One of the most important segments of the Power Sector value chain in any country is the Power Generation company, a company licensed to engage in the generation/production of Electric Power for onward transmission and distribution.
The focus of the article will be Power Generation Company (GENCO) licenses in Nigeria, with a focus on :-
– The types of Power Generation licenses available in Nigeria.
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– The Regulatory Framework governing GENCOs in Nigeria
– The process of commencing a GENCO license application.
– The requirements for a GENCO license application and grant in Nigeria.
– Post-licensing regulations governing GENCOs in Nigeria.
What are the types of GENCO licenses available in Nigeria?
The GENCO licenses available in Nigeria are :-
– Grid-Connected Power Generation Licences :- which allow holders to generate/produce Electric power & connect to the National Grid for distribution.
The distinguishing feature of this type of GENCO license is that its holder is required to enter into connection agreements with the Transmission Company of Nigeria for connection & evacuation of Electric power to the National Grid. GENCO licensee are also required to enter into long-term Power Purchase Agreements (PPAs) with the Nigerian Bulk Electricity Trading Company PLC (NBET).
– Embedded Power Generation Licences :- This is a license that allows for the generation of electricity that is directly connected and evacuated through a distribution system , through the distribution facilities of a licensed Distribution Company (DISCO) or through an Independent Distribution Network licensee via negotiated Power Purchase Agreements (PPAs).
A licensed embedded GENCO does not need to enter into a PPA with either NBET or the Transmission Company of Nigeria (TCN).
Off-Grid Electric Power Generation Licences:- This is a licence that entitles a GENCO to generate and sell power to a single buyer via a PPA.
What are the relevant agencies in charge of licensing and regulating GENCOs in Nigeria?
GENCOs are licensed and regulated mainly by the Nigerian Electricity Regulatory Commission (NERC) through its various regulations and the Electric Power Sector Reform Act and the Ministry of Power.
How are GENCO license applications to be commenced?
Applications are to be made in writing as well as signed and dated by the legal representative of an applicant to the Chairman, NERC Headquarters.
Applications are to be submitted in 3 paper copies along with an electronic version in MS Office software format in a CD-ROM. On the receipt of a GENCO application, NERC (or ‘The Commission’) shall note therein the date of its receipt and shall send to the applicant an acknowledgement stating the date of the receipt.
Can any further information be required of an applicant by NERC even after submitting a licence application?
Yes, it is possible. The commission may upon review of the application require the applicant to provide more information within a period of not more than 1 month from the date of the receipt and acknowledgement of the application.
Will newspaper advertisement publications also be required by NERC for GENCO license applications?
Yes they will. The Commission upon finding an application in order will direct an applicant to publish at his own expense and in 2 daily newspapers, one of them being a local paper in circulation within the applicant’s planned business operation area , a 21-day public notice of the licence application with its relevant details for the purpose of receiving possible objections to be heard by NERC for another period of 30 days.
Can a decision of NERC refusing a licence application be appealed against?
Yes it can. An aggrieved applicant has 21 days within receiving a notification of licence application refusal from NERC to appeal.
Can GENCO licenses be cancelled, suspended, amended, or extended tenure-wise?
Yes, they can. A GENCO license can be suspended (but not for a period of more than 6 months) on the grounds of :-
– Public Interest.
– Default in complying with GENCO license terms and conditions.
– The inability to discharge or perform the duties imposed by a licence terms and conditions, the Electric Power Sector Reform Act, Market rules, NERC regulations, etc.
– Public safety or that of any person.
A GENCO licence can also be cancelled by NERC on the grounds of:-
– Procuring a GENCO license through fraud or the misrepresentation or non-disclosure of a material fact.
– Willful or unreasonable violation of the Power Sector Regulatory Framework.
– Insolvency/Bankruptcy of a GENCO licensee.
– Inability to carry out the duties of a GENCO licensee due to a weak financial position.
– Failure to comply with a GENCO license terms and conditions.
A GENCO license terms and conditions can also be amended on NERC’s own accord, the complaint of a customer or another licensee or the GENCO licence holder itself on the grounds of:-
– Public Interest.
– Inability of a licensee to meet the requirements in its license terms and conditions set by NERC.
– A material change in circumstances of the licensee.
– A default in complying with the Electric Power Sector Reform Act, NERC regulations, Market rules and Network rules.
Regarding GENCO license tenure extension, an application for this has to be commenced within the first 5 years of the initial term of the GENCO license.
How long does it take to process a GENCO license application in Nigeria?
It takes a period of not more than 6 months from the date of receiving a Licence application by NERC to process a GENCO license application.
What are the requirements for a Power Generation Licence in Nigeria?
Mandatory Submission Requirements
– A completed application form.
– A Certificate of Incorporation and MEMART (Memorandum/Articles of Association).
– A Registered Land Title to site or Deed of Assignment or evidence of submission of title documents to the relevant land processing agency.
