FG Risks Repaying Security Bonds to 12 Solar IPPs Financiers

Chineme Okafor in Abuja

The federal government may have to repay about $20.1 million being the total value of the two per cent security bonds reportedly deposited in a JPMorgan Chase Bank account in New York by 12 financiers of the utility-scale solar independent power plants (IPPs) in Nigeria, THISDAY has learnt.

It was gathered in Abuja that as part of the fall-out of the government’s reported review of the tariff in the power purchase agreements (PPAs) it signed in 2016 with 14 solar IPPs investors, which 12 investors have been reluctant to accept, the government may have to refund them the bonds they initially placed in the bank to affirm their commitments to the projects.
THISDAY had reported from exclusive documents it obtained from the Ministry of Finance the reasons for the slow progress of works on the 14 solar power plants that could generate 1,125 megawatts (MW) of power to the grid.

In the documents, the 11.5 cent per kilowatt hour (kWh) tariff agreed in the PPAs of the projects was queried by the finance ministry, as well as the manner of their procurements.
The government also allegedly leveraged these reasons to hold back from signing off Put Call Option Agreements (PCOAs) for the projects which would cost $2.5 billion to build in mostly northern states.
Through the Minister of Finance, Mrs. Kemi Adeosun, the government questioned the 11.5 cent cost of power approved for the projects. It claimed the procurement processes were not clear to it and as such it would hold back approval of the PCOAs for them.

It also insisted that the average cost of procuring solar power globally had continued to decline and that on that basis, Nigeria was at the risk of an unhealthy sovereign risk exposure if it went ahead to approve PCOAs on 11.5 cent per kilowatt hour (Kwh) for the projects.
To this end, THISDAY learnt that two investors – Afrinergia Power Limited and CT Cosmos Limited reviewed their rates to 7.5 cents per Kwh and also got Adeosun’s approval of their PCOAs in December 2017.

In a letter she sent to the Nigerian Bulk Electricity Trading Plc (NBET) in this regards, Adeosun reportedly said: “I wish to advise that going forward, the federal government of Nigeria will only execute PCOAs for solar IPPs that meet the three criteria of fair and competitive pricing, viability and sustainability, assets and liability affordability by the FGN.

Furthermore, the energy charge rate/contract price will not exceed US$0.075 per kWh and the project cost should not exceed $/MW (AC) 1.32.”
Following from this, THISDAY further gathered that the 12 remaining investors had not been officially written to by the NBET to tell them of the tariff changes in their PPAs, and if they would be willing to go ahead with the new terms.

However, sources that are close to the development informed that the two per cent security bonds paid by the investors over their projects could be recalled by the investors, suggesting the government would have to pay back what was paid by them into the JP Morgan account.
It was gathered that the likes of 75MW Pan Africa, 100MW Nigeria Solar Capital Partners, 100MW Motir Desable, 80MW Nova Scotia Power, and 100MW Anjeed Innova Group, were amongst the projects that are yet to sign new tariffs.