Foreign Lenders Shun Independent Power Projects
By Ejiofor Alike, 05.11.2010

Inability of some private entities granted licences for Independent Power Plants (IPPs) to obtain loans from international lending institutions has stalled the take-off of the power projects.
THISDAY investigations revealed that foreign lenders are scared of supporting the IPPs owing to the absence of constitutionally recognised leadership, as provided for in the Electric Power Sector Reform Act of 2005 that established the regulatory agency.


The former Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Ransome Owan, and his six commissioners were in 2009 removed from office over alleged fraudulent acts. They are currently facing trial before an Abuja Federal High Court and have also challenged their alleged removal in another court.
Thirteen out of the 34 registered IPPs are said to have been stalled owing to financial constraints, non-availability of gas and other issues.
But worried by the delay in their take-off, NERC has given a marching order to the entities that were granted the IPP licences to live up to their expectations or risk sanctions.
Assistant General Manager in Charge of Media and Public Relations at NERC, Mr. Patrick Ayendi, confirmed to THISDAY that the agency had written to the IPPs on the need to meet their milestones or face sanction.


The 21 IPPs that are either operational, close to inauguration or have just been licensed, according to the list made available to THISDAY include three Rivers State Government-owned IPPs, which operate as First Independent Power Company at Eleme, Omoku and Trans-Amadi; Shell Petroleum Development Company Limited at Port Harcourt; Nigerian Agip Oil Company Ltd at Okpai in Delta State; Minaj Holding Ltd, a coal-fired plant at Enugu; Ibom Power Limited and Notore Power Limited.
Others include DIL Power; Ewekoro Power Limited; two IPPs by Ikorodu Industrial Power Limited; two IPPs by GET Power Projects Limited at Tinapa in Calabar and Iganmu in Lagos; Tower Power Utility Limited; Coronation Power & Gas Limited; Wedotebary Nigeria Limited, AES Nigeria Barge Limited; NESCO Limited; Geometric Power Limited and Aba Power Limited.


Following the sack of the seven NERC officers, the late President Umaru Musa Yar’Adua had approved the appointment of the Secretary to NERC, Mr Imamudeen Talba, as administrator to oversee the affairs of the commission pending the resolution of the court cases.
THISDAY gathered that acting on the advice of their local consultants, foreign lenders have refused to support IPP projects that require international funding on the grounds that the position of administrator is alien to NERC Act and that any future administration might not honour agreement entered into by the current NERC leadership and the independent power operators.
“The funding of our project is structured in two ways – local funding from the Nigerian banks and international funding from foreign lenders. We have received the support of the local banks. But when we approached the foreign lenders, they contacted their local consultants here in Nigeria for advice.


"These consultants told them that the NERC leadership that is supposed to approve certain things for us is not recognised by the Nigerian law and that any government that comes in the future might cancel such approvals, thereby putting their investment at risk. This made these people to be scared and that is why some of these projects have been stalled,” said a NERC official who craved anonymity.
Section 40 (9) of the Electric Power Sector Act of 2005 stipulates that “whenever the office of chairman or vice-chairman falls vacant, or on the death of the chairman or vice-chairman, the President shall, within three weeks, select another commissioner to fill the vacancy under section 39.”
Based on this provision, THISDAY gathered that the foreign investors are concerned that project agreements endorsed by the administrator might not be legally binding since his position is “alien” to NERC Act.


Section 39 of the Act provides: “Subject to section 40 (6), on the death of, or vacation of office by a commissioner, the President shall nominate a candidate to fill the vacancy and submit that nomination to the senate, within one month, in accordance with section 34.”
However, Senior Manager in Charge of Public Affairs at Geometric Power Limited, operators of Aba Power Plant, Mr. Oseloka Zikora, who spoke on the issue was confident that with the intervention of President Goodluck Jonathan and the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, the issue of funding power projects would soon be resolved.


“If we can get real sector funding internally as CBN and the President are planning to do, at good rate, it is as good as getting international lending. That is not to say that foreign lenders are not needed because the kind of money required in the power sector is beyond what the local banks can afford to provide,” he said.
THISDAY had exclusively reported that NERC was likely to revoke the IPPs licences granted between August 24, 2006 and November 2007 to generate between 12.5mw and 2,800mw of electricity to the national grid owing to the delay in their take-off.
It was also learnt that only a few projects had reached advanced stages, while some licensees are yet to even secure site for the project. Others have not put physical structure on ground, indicating that they are not likely to meet the delivery target.


To ensure the success of the project, NERC was said to have set up a committee that monitors the extent of work done by licensees. Most of the licensees had attributed the lack of progress on the project to funding problems, low tariff structure and the fears that they might be unable to recoup their funds.
However, NERC was said to have been dissatisfied with the pace of work and might have resolved to withdraw licences of entities that have not made meaningful commitments since they obtained the IPP licences.


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Which bank is foolish enough to give a loan for IPP. Its not as if when the power project is complete Nigerians will be charged directly, instead you have to wait and pray that after the project is complete, government will remember to pay you.

Inability of some private entities granted licences for Independent Power Plants (IPPs) to obtain loans from international lending institutions has stalled the take-off of the power projects.

why should this be a news.

Mr Obasanjo already spent $16billion and no result.

The 'institutions' dont want to put their money in 'bottomless pit'

Why wont it be when you have a garrison of commando thieves in the civil service waiting to tell you that before they sign any contract you have to inflate by a percentage of 10 or no deal?

Watch very well anything that the Civil service touches spoils. I just thank God that the civil service did not touch our GSM if not we would still be in the stone age shouting from farm to farm.

If you produce power who sells it for how much? We want power but how much are we prepared to pay. No one talks about that but look at how Nigerians talk about other countries like Ghana.