– A Tax Clearance Certificate for the past 3 years.
– A 10 year business plan (please consult your lawyer on the required contents of a business plan for the purpose of licensing under NERC regulations).
– Off-take Agreement.
– An Environmental Impact Assessment (EIA) approval certificate or proof of submission and acceptance for processing of the report on Environmental Impact Assessment to the Ministry of Environment or details on how effluents and discharges will be managed if proposed Generation Capacity is less than 10MW.
– A Fuel Supply Agreement.
– A Memorandum of Understanding (MOU) or letter of intent from an Engineering Procurement Contractor (EPC) if applicable.
– A Memorandum of Understanding (MOU) or letter of intent from technical partner if applicable.
– Financing Agreements or Letters to fund the project from financial institutions.
– Timelines for commission of power plant and on the date when different capacities of the plant will come into operation.
General Requirements
- A Site map :- showing fuel delivery and storage locations, transmission evacuation site, water pipelines, gaseous, liquid and solid waste disposal areas, etc.
- A location map :- showing roads, rail lines, transmission lines, rivers, reservoirs, etc.
- A principal single-line diagram of the project site.
- Fuel sourcing, transportation and supply arrangements.
- Water supply & availability analysis for plant and staff use.
- Plant design.
- Power Station information(consult your lawyer on the specific required Power station information requirements under the NERC licensing regulations).
- Generator Unit Information (consult your lawyer on the specific Generator Unit Information requirements under NERC regulations).
- Engineering , Procurement & Construction (EPC) Contract (consult your lawyer concerning the report on the guide to the development of Independent Power Projects/IPPs).
- Phasing of project details where applicable.
- Auxiliary systems (refer to the report on the guide to the development of IPPs).
- Ancillary services :-
– Black start facilities.
– Reactive power generation capabilities.
– Frequency response capability.
– Maximize generation(Maxgen) capability.
– Fast start capability.
- Report of evacuation studies (for good connection). This should include:-
– Load flow studies
– Stability studies
– Short circuit studies
- Station Safety Arrangements which should include :-
a). an emergency response plan;
b). fire fighting facilities;
c). first aid;
d). safety awareness & staff training plans;
e). personal protective equipment (PPE);
f). health and safety policy.
- An Environmental Impact Assessment (EIA) and Waste management plan.
- The Expected date of commissioning.
- Evidence of Approval from the Transmission Company of Nigeria (TCN) confirming that proposed connection points have the capacity to take loads which will be fed to them.
Specific Requirements
Hydro Plants
– An approval from or agreement with the Ministry of Water Resources.
– A map showing the proposed dam reservoir area, water conductor system, fore bay, power house, etc.
– Information on area of village, forest land, agricultural land, submerged land, etc.
– Turbine unit (Hydro Turbine) information (please consult your lawyer on Turbine unit information requirements under the NERC regulations).
Thermal Plants
Thermal Plants can either be –
a). Gas steam plants (These plants require Turbine Unit Information for Power Generation licensing. Please consult your lawyer on Turbine unit information requirements under the NERC regulations).
b). Coal steam plants (Which require Turbine unit information for Power Generation licensing. Please consult your lawyer on licensing requirements under NERC regulations).
c). Gas plants/OCGT (Please consult your lawyer on licensing requirements for this type of Power Generation plant under NERC regulations).
d). Oil plants( Please consult your lawyer on licensing requirements for this type of Power Generation plant under NERC regulations).
e). Solar plants (Please consult your lawyer further on licensing requirements for this type of Power Generation plant under NERC regulations).
f). Wind Farms (Please consult your lawyer further on licensing requirements for this type of Power Generation plant under NERC regulations).
Embedded Generation/Off-Grid Generation.
– Total capacity per site.
– Number of generating units per site.
– Fuel type.
– Size of generating units (MW & MVA).
– Terminal voltage.
– Rated power factor.
– Reactive power capacity (if any).
– Noise level .
– System protection.
– Waste management/Environmental Impact Assessment (EIA) if required.
– Agreement or arrangement with a licensed Power Distribution Company (DISCO) for network use.
– Generating equipment manufacturer information (name,year of manufacture and warranty period).
What is the validity period for Power Generation licences in Nigeria?
Grid-Connected Power Generation licenses have a validity period of 10 years while Off-Grid Power Generation licenses carry a validity period of up to 10 years.
What are the fee implications of Power Generation Licence applications in Nigeria?
The fee implications of Power Generation Licence applications in Nigeria are :-
Grid-Connected Power Generation
1-10MW Generation Capacity
Processing/Application fee – 70 Thousand Naira
License fee – $ 5000.00(Five Thousand US Dollars)
Licence Renewal/Tenure extension application fee – 35 Thousand Naira
Annual Operating fee – 1.5% of license holder’s charges per Kwh.
