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TH
POWER SUMMIT/CIVIL SOCIETY ORGANIZATIONS
FORUM
2
Sustaining a Credible and Credit-
worthy Off-taker
by
Rumundaka Wonodi
Managing Director/CEO
Sheraton Hotel and Towers, Abuja FCT, January 30-31st 2014
Outline
Role of NBET in Transitional Electricity Market (TEM)
Features of an Effective Bulk Trader
Guaranteeing Capacity and Energy Payments
Addressing Credit Risks
Mitigating Systemic Risks
Guaranteeing Supply to DisCos
Supporting the Market
Creating a Viable Market
NBETs Commitment
NBETs Near-Term Outlook
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Role of NBET in TEM
Act as a broker between power producers and distribution
companies/eligible customers
Sign PPAs with privatised generation companies
Assume PHCN obligations in existing PPAs with IPPs
(outstanding liabilities transferred to NELMCO)
Negotiate and enter into PPAs with Greenfield IPPs
Sign Vesting Contracts with Distribution Companies
Sign power sale agreements (PSA) with eligible customers and international
customers
Provide payment guarantee in support power purchase
agreement with IPPs
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Structure of NESI in Transitional Electricity Market
GenCo1 GenCo2 GenCo3 GenCo4 GenCo5 GenCo6
DisCo1 DisCo2 DisCo3 DisCo4 DisCo5 DisCo6 DisCo7 DisCo8 DisCo9 DisCo10 DisCo11
NBETPlc
Existing
IPPs
Existing
IPPs
Existing
IPPs
NewIPPs
POWERPURCHASE
AGREEMENTS
VESTING CONTRACTS
Additional
Capacity
EligibleCustomers
PPAs
Features of an Effective Bulk Trader
Generate market confidence through well negotiated PPAs
with fair risk allocation sufficient to secure both equity and
debt financing.
Demonstrate robust capitalization/payment security and FGN support
Minimize risks along the value chain through well aligned
contracts.
Provide Vesting Contract that align DisCo payment incentive
with supply of capacity and energy.
Procure power competitively through a streamlined process
that reduces the development period for projects
Guarantee IPPs investment returns.
Guarantee DisCos a share of bulk trader portfolio of
PPA for growth and expansion of network and
Return on Investment (ROI).
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Guaranteeing Capacity and Energy
Payments
Risks
Systemic Risk
Within
Government
Control
Operational
Risk
Transmission
Risk
Gas
Transportation
Risk
Sovereign
Risk
Regulatory
Risk
Local Political
Force Majeure
Credit Risks
Underpayment
from DisCOs
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Addressing Credit Risks
DisCos willingness to pay compelled by:
Letters of Credit or Bank Guarantees from the DisCos for 3
months of expected payments (Vesting Contract, clause 11.44)
DisCos capability is enhanced by:
Cost reflective tariff broken into fixed and variable components
Adequate supply of energy
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Quantity
Price
Revenue
As represented by P x Q=R
Mitigating Systemic Risk
Cash Capitalization above $800million (128billion) through
privatization proceeds, Eurobond proceeds and budgetary
provisions from the FGN
Further enhanced by credit instruments backed by World Bank and the
African Development Bank
Proper alignment of issues and equitable risk allocation across
value chain under the PPA
NBET reserves the right to review Gas Transportation Agreement(GTA),
Gas Supply Aggregation Agreement (GSAA) and Transmission Use of
System(TUOS)
A Put/Call Option Agreement for termination in the case of
Greenfield PPAs or Share Purchase Agreement for privatized
GenCos respectively.
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Guaranteeing Supply to DisCos
-Supporting the Market
NBET guarantees value to market by procuring power at
cheapest cost possible.
Vesting Contracts guarantee each DisCo a share of Bulk
Trader PPA portfolio.
NBET is disposed to bridging temporary revenue gap for
DisCos due to systemic risks and therefore keep the IPPs
producing
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Creating a Viable Market
Growth in power generation to drive down retail price
Reduction of technical and commercial losses to
maximize power delivery and improve DisCo revenues.
Aggressive investment in transmission infrastructure to
improve wheeling capacity, stability and reach of network
Investment in gas transportation infrastructure to power
added capacity
Fair, transparent and stable regulatory environment both
in and out of the industry.
Coherent, consistent and non-conflicting policies by
Government strictly adhered to.
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NBETs Commitment
Tightly coupled agreements that align incentives for best
performance by all counterparts along the value chain.
Dedication to due-process and transparency
Maintaining robust capitalization with support of FGN for
market confidence.
Institute and continue to refine internal processes and
procedure
Diligent engagement of potential power generation
projects to ascertain viability
Constantly striving to provide the best value for the end-
users
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NBETs Near-Term Outlook
Preparation for Transitional Electricity Market (TEM):
Shadow trading in the interim period in preparation for Transitional
Electricity Market
Novation of all existing PHCN PPAs before TEM
Conclusion of PPAs for all brownfield IPPs before TEM
Ibom Power Plant, First Independent Power Plant, Omotosho
Power Plant etc
Workshop for new IPPs and DisCo owners on the PPA and Vesting
Contract
Testing NBET Contract Management Processes
Execution of wind, solar and coal PPAs by ensuring
diversification of generation mix
Bulk competitive power procurement based on NERC
issued guidelines
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THANK YOU
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