The development is coming months after NERC barred NBET from entering into new electricity
The Nigerian Bulk Electricity Trading Plc (NBET) has begun moves for licence renewal with the Nigerian Electricity Regulatory Commission (NERC) to continue its operations as the bulk trader of electricity in the country.
The development comes months after NERC barred NBET from entering into new electricity contracts.
In July NERC directed NBET to cease entering into new contracts for the purchase and resale of electricity and ancillary services in the Nigerian Electricity Supply Industry (NESI).
Incorporated on 29 July 2010 and fully owned by the federal government in accordance with the Electric Power Sector Act, 2005, NBET acts as the principal purchaser of electricity from generating companies.
The company acquires power through a Power Purchase Agreement (PPA), which sets out the terms and conditions for transactions between these generating companies and NBET.
Following the expiration of the company's initial 10-year licence in November 2021, NERC extended its operating licence for an additional three years. The licence is set to expire in November.
Seeking a five-year trading licence renewal during a public hearing on 'licence renewal application' organised by NERC in Abuja on Thursday, the Acting Managing Director of NBET, Johnson Akinnawo, said within the five-year trading license period NBET will be expected to transform into an energy exchange aimed at promoting bilateral trading between generating companies (GenCos)/Independent Power Producers (IPPs) and commercial/industrial customers through an automated energy trading platform developed and deployed for the sale of electricity, with multiple energy brokers.
"Within the five-year trading license period, the NBET will transform to be an effective market facilitator and efficiently, effectively, and sustainably catalyse private investments in the electricity value chain and market; drive payment discipline in the electricity value chain and market through robust contract management and officiant contract administration; to foster cross-sector alignment and build synergy with public and private stakeholders in the implementation of multi-pronged reform initiatives," he said.
He explained that NBET has administered a contracts portfolio with an annual trading volume in excess of $2 billion, making considerable progress in the quest to achieve its mission of being an effective and efficient catalyst for private sector investment in the Nigerian electricity industry.
He noted that the company's vision is the attainment of a self-sustaining electricity market driven by market forces where public funding and guarantees will no longer be the drivers of investments and transactions.
"Pursuant to the bulk electricity purchase and resale license that NERC issued to NBET In 2011 and subsequently renewed in 2021, in line with NERC's license terms, NBET achieved operationalisation as a going concern and built the capacity to demonstrate credibility to potential developers and investors in the power sector, especially its IPP planning and procurement capabilities."
He added that NBET established a formalised application and project monitoring process and a contract which allowed it to assume Power Holding Company of Nigeria (PHCN) and existing Power Purchase Agreement with Independent Power Producers (IPPs) and manage the vesting contract with distribution companies (DisCos).
"NBET heralded the commencement of a contract regime in the electricity market and currently has in its portfolio PPAs and electricity purchase contracts with twenty-seven (27) GenCos and Vesting Contracts with eleven (11) DisCos," he said.
Also speaking, the Managing Director of Azura Power West Africa Limited, Edu Okeke, said the renewal would boost investors' confidence in the power sector noting that it was important that NBET remains in the sector.
He added that the short-term licence given to an organisation like NBET affects the ability of power companies in accessing funds from financial institutions, noting that NBET should be granted a licence to operate infinitely.
"So, I think that NERC should actually do away with licences that have expiration dates. When you issue a licence to a licensee, if they don't abide by the terms of that licence, you can withdraw it. Can we imagine what would happen today in the banking sector if the Central Bank of Nigeria issued a licence for 10 years? All of a sudden, all the banks will go because they can't raise finance. The same thing with telecom. Can you imagine MTN and when they were about to come in and say your licence is for ten years? No, MTN would not have built anything.
"So this has a very big effect. So my own submission is, based on everything, for me as Azura. For me, I'm selfish on this one. NBET is the custodian of my PPA. NBET has the right and power to novate it to other entities as long as those entities meet certain conditions.
"But I tell you that if we start this discussion today to novate those contracts, it will take at least a year or two years to finish it. So NBET is still needed for a very long time even to novate those contracts. And now we look at the bilateral, we know that NBET is going to play a role there. So I will say, as a regulator, give NBET unlimited, no fixed licence extension," he said.
In his remarks, Commissioner for Legal, Licensing and Compliance at NERC, Dafe Akpeneye, said with the power landscape changing significantly in the past year following the enactment of the Electricity Act 2023, NBET needs to redefine its role in the Nigerian Electricity Supply Industry.
"NBET was established and they had an initial 10-year run for their licence, and when that expired in 2021, they were issued another renewal. That license expires in November of this year, 2024, and they have applied for the licence to be renewed. The commission doesn't believe that we know it all and we think that in view of how the industry is changing and evolving, it's important that we get critical stakeholder inputs into the consideration of the NBET request for the renewal of that licence.
"We saw that a lot of things that NBET was designed to do, due to no fault of theirs, they couldn't. There was supposed to be an immense capitalisation of the utility, which was never done, and when you look at the securitisation framework for the sector, DisCos are meant to post certain guarantees to NBET but those guarantees were never called, also due to no fault of NBET as well," Mr Akpeneye said.
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He added that since the last renewal that was issued to NBET, the sector has changed.
"The legal framework has changed, the constitution has been amended to fully allow subnationals unfettered access to the full players and regulators in the sector. We now have the Electricity Act, and certain regulatory initiatives taken by the commission in view of current economic situations also change as well. So the commission is set to take a decision on NBET," he said.
In July PREMIUM TIMES reported that the administration of President Bola Tinubu may be contemplating the dissolution of NBET following the expiry of its current operating licence.
The Minister of Power, Adebayo Adelabu, had declined to renew the tenure of the current Managing Director/CEO of the company, Nnaemeka Ewelukwa.
Mr Ewelukwa succeeded Marilyn Amobi, whose tenure was riddled with numerous controversial developments and multiple corruption allegations.
In a circular dated 23 July, seen by this publication, Mr Adelabu informed Mr Ewelukwa that his four-year tenure would not be extended. The notice was given in response to Mr Ewelukwa's letter notifying the minister about the imminent expiration of his tenure and possible consideration for a second term.
For a smooth and seamless transition, the minister directed Mr Eweluka to hand over to the most senior general manager in the company by 24 July.