11-50MW Generation Capacity
Processing/Application fee – 150 Thousand Naira
License fee – $30,000(Thirty Thousand US Dollars)
Licence renewal/Tenure extension application/processing fee – 75 Thousand Naira
Annual Operating Fee -1.5% of Licensee’s charges per Kwh
51-100MW Generation Capacity
Application/Processing fee – 200 Thousand Naira.
Licensing fee – $ 40,000.00(Forty Thousand US Dollars).
Licence renewal /Tenure extension Processing fee – 100 Thousand Naira
Annual Operating Fee- 1.5% of charges per Kwh
101-200MW Generation Capacity
Application/Processing fee – 250 Thousand Naira
Licensing fee – $ 60,000.00(Sixty Thousand US Dollars)
Licence renewal/Tenure extension processing fee – 125 Thousand Naira
Annual Operating Fee – 1.5% of charges per Kwh
201-300MW Generation Capacity
Application/Processing fee – 350 Thousand Naira
Licensing fee – $ 80,000.00(Eighty Thousand US Dollars)
Licence renewal/Tenure extension processing fee – 175 Thousand Naira.
301-400MW Generation Capacity
Application/Processing fee – 400 Thousand Naira.
Licensing fee – $ 100,000(a Hundred Thousand US Dollars)
Licence renewal/ Tenure extension processing fee – 200 Thousand Naira
Annual Operating Fee – 1.5% of charges per Kwh.
401-500MW Generating Capacity
Application/Processing fee – 450 Thousand Naira
Licensing fee – $120,000.00(a Hundred and Twenty Thousand US Dollars)
Licence renewal/ Tenure extension processing fee – 225 Thousand Naira.
Annual Operating Fee – 1.5% of charges per Kwh.
500MW – Above Generation Capacity
Application/Processing fee – 500 Thousand Naira
Licensing fee – $140,000.00(One Hundred and Forty Thousand US Dollars)
Licence renewal/Tenure extension processing fee – 250 Thousand Naira
Off-Grid/Embedded Power Generation License Fees.
11-25MW Generation Capacity
Application fee :- 150 Thousand Naira
Licensing fee :- $35,000.00(Thirty-Five Thousand US Dollars)
Licence renewal/Tenure extension processing fee:- 75 Thousand Naira
Annual Operating Fee :- 1.5% of tariff charges per Kwh
26-40MW Generation Capacity
Application fee:- 175 Thousand Naira
Licensing fee :- $40,000.00
Licence renewal/Tenure extension processing fee :- 87,500.00 Naira
Annual Operating Fee :- 1.5% of tariff charges per Kwh
41-60MW Generation Capacity
Application fee :- 225 Thousand Naira
Licensing fee :- $45,000.00(Forty-five Thousand US Dollars)
Licence renewal/ Tenure extension processing fee :- 112,500.00 Naira
Annual Operating fee :- 1.5% of charges per Kwh
61-85MW Generating Capacity
Application fee:- 250 Thousand Naira
Licensing fee :- $50,000.00(Fifty Thousand Naira)
License renewal/ Tenure extension processing fee :- 125 Thousand Naira
Annual Operating fee :- 1.5% of tariff charges per Kwh
86-100MW Generating Capacity
Application fee :- 275 Thousand Naira
Licensing fee :- $55,000.00(Fifty-Five Thousand US Dollars)
License renewal/ Tenure extension processing fee :-
Annual Operating fee :-
101-200MW Generating Capacity
Application fee :- 300 Thousand Naira
Licensing fee :- $75,000.00(Seventy-Five Thousand US Dollars)
License renewal/Tenure extension processing fee :- 150 Thousand Naira
Annual Operating fee :- 1.5% of tariff charges per Kwh
201-400MW Generating Capacity
Application fee:- 400 Thousand Naira
Licensing fee :- $95,000(Ninety-Five Thousand US Dollars)
Licence renewal/Tenure extension processing fee :- 200 Thousand Naira
Annual Operating fee :- 1.5% of tariff charges per Kwh
401-500MW Generation Capacity
Application fee :-500 Thousand Naira
Licensing fee :- $150,000.00(One Hundred and Fifty Thousand US Dollars)
Licence renewal/ Tenure extension processing fee :- 250 Thousand Naira
Annual Operating fee :- 1.5% of Tariff charges per Kwh
500MW – Above Generation Capacity
Application fee :- 600 Thousand Naira
Licensing fee :- $200,000.00(Two Hundred Thousand US Dollars)
Licence renewal/Tenure extension processing fee :- 300 Thousand Naira
Annual Operating fee :- 1.5% of Tariff charges per Kwh.
Conclusion:- Further consultations with the right set of professionals is highly needed for GENCO licensing and operations as this write-up is at best a summarized version of just one aspect of the Regulatory compliance requirements governing GENCOs as a foundational component of Nigeria’s Electric Power Sector.