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FG Approves PPA for $550m, 550MW Ondo Power Plant

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  • FG Approves PPA for $550m, 550MW Ondo Power Plant

The federal government thursday gave its approval to the Power Purchase Agreement (PPA) between the Nigerian Bulk Electricity Trading Company Plc (NBET) and Kingline Power Limited for the construction of its 550 megawatts (MW) Ondo open cycle independent power project (IPP).

The government approval of the project’s PPA was made known in Abuja when the NBET and Kingline signed the terms in the agreement before the Minister of Power, Works and Housing, Mr. Babatunde Fashola.

With the final signing of the PPA by the Managing Director of NBET, Dr. Marilyn Amobi, and Chief Executive Officer of Kingline, Mr. Sean Kim, Kingline indicated that it would now move to achieve a financial closure on the project within quarter three (Q3) of 2018, and subsequently commence construction.

Amobi, in her remarks, stated that the PPA was procured within the least cost development plan of the NBET, and that it had gone through the regulatory processes as well as a review by the Bureau of Public Procurement (BPP), and legal advice, from the office of the Attorney General of the Federation and Minister of Justice.

She explained that Kingline would be expected by the government to from this, achieve a financial closure shortly and construct the plants for power generation to the grid.

Similarly, Kim noted that within the period it initiated the PPA with the NBET in 2016, it had gone on to execute an Engineering Procurement Contract (EPC) with Hyundai Engineering, in addition to securing other contracts relevant to the construction of the plant within 24 months.
He also said the company has so far raised up to $150 million worth of equity for the project, and that its debt financing would be anchored by development financial institutions and export credit agencies being arranged by Standard Chartered Bank.

He stated: “We ave worked hard to keep our project financing at very competitive level. We are achieving 550 megawatts with $550 million in all project costs. That is a $1 million per megawatts and which is substantially lower than other projects. We are doing this while not sacrificing quality, that is why we are using GE turbines. What we hope to achieve is to become the reference project for Nigeria’s power sector.”

In his remarks Fashola, explained that the signing of the PPA was indication that Nigeria’s power sector was still attractive to investors across the globe.

The minister added that the participation of Ondo State in the project equally showed that state governments in the country can invest in the power sector uninhibited.

Meanwhile, the Transmission Company of Nigeria (TCN) had disclosed that it would get about €25 million grant from the European Union (EU) to support its evaluation of solar power lPPs in the country.

TCN also stated during a routine tour of its substations in Abuja and parts of Niger State, that it was working to achieve a national peak power transmission of 6,000MW within the first parts of 2018.

A document shared by the transmission company during the tour stated that TCN had within 2017, entered into collaboration with several partners to reposition it for better service delivery.

It listed some of the partnerships it signed within this period to include the one with Agip and Nigerian National Petroleum Corporation (NNPC) joint venture in respect of towers 94 and 98 on Okpai-Onitsha Direct Circuit Line and provision of Geographic Information System for it.

“Collaboration with Japan government on capacitor banks in Apo and Keffi substations and the rehabilitation of Apapa, Akangba and Isolo substations. Discussions are ongoing with government of Japan to rehabilitate Ikeja West and Ota substations. EU has pledged to provide €25 million grant to support TCN on solar lPPs evaluation,” it added in the document.

The company equally noted that with its works and investments made by the government in the transmission network in 2017, it would unfair to refer to it as the weakest link in the country’s power sector, adding that it had set itself up to become one of the best electricity transmission companies around the world.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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