The Nigerian Bulk Electricity Trading Plc (NBET) has announced that ten of the eleven Independent Power Producers (IPPs) that executed the Front-Runner Solar Power Purchase Agreements (PPAs) on July 21 have successfully posted their development securities to NBET.
A key requirement of the IPP contracts is for each developer to post a $20,000 per megawatt development security letter of credit, which provides security for the IPPs obligation to achieve the financial closing by the target closing date.
According to a statement released Thursday by the management of NBET, the obligations were met by the ten power companies on the due date, which is September 9, 2016.
Furthermore, 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 electricity industry and continued interest in the development of the sector.
As provided by law, the target date is six months after the execution of the PPA or the long stop closing date, which is the date beyond which the target closing date may not be extended, as set in schedule 1 of the PPA.
The development security, however, will be refunded to the IPP when the closing date is met after which the IPP will begin construction of the plant.
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 and October 2, 2016.