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https://www.businessdayonline.com/ambode-signs-agreement-investors-lagos-3000-mw-embedded-power-project/

https://www.businessdayonline.com/wp-content/uploads/2017/05/Power-Plant-560x390.jpg

By LOLADE AKINMURELE

Akinwunmi Ambode, governor of Lagos state on Tuesday signed an agreement with investors to generate 3,000 megawatts of power over the course of seven years, sources tell BusinessDay.

Tagged the “Lagos State Embedded Power Programme,” has the objective to deliver 3,000MW incremental electric power to drive the burgeoning economy of Lagos at the cost of $3billion, subject approval by the Nigerian Electricity Regulatory Commission (NERC).

The first phase which will be commissioned before the end of the first quarter of 2018, is expected to deliver 520MW incremental power, while additional 1,070MW will be delivered by the fourth quarter of 2018. The balance of 1,410MW will be completed by 2022.

According to details of the agreement seen by BusinessDay, Lagos state government will provide 3 months rolling bank guarantees to support the Power purchase Agreements (PPAs), which will be signed between the distribution companies and the embedded power providers (EPPs), to enhance bankability of the projects.

In the agreement, Lagos state government will secure gas for the projects through provision guarantee to gas suppliers using its Ibile Oil & Gas company.

“Given the intractable challenges of local gas market, and to guarantee uninterrupted gas supply to the EPPs, Lagos State has finalised arrangements with reputable international gas suppliers to deploy a floating storage and regasification unit (FSRU) to be moored on Lagos waters and this will be further supported by trucking of LNG from the South-South (in the short-term),” said the document.

According to the agreement, the required liquidity for the transaction volume of about N4trillion is largely private sector funded, self-liquidating and employing series of contingent financial instruments.

The state will carry out a comprehensive power audit exercise in Epe, Ikorodu, Ikeja, Badagry, Marina, Ibeju Lekki, Apapa and Ikoyi where the embedded project will be deployed.

In the arrangement, prospective EPPs will generate and inject off-grid power for distribution through the network of Eko and Ikeja DisCos. Huge investments are anticipated in upgrading distribution infrastructure of the DisCos such as 33/11kv, step down sub-stations, distribution transformers and feeders.

Lagos and its joint venture partners plan to recover costs from the wheeling charges due to the DisCos based on agreed terms. Proposed tariff is N52.52 per kWh.

Mynd44, OAM4J, Lalasticlala

Ambo weldone

But please get really serious

Let the development be commensurate to IGR & Faac

Nice one. Eko Onibaje

This is excellent news! Dependable power is the one missing ingredient Lagos requires to really power ahead even faster than it already has. If this agreement is structured properly, without requiring the power to be distributed via the incompetent PHCN, or forcing the power companies to sell below cost to retail customers who prefer to steal their electricity, the boost it will give to business in Lagos will allow the state to match and even surpass the growth rates of the East Asian "tiger" economies at their peak.

Ambode has done his bit, but now the question is whether the FG will allow Lagos the freedom to fully capitalize on this move, or insist as usual on the same centralized, inept control that has crippled the rest of the country's power generation and distribution.

Best News ever out of Nigeria in a long long time.


This is the solid and visionary project we've been expecting Ambode to come up with and he sure did.

This sounds like a well thought out project with all the bases covered.

With Dangote refinery, gas plant, petrochemical and fertilizer plants coming upstream in less than 2 years, it's a wrap, Lagos is about to be one of the top 3 economies in Africa.

omohayek:
This is excellent news! Dependable power is the one missing ingredient Lagos requires to really power ahead even faster than it already has. If this agreement is structured properly, without requiring the power to be distributed via the incompetent PHCN, or forcing the power companies to sell below cost to retail customers who prefer to steal their electricity, the boost it will give to business in Lagos will allow the state to match and even surpass the growth rates of the East Asian "tiger" economies at their peak.

Ambode has done his bit, but now the question is whether the FG will allow Lagos the freedom to fully capitalize on this move, or insist as usual on the same centralized, inept control that has crippled the rest of the country's power generation and distribution.

The fact that this is an embedded system means every MW shall remain in Lagos state, but the only issue here is the capacity to transmit and distribute.

deomelo:
The fact that this is an embedded system means every MW shall remain in Lagos state, but the only issue here is the capacity to transmit and distribute.

In that case, the key question is whether the power providers will be forced to deal with retail customers and offer them below-market rates, or whether they'll be allowed to only deal with businesses that are willing to pay enough to make it worthwhile to guarantee 24/7 supply. If the latter, then it will be easy to justify building out the distribution infrastructure to reach industrial estates, commercial buildings. The key problem with Nigeria's power sector is the misguided populism that has forced the GENCOs and DISCOs to operate at a loss.

Honestly, gej and OBJ got this power issue wrong. What ambode is doing is exactly what they should've created. Every state should provide its electricity need.

Nonetheless, I see good news all round. When this Lagos initiative is complete, they'll leave the national grid thereby making more megawatts available for the parts of the country.

Grundig:
Honestly, gej and OBJ got this power issue wrong. What ambode is doing is exactly what they should've created. Every state should provide its electricity need.

Nonetheless, I see good news all round. When this Lagos initiative is complete, they'll leave the national grid thereby making more megawatts available for the parts of the country.

