NBET signs off $5b agreement on 1200mw coal power project
THE Nigerian Bulk Electricity Trading Plc (Bulk Trader) has signed off a Power Purchase Agreement (PPA) clearing the coast for financial closure and the commencement of construction work for Nigeria’s coal power project, the Itobe Coal Power Project, planned to start the first quarter of next year.
The $5 billion coal power project is currently the largest licence for coal power generation and is expected to generate 1200 megawatts (mw) of electricity from coal deposits in Itobe, Kogi State. It is expected to generate 300mw of electricity in 30 months and a total of 1200mw in subsequent years.
Speaking at the signing of the PPA in Abuja at the weekend, Managing Director of NBET, Dr. Rumundaka Wonodi, described the development as a major milestone in the quest to develop electricity from coal in the country.
He said: “We have just initialled the Power Purchase Agreement (PPA) 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.
“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. This PPA made consideration for the kind of technology, which is coal. It is quite different from gas and has many other feeding part of it, 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.
“The PPA pricing is based on the Multi-Year-Tariff-Order (MYTO) generation tariff as approved by the regulator, the Nigerian Electricity Regulatory Commission (NERC).”
Chairman of Zuma Energy Nigeria Limited, Dr. Innocent Ezuma, stressed how his firm had worked assiduously for 10 years to develop the coal mine.
He stated: “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 1200mw coal power project. This first project is 300mw and has reached advanced stage. What we just did now is to sign the PPA. The PPA is a power purchase agreement, which is required for the project to reach financial close, because the PPA is the only source of revenue for the project.
“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 1200mw into four has necessitated this speedy attainment of the execution of the PPA.”