* Deal could make private power projects bankable
* Billions of dollars in potential investment waiting
* Could help end country's chronic power shortages
By Nick Tattersall
LAGOS, July 30 Nigeria is close to agreeing a
framework to make private power generation for the national grid
commercially viable, potentially unlocking billions of dollars
of investment and helping end chronic power shortages.
Finance Minister Olusegun Aganga said a presidential task
force had met with independent power producers in the capital
Abuja on Friday and had agreed to establish a new power purchase
agreement within six weeks.
The aim of the agreement is to guarantee that independent
power producers (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.
The current intermediary, the Power Holding Company of
Nigeria (PHCN), is 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-subsidised rather than market rates.
That means private companies wanting to build power plants
in Nigeria are unable to find the funding to do so because they
cannot guarantee that PHCN will have the capacity to repay them.
"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."
Nigeria is home to Africa's biggest oil and gas industry yet
is plagued by chronic power shortages, leaving its 140 million
people without reliable mains electricity, and businesses and
wealthy individuals reliant on expensive diesel generators.
The power crisis is a major brake on growth in sub-Saharan
Africa's second-biggest economy. Solving it could unlock the
potential of a country dubbed "Africa's sleeping giant" and
yield huge returns for investors.
"PROBLEM HAS CHANGED NAME"
Andrew Alli, chief executive of the Africa Finance
Corporation which funds infrastructure projects around Africa,
told Reuters this month foreign investors were ready to pump
billions of dollars into Nigeria's power sector if government
could sort out the regulatory framework. [ID:nLDE6640QU]
He said large foreign power companies had been to scout for
investment opportunities, while development finance institutions
such as the World Bank and African Development Bank would also
provide debt financing given the right regulatory framework.
Solving the power crisis in Africa's most populous nation
would be a major coup for the president and his administration.
President Goodluck Jonathan has made boosting power supply a
top priority since taking office in May, promising Nigeria will
privatise generation and distribution next year. [ID:nLDE65R12L]
But elections are due in January and it is not yet clear
whether he will contest.
Successive presidents have pledged to boost Nigeria's power
generation -- which regularly plunges to well below its 3,000
megawatt capacity due to poor maintenance and mismanagement --
but little concrete progress has been made.
PHCN's predecessor, the Nigerian Electric Power Authority
(NEPA) was dubbed "Never Expect Power Always". PHCN is known as
"Problem Has Changed Name", or "Please Have Candle Nearby".
"Steady power supply is coming a step closer," the finance
ministry promised in its statement.
(For more Reuters Africa coverage and to have your say on the
top issues, visit: af.reuters.com/ )
(Additional reporting by Camillus Eboh; Writing by Nick