The Bilateral Power Purchase Agreement (PPA) is a fundamental document in Nigeria's power sector, used to establish long-term electricity supply arrangements between power generators and buyers. This agreement type became particularly important following Nigeria's power sector privatization under the Electric Power Sector Reform Act 2005, which created a market for private power generation and distribution. The document typically spans 20-25 years and includes detailed provisions for power pricing, delivery obligations, technical requirements, and risk allocation. It is essential for project financing in Nigeria's power sector and must comply with NERC regulations while addressing specific challenges in the Nigerian electricity market, such as grid stability, currency considerations, and local content requirements. The agreement is crucial for both conventional and renewable energy projects and often serves as security for project finance lenders.
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1. Parties: Identification of the power producer (seller) and the buyer, including their legal status and registration details
2. Background: Context of the agreement, including project overview and parties' authority to enter into the PPA
3. Definitions: Comprehensive definitions of technical and legal terms used throughout the agreement
4. Sale and Purchase Obligations: Core obligations regarding the sale and purchase of electricity, including minimum take-or-pay provisions
5. Term and Termination: Duration of the agreement, conditions for renewal, and termination rights
6. Commercial Operations Date: Conditions and requirements for achieving commercial operations
7. Metering and Testing: Requirements for measuring delivered electricity and testing procedures
8. Billing and Payment: Payment terms, invoicing procedures, and dispute resolution for payments
9. Force Majeure: Definition of force majeure events and their consequences
10. Grid Connection and Delivery Point: Specifications for grid connection and electricity delivery point
11. Performance Security: Requirements for performance bonds or other security arrangements
12. Representations and Warranties: Standard legal representations and specific technical warranties
13. Insurance: Required insurance coverage for both parties
14. Change in Law: Provisions dealing with regulatory changes affecting the agreement
15. Dispute Resolution: Procedures for resolving disputes, including arbitration provisions
16. Governing Law: Specification of Nigerian law as governing law and relevant jurisdictions
1. Renewable Energy Credits: For renewable energy projects, provisions regarding renewable energy credits and environmental attributes
2. Carbon Credits: Allocation of carbon credits and environmental benefits, if applicable
3. International Financing Provisions: Additional provisions required by international lenders or development finance institutions
4. Currency Conversion: For PPAs with international parties, provisions for currency conversion and exchange rate risk
5. Step-in Rights: Rights of lenders to take control in case of default, typically required for project financing
6. Local Content Requirements: Specific provisions for meeting Nigerian local content requirements
7. Hybridization Rights: Rights to add additional generation sources in the future
8. Energy Storage Provisions: For projects including energy storage systems
1. Technical Specifications: Detailed technical specifications of the power facility
2. Testing and Commissioning Procedures: Detailed procedures for testing and commissioning the facility
3. Metering Specifications: Technical requirements for metering equipment and procedures
4. Tariff and Payment Calculations: Detailed formulas and methods for calculating payments
5. Performance Standards: Required performance levels and calculation of liquidated damages
6. Interconnection Requirements: Technical requirements for grid interconnection
7. Form of Performance Security: Template for performance security documents
8. Operating Procedures: Detailed operating procedures and protocols
9. Insurance Requirements: Detailed specification of required insurance coverage
10. Environmental and Social Requirements: Environmental and social standards to be maintained
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