Federal government and promoters of the Qua Iboe Power Plant (QIPP), a private generating company, have commenced negotiations over a power purchase agreement (PPA) for the 540MW project in Ibeno, Akwa Ibom state, TheCable said yesterday.
The agreement will see the federal government commit to about $30 million monthly take-or-pay obligations when the power plant comes on stream in 2025. The federal government had in 2017, approved the PPA negotiated by the Nigerian Bulk Electricity Trading Plc (NBET) with the new investors in QIPP, led by the Black Rhino.
NBET — the body that buys power from the generating companies (Gencos) through PPAs and sells to the distribution companies (DisCos) through vesting contracts — later objected to the QIPP purchase agreement citing the financial risks. The QIPP had written to Ibrahim Gambari, chief of staff to President Muhammadu Buhari, asking for his intervention.
QIPP said that only a pull/call option agreement (PCOA) can make the project bankable and investors get returns on their investment, insisting it cannot bear the risk alone.
QIPP promoters said the contract must present sufficient protections to justify investing about $1 billion in Nigeria, with the PPA ensuring both parties are obligated to undertake their responsibilities to make the contract work.
Nigeria’s current deal with Azura-Edo Power obligates the country to pay at least $30 million a month whether or not the country takes the power generated by the plant. Azura is the only private Genco given a sovereign guarantee by the federal government following the World Bank partial risk guarantee (PRG) signed by Nigeria in August 2015.
Meanwhile the Transmission Company of Nigeria (TCN) has been forced to give priority to Azura while other plants are asked to reduce their production. The regulator is said to have limited capacity to take the power generated by the Gencos,
The energy generated by QIPP is expected to be transmitted to the national grid through the Ikot-Abasi- Ikot Ekpene transmission line, which is still under construction by NDPHC and also facing huge challenges over the right of way.
The gas-fired power project, slated to begin commercial operations in 2025, is estimated to cost about $1.1 billion, with a proposed 58-kilometre transmission line that will link the plant to the national grid.
QIPP has entered into a 20-year gas supply agreement with Exxon Mobil to get 400 million standard cubic feet per day of gas through its deep offshore facility. The project is also benefiting from a World Bank PRG covering $150 million loans.
By Chibisi Ohakah, Abuja