The Power Offtake Agreement serves as a critical commercial instrument in Nigeria's power sector, establishing the legal and commercial framework for power purchase arrangements between generators and offtakers. This document is essential for any power generation project in Nigeria, whether conventional or renewable, and must comply with the Electric Power Sector Reform Act and NERC regulations. It is typically used when developing new power generation facilities or restructuring existing power supply arrangements, providing certainty for project financing and long-term operational stability. The agreement addresses key aspects such as power purchase commitments, pricing mechanisms, technical standards, and risk allocation, while incorporating specific requirements of Nigerian law and market conditions. It forms the backbone of project financing arrangements and often requires approval from regulatory authorities.
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1. Parties: Identification of the power producer (seller) and the offtaker (buyer), including their legal status and registered addresses
2. Background: Context of the agreement, including project overview, facility location, and relevant regulatory framework
3. Definitions and Interpretation: Comprehensive definitions of technical and legal terms used throughout the agreement, and rules of interpretation
4. Sale and Purchase Obligations: Core obligations regarding the sale and purchase of electricity, including minimum take-or-pay provisions
5. Term and Effectiveness: Duration of the agreement, conditions precedent, and effective date
6. Delivery Point and Title: Specification of the point where electricity will be delivered and transfer of title/risk
7. Metering and Testing: Requirements for measuring delivered electricity and testing procedures
8. Billing and Payment: Payment terms, invoicing procedures, disputed bills, and payment security
9. Performance Security: Security obligations of both parties, including performance bonds or guarantees
10. Construction and Commercial Operation: Requirements for facility construction and achieving commercial operation date
11. Operating Requirements: Operating procedures, maintenance schedules, and performance standards
12. Force Majeure: Definition of force majeure events and consequences
13. Default and Termination: Events of default, cure periods, and termination rights
14. Liability and Indemnification: Allocation of risks and responsibilities between parties
15. Dispute Resolution: Procedures for resolving disputes, including arbitration provisions
16. Governing Law: Specification of Nigerian law as governing law and relevant jurisdictional matters
1. Change in Law: Provisions addressing changes in regulatory framework - include for long-term agreements or when regulatory environment is uncertain
2. Environmental Credits: Treatment of renewable energy credits or carbon credits - include for renewable energy projects
3. Grid Interface: Specific provisions for grid connection and compliance - include when seller is responsible for grid connection
4. Fuel Supply: Provisions regarding fuel supply and quality - include for thermal power plants
5. Step-in Rights: Lender's step-in rights and direct agreement provisions - include when project financing is involved
6. Local Content: Local content requirements and compliance - include when required by Nigerian regulations
7. Currency Conversion: Currency conversion and exchange rate provisions - include for international investments or foreign currency payments
1. Technical Specifications: Detailed technical specifications of the power facility
2. Testing Procedures: Procedures for testing and commissioning the facility
3. Metering Specifications: Technical requirements for metering equipment and procedures
4. Tariff and Payment Calculations: Detailed methodology for calculating payments, including capacity and energy charges
5. Performance Standards: Required performance levels and calculation of liquidated damages
6. Operating Procedures: Detailed procedures for day-to-day operation and maintenance
7. Form of Performance Security: Template for performance bonds or guarantees
8. Interconnection Requirements: Technical requirements for grid interconnection
9. Insurance Requirements: Required insurance coverage and terms
10. Dispute Resolution Procedures: Detailed procedures for dispute resolution and arbitration
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