A Review of the Nigerian Energy Industry

NERC licenses firm to build N1.2tn power plants

16 February 015, Abuja – The Nigerian Electricity Regulatory Commission has issued on-grid generation licences to Zuma Energy Nigeria Limited to construct four units of 300 megawatts coal-to-power plants in Kogi State at a total cost of $5bn (N1.2tn).

Dr. Sam Amadi, NERC
Dr. Sam Amadi

According to NERC, the firm was initially issued an on-grid licence on September 20, 2011 to enable it to operate a 1,200MW independent power plant.

The Chairman, NERC, Dr. Sam Amadi, however, said that on July 31, 2014, the company submitted an application for an amendment to enable it to assign the licence to four different Special Purpose Vehicles to build a 300MW plant each.

“Following the completion of the application, the commission passed a resolution dated November 11, 2014 authorising the company to publish the statutory notices in line with the mandatory provisions of Section 70(2) of the EPSR Act. The commission on December 18, 2014 approved the recommendation to amend and assign licence No. NERC/LC/066 to the plants,” Amadi said.

The Chief Executive Officer, Zuma Energy Nigeria Limited, Dr. Innocent Ezuma, said it would cost the firm about $5bn to build the four plants.

“By the reason of receiving these licences, we must hit the ground running. Very soon, we will see the approval of a tariff for the four SPVs that will enable us execute the Power Purchase Agreements and by the end of this year, the ground-breaking of the first unit of the Itobe 1 coal-to-power 300MW plant in Kogi State will be done,” he said.

On why the 1,200MW plants will be constructed in segments of 300MW each, Ezuma said, “Basically, it is for ease of implementation. As you may understand, to build one megawatt coal power station, you will require about $3m. So, if you are building 1,200MW, you will require approximately $5bn, and this is a huge amount of money for any investor at this time when Nigeria is just beginning to tap into its coal resources.

“With the sub-division of these licences, it means that we can embark on two projects simultaneously at a time. The timeline for the construction of a coal-fired power plant is from two-and-half to three-and-half years.”

Ezuma said the equity for the plant had been over-subscribed by investors, stressing that the firm’s financial partners were aware of the huge capital outlay needed for the project.

He said, “Power plants are not funded solely. The development phase of a power plant is always funded by sponsors. But as I speak to you, Zuma Energy has invested huge sums of money in developing this plant up to this level solely.

“However, at the time of financial close, there will be other strategic equity investors and of course other financiers from the banking sector that will fund part of the project. But the equity of the project has been oversubscribed.”

He also explained that the technology adopted for the plants were environmentally-friendly as recommended by the World Bank.

“Today, the latest technology in coal management is environmentally-friendly. The technology we are adopting does not have smoke and it does not have fire. And the emission standard is way below the World Bank standard,” he added.

– Punch

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