the power firms, they will forfeit the bond if they fail, but will get refunded if they meet the financial closure deadline.
A statement issued by the NBET in Abuja on Thursday said the 10 firms successfully posted their development securities to it on the due date of September 9, 2016.
A key requirement of the contract is for each developer to post a $20,000 per megawatts Development Security Letter of Credit, which provides security for the IPPs’ obligation to achieve the financial closing date by the target closing date (six months after the execution of the PPA) or the long stop closing date (the date beyond which the target closing date may not be extended).
The development security will be refunded to the IPP when the closing date is met after which the IPP will begin construction of the plant.
The NBET said, “It is important to note that the additional three IPPs that executed their PPA are expected to post their development security on their due date of September 28, 2016 and October 2, 2016.
“Furthermore, the NBET notes that the posting of development security by 10 out of the 11 IPPs that were due is a testament to investor confidence in the Nigerian power sector and continued interest in the development of the same.”