Omotosho Power Generation Company in Okitipupa Local Government Area of Ondo State and Olorunsogo Power Station in Ogun State have threatened to sue the Nigerian Bulk Electricity Trading Plc (NBET) in the London Court of International Arbitration following a dispute over N13.2 billion Power Purchase Agreement (PPA), THISDAY has learnt.
NBET was accused of mismanaging the PPAs it signed with the 335-megawatt capacity Olorunsogo and the 335MW Omotosho Gencos, which led to the alleged deduction of N5.2 billion from the gencos’ accounts as foreign exchange differential.
NBET was also accused of withholding another N8 billion from the two gencos, which the bulk trader claimed was surplus payments to them by the Market Operator (MO) for power supplied to the national grid.
According to documents obtained exclusively from the Nigerian Electricity Regulatory Commission (NERC), Pacific Energy, which is the owner of the two plants, has sent a protest letter to the regulator and the Minister of Finance, Mrs. Zainab Ahmed, who is also the chairperson of NBET.
In the letters signed by the chair of Pacific Energy, Mr. Deji Adeleke, NBET had instituted and sent dispute notices to the gencos, claiming discrepancies in their March 2020 capacity payment invoices, which were thought to have been settled.
It was gathered that in their respective PPAs with the NBET, the gencos were entitled to minimum capacity payment on 186.3MW monthly by the NBET; meaning that the least generation capacity payment they were entitled to monthly in their PPAs was this amount.
However, this was contested by NBET but NERC in its April 17, 2020, regulatory ruling, reportedly resolved this dispute and directed that the terms of the PPAs be respected.
But in an alleged breach of NERC’s ruling, NBET in May notified the gencos of existing disputes with them over the minimum monthly capacity payment.
Adeleke described NBET’s position as shocking in view of the fact that NERC had resolved the issue.
Adeleke added that NBET’s position amounted to an abuse of contract and indicated his intention to activate the dispute settlement clauses in their PPAs with the NBET at the London court since it disregarded the NERC’s ruling.
He accused NBET of unilaterally and illegally changing the base exchange rates on their PPAs from N157 per dollar to N169 per dollar and consequently deducted N5.25 billion from the gencos’ accounts and refused to refund the deduction, despite NERC’s directive.
According to him, this development forced the gencos to take a loan from the banks to fully offset their gas bills between January and September 2019.
Adeleke said over N8 billion was deducted from the gencos’ accounts by NBET as overpayment to them despite a completed market reconciliation exercise with the Market Operator (MO).
The gencos stated that the terms of their PPAs with the NBET recognised that they will get reduced capacity and energy tariffs on the seventh year of their operations, adding that the NBET swiftly implemented this but refused to obey another clause, which recognised exchange rate true invoices – a term for capturing gaps in exchange rates used in their PPAs with real rates.
“One can safely conclude that any provision in the PPAs that reduces the plants’ revenue is implemented without delay while any provision of the PPAs that will increase the plant’s revenue is delayed indefinitely. How can any company survive under this type of business atmosphere?
“This type of poisonous business atmosphere only lays the foundation for blackmail and corruption,” said one of the letters signed by Adeleke.
The letter said: “Pacific Energy Company Limited, the owner of Olorunsogo and Omotosho plants, have restrained from taking NBET to the London Court of International Arbitration as provided for in Clause 21 of the PPAs, but has always reported to NERC, the regulator, in order to avoid embarrassment to our dear country, Nigeria. But Pacific may have no other choice if NBET continues to disregard NERC’s rulings.”
During the privatisation of the power sector, the federal government had sold the Omotosho Power Plant to a consortium of China National Machinery and Equipment Import and Export Corporation (CMEC) and Pacific Energy under a debt-equity swap arrangement.
Olorunsogo Power Station was also bought by a consortium led by Sepco III Electric Power Construction Corporation of China and the indigenous company, Pacific Energy.
Source: THISDAY