That policy is one of the things hindering the power sector.. . No state wants to invest in power generation as long as there's national grid. . FG needs to decentralize power generation

omohayek:
In that case, the key question is whether the power providers will be forced to deal with retail customers and offer them below-market rates, or whether they'll be allowed to only deal with businesses that are willing to pay enough to make it worthwhile to guarantee 24/7 supply. If the latter, then it will be easy to justify building out the distribution infrastructure to reach industrial estates, commercial buildings. The key problem with Nigeria's power sector is the misguided populism that has forced the GENCOs and DISCOs to operate at a loss.

Good question.

I'm thinking the state's overall interest in this project is the general public and consumers hence the state inserting guarantees and also using taxpayers entities like Ibile Oil & Gas company.

The problem with GENCOS started even before privatization because to survive and operate successfully in the power business, you need funds and credit facilities to expand operations from generation to front-end services like billing and collection, but ti adequately bill and collect, you have to first provide excellent service which they are not doing so where is the incentives to pay for poor service?


Also, they are not entering other areas or selling products like residential solar power systems like equipping residential homes with solar power systems and have them make monthly payments or installments till the cost of the unit is paid off. Consumers won't hesitate to pay because with solar systems, they are almost guaranteed 24/7 electricity.

Unfortunately, they DISCOS are financially strapped and lending institutions are not willing to fund their operations because of the DISCO's shaky and almost doomed business models and uncertain ROI.

At the moment, the DISCOS are pretty much useless and can not function optimally.

Grundig:
Honestly, gej and OBJ got this power issue wrong. What ambode is doing is exactly what they should've created. Every state should provide its electricity need.

Nonetheless, I see good news all round. When this Lagos initiative is complete, they'll leave the national grid thereby making more megawatts available for the parts of the country.

As a visionary public official like many right thinking leaders in Lagos state, Tinubu followed this path when he built the first IPP in Nigeria/271MW after securing guarantee right there in Lagos state, but because of politics, shortsightedness and lack of foresight, OBJ trashed the agreement and nationalized the project by sending it into the National grid.

The FG is still deducting the loans the from Lagos State's Federal allocations. This happened over a decade ago, but just imagine Lagos state today without FG meddling and destructive politics. This single incident halted Lagos's IPP dreams and energy self-sufficiency.

deomelo:
Good question.

I'm thinking the state's overall interest in this project is the general public and consumers hence the state inserting guarantees and also using taxpayers entities like Ibile Oil & Gas company.

I find that prospect quite troubling, not because I don't appreciate the sentiment behind it, but because it creates room for problems down the line, if the state should ever find itself unable to pay the subsidies for the retail consumers.

I think it would be better in the long run to offer no subsidies at all, and allow these embedded operators to cater exclusively to businesses which are willing and able to pay market rates, which will in turn support the growth of businesses that can hire more workers at high enough salaries that they won't need government subsidies to pay their electricity bills. The focus on subsidizing mass consumption - thereby encouraging even more such consumption - is one of the main reasons why Nigeria now has to import most refined its oil while its 4 refineries are lying largely idle, as they don't charge enough for petrol to cover their operating costs.

I know it's not the popular thing to do, and I'm sure Ambode thinks it will help his 2nd term chances, but subsidizing retail customers is exactly the wrong way to go. It would be better to simply let the business sector thrive on 99.9% available commercially priced power, and let that indirectly push up retail customers' incomes instead.

Fantastic development.

only in Lagos you can hear this. I just hope the power won't be sent to national grid at the end.

omohayek:
I find that prospect quite troubling, not because I don't appreciate the sentiment behind it, but because it creates room for problems down the line, if the state should ever find itself unable to pay the subsidies for the retail consumers.

I think it would be better in the long run to offer no subsidies at all, and allow these embedded operators to cater exclusively to businesses which are willing and able to pay market rates, which will in turn support the growth of businesses that can hire more workers at high enough salaries that they won't need government subsidies to pay their electricity bills. The focus on subsidizing mass consumption - thereby encouraging even more such consumption - is one of the main reasons why Nigeria now has to import most refined its oil while its 4 refineries are lying largely idle, as they don't charge enough for petrol to cover their operating costs.

I know it's not the popular thing to do, and I'm sure Ambode thinks it will help his 2nd term chances, but subsidizing retail customers is exactly the wrong way to go. It would be better to simply let the business sector thrive on 99.9% available commercially priced power, and let that indirectly push up retail customers' incomes instead.

You raised critical and valid points.

The only problem I see on the horizon which probably won't manifest anyway is if the parties involved reneges or transgressed. I don't see this affecting the state directly since the entire project is going to be privately funded and all the state is doing is standing in as prestige guarantor for easy lending and not necessarily the moneybag or subsidizing entity.

The whole power issue is currently going nowhere because of funding issues, creative and daring leadership so Lagos state/Ambode stepping in to bridge the gap is a great move to get get rid of the impasse and get the ball rolling.

I do agree that in terms of consumption, business should be prioritized for guaranteed returns and rapid economic growth with collateral benefits like job and income growth and also improved state IGR.


This is a win-win situation for Lagos state

deomelo:
The fact that this is an embedded system means every MW shall remain in Lagos state, but the only issue here is the capacity to transmit and distribute.

The state will carry out a comprehensive power audit exercise in Epe, Ikorodu, Ikeja, Badagry, Marina, Ibeju Lekki, Apapa and Ikoyi where the embedded project will be deployed.

In the arrangement, prospective EPPs will generate and inject off-grid power for distribution through the network of Eko and Ikeja DisCos. Huge investments are anticipated in upgrading distribution infrastructure of the DisCos such as 33/11kv, step down sub-stations, distribution transformers and feeders.