The Power Purchase Contract is a fundamental document in Nigeria's electricity sector, essential for establishing long-term power supply arrangements between generators and off-takers. This agreement is typically used when independent power producers or utilities seek to sell electricity to bulk traders, distribution companies, or large industrial consumers. The document must comply with Nigerian regulatory requirements, particularly those set by the Nigerian Electricity Regulatory Commission (NERC) and the Electric Power Sector Reform Act 2005. It includes comprehensive provisions for power supply, pricing, technical standards, and operational requirements, while addressing specific challenges in the Nigerian electricity market such as grid stability, payment security, and foreign exchange considerations. The agreement is crucial for project financing and typically forms part of the security package for power project lenders.
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1. Parties: Identification of the power producer/seller and the buyer/off-taker, including their legal status and registered addresses
2. Background: Context of the agreement, including project overview, facility location, and regulatory framework
3. Definitions and Interpretation: Detailed definitions of technical and legal terms used throughout the agreement
4. Sale and Purchase Obligations: Core obligations of the parties regarding the sale and purchase of electricity
5. Term and Effectiveness: Duration of the agreement, conditions precedent, and effective date
6. Construction and Development: Requirements and timeline for facility construction and commissioning
7. Operation and Maintenance: Standards for facility operation, maintenance requirements, and performance obligations
8. Metering and Testing: Requirements for measuring electricity delivery and testing procedures
9. Billing and Payment: Payment terms, invoicing procedures, and dispute resolution for payments
10. Force Majeure: Definition of force majeure events and their consequences
11. Default and Termination: Events of default, cure periods, and termination rights
12. Liability and Indemnification: Allocation of risks and responsibilities between parties
13. Dispute Resolution: Procedures for resolving disputes, including arbitration provisions
14. Governing Law: Specification of Nigerian law as governing law and relevant jurisdictions
15. Miscellaneous: Standard legal provisions including notices, amendments, and assignments
1. Grid Connection: Required when the facility needs to connect to the national grid, specifying connection requirements and responsibilities
2. Carbon Credits: Include when parties wish to address the allocation of carbon credits or environmental attributes
3. Local Content: Required when specific Nigerian local content requirements apply to the project
4. Step-in Rights: Include when lenders require rights to take over the project in case of default
5. Insurance: Detailed insurance requirements section when not covered in schedules
6. Security Package: Required when specific performance security or parent company guarantees are needed
7. Change in Law: Detailed provisions for handling regulatory changes when significant regulatory risk exists
1. Technical Specifications: Detailed specifications of the power facility, including capacity and technology
2. Testing and Commissioning Procedures: Detailed procedures for facility testing and commissioning
3. Metering Specifications: Technical requirements for metering equipment and procedures
4. Tariff and Payment Calculations: Detailed formula and methodology for calculating payments
5. Performance Standards: Specific performance requirements and guarantees
6. Interconnection Requirements: Technical specifications for grid connection
7. Form of Performance Security: Template for required performance bonds or guarantees
8. Insurance Requirements: Detailed list of required insurance coverage
9. Environmental and Social Requirements: Environmental and social standards to be maintained
10. Operating Procedures: Detailed procedures for day-to-day operation and maintenance
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