THE much talked-about Qua Iboe Power Plant (QIPP) which is to be sited in Akwa Ibom State, and which would add about 540 megawatts of electricity to the national grid, may not take off anytime soon because of mounting debts and decaying infrastructure, among other things, Reuters is reporting.
The facility which is owned by Qua Iboe Power Plant Limited (QIPPL) is expected to gulp about $1.1 billion.
QIPPL, whose chairman is the former Governor of the Central Bank of Nigeria and current Emir of Kano, Muhammadu Sanusi, is a joint venture between Black Rhino, an energy infrastructure company, and the Nigerian National Petroleum Corporation (NNPC).
The Reuters report quoted NNPC sources as saying that the QIPP “will not get a green light by the end of 2018 as planned and it was unclear when the deal might close”.
One of the obstacles against the project is the series of challenges being experienced with the Azure-Edo power plant with regards to finance.
Azure Edo plant is Nigeria’s first privately-financed independent power project. It was launched in February 2018.
How the Nigerian power sector operates is that the Nigerian Bulk Electricity Trading Company (NBET) buys power from GENCOs (Generating Companies), such as Azure, and passes it on to DISCOs (Distribution Companies) who then collect money from customers and reimburse NBET.
But the DISCOs have always complained that the amount being paid as tariffs by consumers are too low; hence their inability to pay NBET in full, and consequently NBET cannot pay the GENCOs.
However, the GENCOs are partly reimbursed from an emergency central bank loan fund created to keep the sector afloat, Reuters reports.
Speaking with Reuters in November, Marilyn Amobi, the Head of the NBET, complained: “You don’t have the infrastructure, you don’t have the financial position to do it, you don’t actually have the products, and you don’t have the grid.”
Some other partners in the QIPP project, like the Dangote Group, have pulled out because of the huge debts and the inability of the DISCOs to meet their obligations.
“The huge debt level, and, the fact the IPPs are not making profits, is another reason for prospective investors to be deterred. Further, collecting revenue from the distribution companies is also becoming a mirage,” a top official with Dangote told Reuters on condition of anonymity.
Many agreed that if the Central Bank was not paying part of NBET’s commitment to the GENCOs, the system would have collapsed.
Azura’s experience, according to an expert who also asked not to be named, “was damaging international investors’ view of Nigeria,” the report noted.
“There has to be some understanding of how the sector is going to be able to afford new electrons coming into the grid. (Those involved) do not want QIPP to build a project that could just end up in a default situation,” he said.
Read the full report here.