Nigerian Bulk Electricity Trading (NBET) has signed a power purchase agreement (PPA) for the Itobe Coal Power project.

Construction works for the project, which is expected to cost around $5bn is expected to start in the first quarter of 2016, reports The Guardian.

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The PPA for the project, which extends over a 20-year period, is expected to generate $12bn.

Around 300MW of thermal energy will be generated at the coal power generating station within 30 months, which will amount to 1.2GW over subsequent years.

"With this, we have a coal PPA for the industry so that all the coal projects have a template that they can borrow."

NBET managing director Rumundaka Wonodi was quoted by the news publication as saying: "We have just initialled the power purchase agreement (PPA) for the Itobe 1 Coal Power Plant located in Kogi State.

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"The PPA is entered into between the sponsors and developers of the project, Zuma Energy and Nigerian Bulk Electricity Trading Plc., otherwise known as the Bulk Trader.

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"With this, we have a coal PPA for the industry so that all the coal projects have a template that they can borrow. We can use that for concluding discussions with them very quickly.

"It has taken over three years of engagement. When we started, the first thing was for Zuma Energy to demonstrate that they have a viable project. It was after that due diligence that we started the issue of negotiating a PPA.

"This PPA made consideration for the kind of technology, which is coal. It is quite different from gas and has many other feeding part of it, especially the fact that there would be ancillary dunking yard for coal, additional transmission line and all the other things are captured in the risk allocation in this PPA and other supplementary agreements.

"The PPA pricing is based on the multi-year-tariff-order (MYTO) generation tariff as approved by the regulator, the Nigerian Electricity Regulatory Commission (NERC)."