A Review of the Nigerian Energy Industry

Nigeria signs new deal with independent power producers

03 September 2012, Sweetcrude, ABUJA – NIGERIA’S Federal Government has signed a new power purchase agreement with the Independent Power Producers, IPP, aimed at stabilising power supply in the country.

Officials say they expect the new deal to be implemented in the next six months.

Mr. Okwudili Ojukwu Enendu, Special Assistant to the Minister of Finance said the Power Purchase Agreement, PPAs, which determines commercial viability, is at the heart of investment in the energy sector.

The government through the Minister of Finance also said it was now ready to meet its obligations to the labour unions.

He said, “The electricity workers union has been agitating for the payment of their monetization arrears and severance package, causing hitches in the reform process. The appropriations to clear these outstanding payments were contained in the supplementary budget recently passed by the National Assembly.

“Besides clearing the payments, the ministry was setting up a Sovereign Risk Management unit which will work out an appropriate guarantee for the single buyer of the power to be produced by the IPPs.

“The single buyer for privately generated power is a statutory entity created by the Electric Power Sector Reform Act 2005, for the bulk procurement of power from the generating companies and the bulk sale of power to the distribution companies. The IPPs want to ensure that the single buyer is a credit-worthy entity, which in turn makes them (the IPPs) more bankable.

Enendu stated that the timetable agreed that the government’s side shall present a term sheet that will contain 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,” he added.

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