Twenty of the 25 power generation companies (GenCos) in Nigeria’s electricity market do not have active power purchase agreements (PPAs), five years after the country concluded its power market privatisation, THISDAY has learnt. A status report from the Nigerian Electricity Regulatory Commission (NERC), which was obtained by THISDAY yesterday in Abuja, equally stated that 18 of the 25 power firms do not have guaranteed gas supply agreements (GSAs) with gas producers, thus indicating that the transactional terms between the Gencos and gas suppliers are perhaps operated on best-endeavour basis.
According to the World Bank, PPAs secure the payment stream for a Build-Own-Transfer (BOT) or concession project for an independent power plant (IPP). It is usually between the purchasers or off-taker, which is often a state-owned electricity utility outfit like the Nigerian Bulk Electricity Trading Plc (NBET) and a privately-owned power producer. On the other hand, GSAs are standard agreements for the sale and purchase of natural gas for delivery to a Genco or Liquefied Natural Gas (LNG) liquefaction plant.
Active GSAs and PPAs are, according to energy market experts, the model documents that signify that the electricity sector of a country is operated on a firm contract basis. However, the NERC document showed that the three hydro Gencos with generation capacities of 600 megawatts (MW) for Shiroro; 578.4MW for Jebba, and 760MW for Kainji do not have active PPAs.