Two more project developers have signed financial risk agreements for utility-scale solar power projects in Nigeria, strengthening the country’s roadmap towards becoming a major solar power market in Africa.
Local companies Afrinegia Nigeria Limited and CT Cosmos Nigeria Limited signed put/call option agreements with the Ministry of Power Works and Housing. Afrinegia Nigeria Limited will develop a 50-megawatt solar power project while CT Cosmos Nigeria Limited will set up a 70-megawatt solar power project.
A put/call options agreement helps in the mitigation of financial risk to the project developers. These agreements transfer the payment risk from the state-owned company Nigerian Bulk Electricity Trading Plc (NBET) directly to the ministry.
The agreements are part of Nigeria’s push towards large-scale deployment of solar power projects across the country. In July of last year, Nigerian Bulk Electricity Trading (NBET) signed power purchase agreements with more than 10 companies willing to develop around 975 megawatts of solar power capacity.
Subsequently, more companies, including Scatec Solar, a joint venture of Nigus Greenergy and Volt Renewables, Phanes Group, and GreenWish Partners, also signed similar power purchase agreements with NBET.
In 2015, the Nigerian Electricity Regulatory Commission approved feed-in tariff regulations for renewable energy sourced electricity. As per the provisions of the regulations, electricity distribution companies will be required to source at least 50% of their total procurement from renewable energy sources. The Commission also mandated that the balance 50% electricity would have to be sourced from NBET.