… gets the backing of stakeholders
The Nigerian Bulk Electricity Trading Plc (NBET) has begun moves to renew its operating licence to enable it continue operation beyond November 2024 when the present licence is expected to expire.
This follows the recent order by the Nigerian Electricity Regulatory Commission, which bars NBET from entering into new contracts for the purchase and resale of electricity and ancillary services in the Nigerian Electricity Supply Industry, by Section 7(2) of the Electricity Act 2023.
Speaking during the public hearing on ‘License renewal application’ in Abuja on Thursday, Johnson Akinnawo, the Managing Director of NBET explained that the organisation over the years has engaged in activities aimed at improving the overall health of the Nigerian Electricity Supply Industry.
According to him, NBET has administer contracts portfolio with an annual trading volume of over $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.
“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 investment and transactions.
“Under 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 rationalization 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.
“NBET established a formalized application and project monitoring process and a contract which allowed it to assume PHCN and existing PPAs with IPPs and manage the vesting contract with 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
Seeking a five-year trading license, the MD said that within the 5 year trading license period, the NBET will be expected to transform into an energy exchange aimed at promoting bilateral trading between 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.
He explained that the organization with the years granted will ensure the rapid growth of the market, create a diversified trading environment, while also closing the supply-demand gap for electricity in the country.
“Within the 5 year trading license period, the NBET will transform to be an effective market facilitator and efficiently, effectively and sustainably catalyze private Investments in the electridly value chain and market; to drive payment discipline In the electricity value chain and market through robust contract management and officient contract administration; to foster cross-sector alignment and bulld synergy with public and private stakeholders in the implementation of multi-pronged reform initiatives,” he added.
Speaking in support of NBET’s application, Edu Okeke, the Managing Director of Azura Power West Africa Limited said that the short-term license given to organisations like NBET affects the ability of power companies in accessing funds from financial institutions.
He argued that the NBET should be granted a license to operate infinitely adding that such a license can be withdrawn if the holder acts wrongly.
“License is not a regulatory instrument, if you give an MTN license, you’re giving them license for them to build out their facilities, if you give license to UBA, you don’t go to UBA and say, we give you 5 years license. If I am building a power plant today, I expect that power plant to be there for the next 50 years but when you give me a 5-year license, I can’t raise finance beyond my license tenure.
“So as a regulator, we should know that it is not just about NBET, it’s about every other player in the industry. Don’t use license as a regulatory instrument. Give them unlimited licenses.
“For example, let’s use the banking industry as an example because at least it’s one industry where the regulator is very active, CBN. Every bank has a license, they don’t go any day thinking, I need to renew my license. Now, the CBN license has rules on what you need to be doing. The day a bank is no more doing those things, CBN can withdraw their license to cease to operate.
“So now, NBET, by giving them a 3-year license, that means that NBET and any company that NBET is a customer cannot raise financing past the three years.
“Because as Azura, NBET is my customer, if I go to a bank now to say, give me loan for 10 years, the bank will say, who will buy your product? You say NBET. They say, but MBET will only be there for three years, that means I can only give you loan for three years. That makes that loan very expensive.
“Can you imagine you go and register with Corporate Affairs Commission and they say it’s only for five years. Nobody would do business because every five years you have to run back. Why do we have to do it in the power sector? It’s one of the anomalies that we need to correct,” he explained.
In his remarks, Dafe Akpeneye, the Commissioner of Legal, licensing & Compliance at NERC explained that NBET was established as a transition institution to create financial balance in the sector, as the DISCOs lacked needed credibility.
“NBET was established and they had an initial 10-year run for their license, 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 license to be renewed. The Commission doesn’t believe that we know it all and we think that given 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 license.
“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 capitalization of the utility, which was never done, and when you look at the securitization 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.
“Since the last renewal that was issued to NBET, the sector has changed. I don’t think there have been more changes in our sector than has happened in the past year or so.
“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. The legal framework upon which we regulate the sector has also changed. We now have the Electricity Act, and certain regulatory initiatives taken by the Commission in view of current economic situations also change as well,” he said.
