NBET is an acronym for Nigerian Bulk Electricity Trading PLC. NBET is popularly known as the Bulk Trader.
NBET purchases electricity from the generating companies through Power Purchase Agreements (PPAs) and sells to the distribution companies through Vesting Contracts and to International customers through Interconnection Agreements. The generating companies include the recently privatised PHCN successor companies, the National Integrated Power Projects (NIPPs), the already existing Independent Power Producers (IPPs) and the new IPPs. Our mandate includes:
- To put in place an effective transaction environment which minimizes risk and allocates it fairly to the parties best able to manage these risks.
- To implement a procurement process that is transparent and will result in the economic procurement of needed power.
- To enter into contracts that are well structured and managed in a manner that precludes recourse to any credit guarantee instrument.
- To novate contracts and wind up as soon as the DISCOs are ready to take on their own procurement.
NBET is a Federal Government of Nigeria owned public liability company with two institutional shareholders with the following stakes: The Bureau of Public Enterprise (BPE) has 80% stake and; The Ministry of Finance (MOF) incorporated has 20% stake.
On August 23, 2011, President, Dr. Goodluck Ebele Jonathan, GCFR, inaugurated the Board of Directors with Coordinating Minister of the Economy and Honourable Minister of Finance, Dr. Ngozi Okonjo-lweala as the statutory Board Chair and Mr. Rumundaka Wonodi as the Managing Director and Chief Executive Officer. The other Board members are:
- Mr. Saka Abimbola lsau, SAN, (Vice Chairman)
- The Honourable Minister of Power, Prof. Chinedu Nebo
- Director-General, Bureau of Public Enterprises, Mr. Benjamin Ezra Dikki
- Mr Haruna Samba Mohammed
- Hon. Mohammed Kumalia
- Mr. Paul Usoro, SAN
The vision of NBET is a Nigeria where electricity is taken for granted.
The mission of NBET is to be an effective and efficient catalyst for private sectors investment into the electricity industry in Nigeria.
Integrity, Transparency, Professionalism, Team work and Social responsibility.
NBET is adequately capitalised through the following means to meet its payment obligations to Generation Companies: Payments receipts from the DisCos for energy sales through Vesting Contracts - approximately $150 million per month Letter of Credit or Bank Guarantees from the DisCos for 3 months of expected payments to mitigate market shortfalls Budget Appropriations: Working Capital Supplementation from the FGN via budgetary appropriations - approximately $145 million for 2013 Eurobond Proceeds: Expected addition to Working Capital from Federal Government's 2013 Eurobond sale - US$350 Million Egbin Power Plant Sales Escrow of N50 billion ($325million) Olorunsogo Power Plant Sales: Escrow of $10m
On February 2013, as part of the signing of privatization transaction agreements and related industry agreements, NBET executed seventeen (17) contracts: one (1) PPA with each of the six (6) successor generation companies (GENCO) and oneVesting Contract with each of the eleven (11) successor distribution companies (DISCO). Further to this, the Federal Government of Nigeria issued handover share certificates and licenses to the new owners of the PHCN successor companies on September 30, 2013.
These are Independent Power Producers that have existing PPAs prior to the privatisation of PHCN. These legacy IPPs supply power to the national grid. NBET is in the process of novating all the Rights and Obligations in the existing PPAs entered into by defunct PHCN with IPPs while all the existing liabilities transferred to Nigerian Liability Management Company (NELMCO).
This is a market stage that is characterized by:
- Unbundling of PHCN into Generation, Transmission and Distribution segments
- Privatization of PHCN Generation and Distribution assets
- Test run of the Grid Code and Market Rules
NBET will perform shadow market trading and continue to sign power purchase agreements with greenfield Independent Power Producers (IPPs).
This is the stage of the Electricity Market where all contracts and industry agreements become effective. During TEM, all trading arrangements will be on contractual basis. generation to distribution via the transmission line (132/330KV).
During TEM NBET will begin trading of electricity based on contracts and the invoice settlement will be bilateral that is Gencos to NBET and NBET to Discos for capacity and energy. The PPAs and Vesting Contracts will become effective.
During TEM the MO will be the administrator of the Market, administering the Market Rules and Market Procedure. It will also provide Settlement Statement to Gencos, NBET and Discos. The payment of Capacity and Energy will be based on the MO's Final Settlement. The MO is also in charge of payment of market administration charges to NBET and other market participants.
The SO dispatches the contractual quantities nominated by NBET during TEM. The SO is responsible for the transportation of energy from
NBET is the contractual party to all power purchase agreements (PPA) that are signed with the generation companies. The PPA allows NBET to purchase all capacity, energy and ancillary service produced by the Generation Companies during TEM.
