Nigeria IPPs make additional demands on FG to guarantee investments

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The Nigerian Independent Power Producers (IPPs) are asking the Federal Government to make additional written commitment to them, stating categorically that the Federal Ministry of Power will pay for any power generated by them and sold to consumers at any point that the Nigeria Bulk Electricity Trader (NBET) fails to meet its agreed payment obligation.

The additional written agreement which, they said, is critical to unlocking the potential huge electricity addition to the grid will not only provide them guarantee but will also give their financiers the comfort to commit their monies to building their plants.

They said their financiers are also asking for the agreement because so much confidence has been lost in the power sector considering experiences of huge debts owed by NEPA, PHCN and therefore cannot trust government enough even with so much comfort already provided by setting up the bulk trader.

The Nigeria Electricity Regulatory Commission (NERC) has licensed several Independent Power Producers with an estimated 13,000 potential megawatts but many of their plants are yet to take off.

The IPP operators are also not comfortable with NBET capitalisation which is expected to reach $1.2 billion by the time all the funding expectations from various sources come in.

They are, therefore, asking the Federal Government to increase funding to the bulk trader to provide an additional comfort to investors, saying it is capable of taking up any liability that may arise from the power distribution end.

These were some of the concerns raised by members of the Independent Power Producers Association of Nigeria (IPPAN) during their visit to the NBET on Tuesday.

The IPPAN said they were coming as a pressure group to discuss with the bulk trader as well as other stakeholders in the power sector to find ways of resolving the pending issues which had impeded the implementation of their various projects.

They had also at the weekend met with Chinedu Nebo, minister of power, where they listed numerous challenges they said were frustrating their efforts to begin building of power plants for which they had obtained operating licences years ago.

Key of the issues they raised then were adequate funding for the bulk trader, the issue of gas which the minister of power had explained to them about what his office is doing to support; transmission; guarantees; waiver on importation of equipment for the power sector as well as the installation of prepaid metres.

During their visit, Innocent Ezuma, executive chairman, Zuma Energy, who led the IPPAN delegation admitted that the five issues had been deliberated upon earlier and some resolutions reached.

He said they were also advised to meet other stakeholders to inform them of the problems of IPPs as to “why the licences issued to them a long time is not crystalising into projects construction and therefore increased power transmission to the grid”.

“In the case of NBET, we must address the singular important impediment that all our members are crying about and that is the issue of provision of guarantees, be it sovereign guarantee or any other kind that will give additional comfort or cushion the PPA that NBET will sign with investors and developers. NBET is a new company and has not built a track record that it can take up these obligations.

“Basically, this is the only militating factor against most of IPPs and if this kind of guarantee is made available, you will see escalation of project implementation and construction that will translate into power to the people. What we are asking for is a commitment letter to pay where NBET fails and also to provide adequate money for the bulk trader to be able to take off while correction processes will be put in place”, Ezuna stated.

But the NEBT thinks that most of these expectations are unrealistic and insists that the government has already provided enough guarantees to encourage investments at both the generation and distribution ends and that the current $1.2 billion funding provisions to it is already sufficient to meet its obligations.

In response, Chineme Okafor, managing director, NBET, said that some of the issues raised by the IPPs are also tackled in the power purchase agreement and that it had necessary funding.

In a presentation, he tried to convince the operators that the bulk trader has sufficient funding as he explained how the $1.2 billion will come about.

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