Nigeria’s IPP Framework Almost Ready

According to Nigeria’s Minister of Finance, Olusegun Aganga, the country is on a mission to pull together the framework to make private power generation for the national grid commercially viable. If this pans out Nigeria stands to gain hundreds of millions in investment, and more importantly, realize improved stability in its power sector that is plagued by chronic outages. Others, like the US, have already offered assistance to the West African country to help drive its IPP market.

In April Nigeria’s Minister of State for Power Nuhu Way said that the federal government was expected to release a comprehensive blueprint on the development of the West African country’s power sector. And in June, Nigerian President Goodluck Jonathan demanded the commencement of the Power Sector Reform Act in an effort to shore up private sector investment and create stability for the West African country’s energy sector.

In a Reuters report Aganga said the presidential task force had met with independent power producers (IPPs) and had agreed to establish a new power purchase agreement (PPA) by mid-September. The aim of the agreement is to guarantee that IPPs will be able to sell power to a credit-worthy single off-taker, which will sell electricity on to distribution companies and in turn repay the IPPs.

Aganga added that the Power Holding Company of Nigeria (PHCN) was not regarded as a credit-worthy buyer of power partly because it is failing to collect its own bills efficiently from consumers, and partly because it is selling power at government-subsidized rates rather than market rates which makes it hard for the IPPs to collect on what is owed from PHCN.

“The IPPs want to ensure that the single buyer is a credit-worthy entity, which in turn makes them more bankable,” Aganga’s office said in a statement. “The timetable agreed at the meeting stipulates that the government side shall present … key terms and conditions for the PPA between the single buyer and the IPPs. The stakeholders will then negotiate and perfect the term sheet to produce a power purchase agreement for signing in six weeks.”

Andrew Alli, chief executive of the Africa Finance Corporation which funds infrastructure projects around Africa, told Reuters that there would be plenty of foreign investors lining up to pump funds into the power sector if the government could sort out the regulatory framework. Alli went on to say that the large foreign power companies had been in Nigeria to explore investment opportunities.

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