The Nigerian Bulk Electricity Trading Company Plc (NBET), otherwise known as the Bulk Trader, has signed a power purchase agreement (PPA) that will enable the 550 megawatts (MW) Ondo open cycle independent power project (IPP) to achieve a financial close.
The PPA was jointly signed in Abuja by the Managing Director of NBET, Dr. Marilyn Amobi and Managing Director of Kingline Development Nigeria Limited, Mr. Akinnola Fola.
The agreement will offer the project’s promoters, the opportunity to negotiate their put-call option agreement (PCOA) with the government, take a final investment decision (FID) and begin construction.
Amobi said shortly after signing the PPA, that the development was good for Nigeria’s quest to improve her power generation capacity. She explained that the NBET would expect Kingline to quickly move to site.
“For NBET, we are working assiduously every day to see that people who have to sign PPAs, the agencies they have to interact with and the foundations they need to continue to develop their project is strengthened. I hope that this is the baseline you need to move quickly to complete this project,” said Amobi.
Fola, in his remarks, said that an Engineering, Procurement and Construction (EPC) contract with South Korean firm, POSCO E&C has been signed and that construction work at the site will last for 24 months once a FID is achieved.
He also said the company was talking with Seplat for gas supply to the plant which he said will also share existing gas and transmission infrastructure with the Omotosho power plant in Ondo.
“It is a major step forward for the project, you know the PPA is a major component in this sort of project. What this indicates is that we can move to the next stage of finalising commercial discussions with our lenders and other investor because without the PPA, nobody will be willing to put down anything,” said Fola.
He further explained: “This signifies that NBET the off-taker is ready to take the power from us when we come on stream. We have secured the other heads of agreements needed and one of the last pieces of developmental activities on this is the PPA which we have initialled today.
“We intend to achieve financial close in the next four or five months and from then we can issue the notice to proceed to the contractor. The construction period will take 24 months from the time of the financial close and once that is completed we will have 550 megawatts put in the national grid.”
He said the plant will cost the promoters $550 million to build and that he expects the PCOA to be signed soon to give comfort to the lender.
“The ministry of finance is handling that (PCOA) in conjunction with the NBET. That also has to be in place and I am confident it will happen soon.
“We have practically done all we have to do and we appeal to the agencies of government to expedite action on the PCOA because it could be a major holdback,” he added.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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