By Adibe Emenyonu, Jaiyeola Andrews and Chineme Okafor
President Goodluck Jonathan friday said that the completion of all necessary arrangements for the construction of the $1 billion (450 megawatts) Azura Independent Power Plant (IPP) in Edo State was a good testament to the federal government’s conviction in undertaking ongoing reforms in Nigeria’s electricity sector, despite reported odds against it.
He also stated that the “project financed” Greenfield IPP represented a great opportunity for more private sector-led investments in Nigeria’s electricity industry, pledging that government would in this regard, stay committed to its policy in the industry. The Azura-Edo project which is on track to achieve full financial closure by November 2014 is the first of a new wave of project-financed Greenfield IPPs currently being developed in Nigeria.
Being developed by a consortium of local and international investors led by Amaya Capital Limited and American Capital Energy and Infrastructure, Azura-Edo IPP comprises a 450MW open cycle gas turbine power station; a short transmission line connecting the power plant to a local substation and a short underground gas pipeline connecting the power plant to the country’s main gas-supply. It represents the first phase of a 1,500MW power plant facility to be built on the same site.
Accompanied by the Governor of Edo State, Adams Oshiomhole, Ministers of Power and Petroleum Resources, Chinedu Nebo and Diezani Alison-Madueke amongst others, President Jonathan noted before he formally inaugurated construction of the power plant at Ihovbor/Orior Osemwende communities in Edo State that the plant represented the next logical step in the government’s plan for uninterrupted access to electricity in Nigeria.
“I am pleased to join you today on this history making occasion as we witness the ground-breaking of the Azura Edo Power Project. This initiative is a major milestone in our power sector reforms programme and we are happy to associate with Azura as this model of private sector investment in new generation capacity represents the next logical step in our vision for uninterrupted access to power for our people.
“This project is a first in many ways. It is the first fully financed private sector power plant to get to this final stage, under the new framework facilitated by our reform instituted agencies. It is the first power generation project to receive the World Bank Partial Risk Guarantee and Multilateral Investment Guarantee Agency (MIGA) support. It is also the first signal from the global financial industry that the years of work that the federal government has dedicated to the reform of the power sector, in order to attract private sector developers and financing, is finally yielding results,” President Jonathan said.
He further stated: “This 450 megawatts of new generation capacity has attracted almost a billion dollar, mainly in foreign direct investment, into the power sector; comprised of $700 million in construction of the power plant and $300 million in associated gas supply infrastructure.”
He noted that government would continue with its reform of the electricity industry. “We are committed to irreversibly repositioning the Nigerian power sector as a pivot for the attainment of the nation’s developmental targets.
“We are also maintaining our policy push for increased diversification of our energy, expanding investments in large hydro power projects through public-private partnerships and the provision of necessary support to accelerate the exploitation of our coal resources,” he said. Similarly, Oshiomhole in his remarks commended the cooperation of the federal government with the state and project promoters, saying that the key responsibility of government is to advance development amongst its people and society.
Oshiomhole said: “You have shown that this reform is here to stay. The politics of privatising the power sector is as old as 1999 but the private sector are now showing confidence in the reform that you have initiated, therefore, I think it is only right to thank you for the leadership you are providing and the confidence you have restored in the power sector without which no one will bring $1 billion to invest in the sector.
“Each time I had conversation with the promoters, they tell me how much support they get from the federal government. I want to thank you Mr. President. Without your commitment and clear-cut direction, this project would have remained in the brains of the promoters.” Notwithstanding, the financing of the Azura-Edo IPP involves equity and debt from a consortium of local and international financiers. The project also incorporates an additional investment being made by Seplat Petroleum Development Company Plc in new gas processing facilities at its Oben gas plant.
The gas project will as part of Seplat’s joint venture with the Nigerian Petroleum Development Company (NPDC) supply the plant with fuel gas requirements.
Other sponsors that are contributing equity to the project are the Africa Infrastructure Investment Fund 2 (AIIF2), Aldwych International Ltd and Asset Resource Management Company Ltd (ARM).
The Engineering, Procurement and Construction (EPC) contractors for the project are Siemens and Julius Berger Nigeria; with an Operations & Maintenance (O&M) contract in place with the PIC Group, a subsidiary of Marubeni.
Being the first Nigerian power project to benefit from the World Bank’s ‘Partial Risk Guarantee’ structure, specifically created to meet the developing needs of emerging markets world-wide and political risk insurance for equity and commercial debt from the MIGA, also part of the World Bank group, the project’s overall transaction will be underpinned by financial support provided by the federal government through a Put and Call Option Agreement agreed by the Coordinating Minister for the Economy and Minister of Finance Dr Ngozi Okonjo-Iweala.
The arrangement will also complement the Power Purchase Agreement (PPA) that was signed in 2013 between Azura and the Nigerian Bulk Electricity Trading Plc (NBET). The model PPA for Azura was tightly developed with a team from NBET; it is reported that accompanying risks were apportioned equally in the PPA.
Its promoters explained that locating the plant on the outskirts of Benin City gives it the advantage of close proximity to Nigeria’s biggest gas distribution pipeline which makes gas feedstock easily available as well as a unique accessibility to the country’s high voltage transmission network to facilitate the evacuation and distribution of power.
The first phase of the plant is targeted to come on stream in 2017 and is estimated to create over 1,000 jobs during its construction and operation.
One of the promoters is David Ladipo who is the CEO of Azura Edo Power Project.