Power Purchase Agreements   Presentation To Power Gen Electrotex Conference 2008 [Compatibility Mode]
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Power Purchase Agreements Presentation To Power Gen Electrotex Conference 2008 [Compatibility Mode]

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Power Purchase Agreements   Presentation To Power Gen Electrotex Conference 2008 [Compatibility Mode] Power Purchase Agreements Presentation To Power Gen Electrotex Conference 2008 [Compatibility Mode] Presentation Transcript

  • Power purchase agreements: Who will pay the  generator and who will pay for transmission and  generator and who will pay for transmission and distribution? Dr. Adeoye Adefulu Odujinrin & Adefulu Barristers, Solicitors & Notaries Public Barristers  Solicitors & Notaries Public Lagos – Abuja – Port‐Harcourt
  • Outline  Outline • Background – Pre EPSRA structures – Post EPSRA structures • Power Purchase Agreements g • Appropriate Offtaker • Cashflows • EPSRA transitional trading arrangements • Paying for Transmission 21/09/2009 Odujinrin & Adefuluestd. 1972 2
  • Pre‐EPSRA power provision p p • NEPA operated as a vertically GENERATION integrated monopoly • I 1998 amendments were made In 1998, d t d to the Electricity Act & NEPA Act TRANSMISSION which removed the utility’sutility s monopoly, whilst it remained a vertically integrated monopoly • This reform allowed for IPPs and DISTRIBUTION for power to be sold through PPAS primarily to NEPA CUSTOMER 21/09/2009 Odujinrin & Adefuluestd. 1972 3
  • EPSRA reform initiatives • the Electric Power Sector Reform Act, 2005 introduced extensive reforms  h l f d d f and created a pathway to the establishment of an electricity market • Provides for: – establishment of an initial holding company to hold the assets & liabilities of  NEPA (PHCN) – unbundling of the entity along functional lines unbundling of the entity along functional lines • 6 generation companies • 11 distribution companies • 1 transmission company – the establishment  the Nigerian Electricity Regulatory  Commission – evolution of the electricity market 21/09/2009 Odujinrin & Adefuluestd. 1972 4
  • EPSRA reform initiatives & PPAs • the unbundling of PHCN as well as the introduction  of new IPPs requires a new method of securing the  provision of generated power – At least 24 new generation licenses have been issued – AGIP & AES are already producing under pre‐EPSR Act PPAs  G & S l d d i d S • NERC currently considering the introduction of  vesting contracts & model PPAs i & d l PPA – Vesting contracts – Successor Gencos, New IPPs & NIPP – PPAs for existing IPPs (AES AGIP & Shell) PPAs for existing IPPs (AES, AGIP & Shell) 21/09/2009 Odujinrin & Adefuluestd. 1972 5
  • Power Offtake Agreements Power Offtake Agreements • “a legal contract between an electricity  g generator and a purchaser of energy or  p gy capacity (power or ancillary services).”  – Serves to allocate risks between the parties Serves to allocate risks between the parties – defines the rights and obligations between the buyer and  seller – sets the price for energy – Defines the output and associated revenue stream of the Defines the output and associated revenue stream of the  plant • Provides basis for non‐recourse financing 21/09/2009 Odujinrin & Adefuluestd. 1972 6
  • Classic IPP Structure Classic IPP Structure Shareholders O&M Contractor Shareholders Agreement O&M Agreement Government Concession A C i Agreement t EPC Contractor Power Off-taker EPC Contract Power Purchase Agreement IPP Project Company Fuel Supplier Regulator Licence Li Fuel Supply Agreement Insurance Co. Water Supplier Insurance Agreements Water Supply Agreement Lenders Loan Agreement Globeleq 2007 q 21/09/2009 Odujinrin & Adefuluestd. 1972 7
  • Who pays the generator? Who pays the generator? • PPA – who is the proper offtaker? PPA  who is the proper offtaker? – Credit worthy • Fi Financial statements i l t t t • Assets  • Where is the cash coming from? 21/09/2009 Odujinrin & Adefuluestd. 1972 8
  • Proper Offtaker Proper Offtaker Bulk Cash Purchaser P r h r from Distribution consumers Transmission Generation Generation Transmission Distribution • Manage fuel • Transmit power • Step-down voltage, delivery over long distance distribute and sell Consumer • Produce electric in high voltage power to power systems end-consumers Globeleq 2007 q 21/09/2009 Odujinrin & Adefuluestd. 1972 9
  • What does the law say?  What does the law say? • Section 25 of EPSRA provides for the trading  arrangements during the transition or pre‐ privatisation stage – anticipates the establishment and licensing of a trading  licensee holding a bulk purchase and resale license • Shall purchase and resell power from IPPs & successor Gencos 21/09/2009 Odujinrin & Adefuluestd. 1972 10
  • What does the law say? (contd) What does the law say? (contd) – Successor Gencos shall sell power to: • the Trading Licensee;  • successor Discos; and • Eligible customers – IPPs shall sell power to: • The Trading Licensee; and g ; • Successor Discos 21/09/2009 Odujinrin & Adefuluestd. 1972 11
  • EPSRA – Transitional trading arrangements EPSRA  Transitional trading arrangements IPP IPP GENCO GENCO TRADING ELIGIBLE DISTCO DISTCO LICENSEE CUSTOMER CUSTOMER CUSTOMER CUSTOMER CUTOMER 21/09/2009 Odujinrin & Adefuluestd. 1972 12
  • Cashflow Bulk Cash Subsidies Purchaser from Distribution consumers Transmission Generation Generation Transmission Distribution • Manage fuel • Transmit power • Step-down voltage, delivery over long distance distribute and sell Consumer • Produce electric in high voltage power to power systems end-consumers 21/09/2009 Odujinrin & Adefuluestd. 1972 13
  • Cashflow (contd.) Cashflow (contd.) • Subsidy – Who pays? p y • FG, States, FG +States? – Where is it coming from? Where is it coming from? • Budgetary allocation – What is the mechanism for disb rsing? What is the mechanism for disbursing? 21/09/2009 Odujinrin & Adefuluestd. 1972 14
  • Transmission  who pays? Transmission – who pays? • Transmission provides the hub • Payments must be made for: Payments must be made for: – Connection of generators • Sh ld Should generators pay for transmission  t f t i i – Continuous use of system  • Generator, distributor or both • Balancing risk 21/09/2009 Odujinrin & Adefuluestd. 1972 15
  • Odujinrin & Adefulu has acquired significant experience in the Nigerian power industry. We have advised government entities and private sector entities in a range of areas, which include: areas – Advising the Nigerian Government on the drafting of the Electric Power Sector Reform Act; – Advising NEPA on Power Purchase Agreements; – Principal counsel in energy litigation; – Advising a private equity firm on acquiring a significant interest in a Nigerian IPP g p q y q g g g project; – Advising NERC on aspects of the Electric Power Sector Reform Act; – Advising a major manufacturer on aspects of captive power generation projects in two locations in South-west Nigeria. Odujinrin & Adefulu 1st Fl Floor, Ch h H Church House 29, Marina, Lagos enquiries@odujinrinadefulu.com 21/09/2009 Odujinrin & Adefuluestd. 1972 16