NBET is the contractual party to all Vesting Contracts (VC) that are signed with the distribution companies. The VC allows NBET to sell all capacity, energy and ancillary service produced by the Generation Companies to the distribution companies during TEM.
NBET will procure new generation capacities for the market through the execution of a Power Purchase Agreement (PPA) with any interested Independent Power Producer (IPP). There are two routes to signing a PPA with an IPP:
- Unsolicited Bids: The developer drives the process towards execution of a PPA by developing the project and engaging NBET to buy the power generated by the power plant. There are FOUR mandatory due diligence requirements which every developer must meet before a PPA can be signed with the developer This is the practice currently in place until such a time when the industry moves towards competitive power procurement.
- Solicited Bids / Competitive Power Procurement: The market is now in the Competitive Procurement market where investors would bid to build power plants where generation capacity is needed as listed in the bid documents. There are two types of competitive power procurement: the Open MW Procurement; and the Project Specific Procurement.
At NBET, we have four mandatory requirements for our due diligence exercise: Land: We request for any one of the following documents relating to your land documents:
- Registered title deed to project site land.
- Notarized sale agreement of the project site land.
- Deed of assignment / gift of the project site land.
- Evidence of submission of a title deed to a relevant land processing agency regarding the project site land.
NBET has concluded the signing of a PPA with the first front runner greenfield project, Azura Edo IPP. NBET has also signed a PPA with the government owned Olorunsogo power plant in December 2013. Each IPP PPA is a confidential document that cannot be shared with another IPP, however, NBET will provide a developer with the Form PPA when it meets the minimum standards of the required due diligence.
When can a new entrant sign a PPA with NBET and what is the minimum capacity tha NBET will purchase?
Nigerian Bulk Electricity Trading (NBET) Plc. is a Federal Government of Nigeria owned company established pursuant to the Electric Power Sector Reform Act, to undertake the bulk purchase of electric power from power generation companies and onward sale to electricity distribution companies. To this end, NBET is willing to enter into long term power purchase agreements (“PPAs”) that are based on the terms and conditions, including tariffs, approved by the sector regulator, Nigerian Electricity Regulatory Commission (NERC). NBET can purchase any amount of power generated provided it can be synchronized to the grid (132KV/330KV Lines). Any generation that cannot be put on the grid and can only be put on 33KV Lines is referred to as “Embedded” and will be purchased by discos.
The PPA term is usually 20 Years
NBET is creditworthy off-taker that was set up to incentivise private investments in power generation in Nigeria. NBET's current capitalisation is in excess of $800M.
NBET will begin trading at the declaration of the Transitional Electricity Market (TEM). NBET acts as a link between the Generation Companies (GenCos) and Distribution Companies (DisCos) through the PPA and Vesting Contracts. To this extent, NBET would ensure that that GenCos are paid through the prime source of revenues which is the payment receipts from the DisCos for energy sales through the vesting contract. In addition to this, NBET is capitalized to a tune of $800MM and this includes L/C or Bank Guarantees from the DisCos for 3 months of expected payments, Working Capital set aside through budgetary allocation and additional working capital from the Federal Government 2013 Eurobond.
New entrants into the Nigerian Electricity Supply Industry are advised to use the Multi Year Tariff Order (MYTO) model to calculate tariff for megawatts of power. This model is available for download on Nigerian Electricity Regulatory Commission (NERC), the regulator's website - www.nercng.org In a situation where the new entrants' assumptions or costs lead to a tariff higher than MYTO, NBET and the new entrant can then discuss the assumptions contained in the new entrants financial model on an open book basis and agree a reasonable and cost-reflective tariff with the new entrant. After the tariff has been agreed, both parties will then have to seek a waiver from NERC to sign the PPA containing the higher tariff.
The best place to start is getting clarification on licensing for the project will be the Legal, Licensing & Enforcement department of the Nigerian Electricity Regulatory Commission (NERC).
The Domestic Supply Obligation (DSO) price for 2014 is $2.30/mmbtu but this price is different from the price that independent gas suppliers sell their gas. NBET will review the gas supply and transportation price for each IPP and agree with the IPP on the gas price before it is and presented to NERC for approval.
The Grid Code and Market Rules supersede the PPA.
The wholesale contract price in the MYTO II financial model on the regulator's website (www.nerc.org) consists of the Capacity Charge with consists of Capital Cost, Fixed Operations and Maintenance (FOM) Cost, Tax Cost and the Energy Charge which consists of the Variable Operation and Maintenance (VOM) Charge, Fuel Charge and Transmission Loss Cost which is a pass-through.
The vesting contract means the resale of electric power by the buyer to each of the distribution companies of a portion of the Available Capacity and Net Electrical Output purchased under PPA.