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Investors to sink $8bn into new power projects in Nigeria
Investors are working out financing arrangements to sink $8bn to new
power projects capable of generating some 8,000 MW of electricity -- part of
a wider plan to address perennial supply.
The National Electricity Regulatory Commission (NERC) has also disclosed
it is working on fresh incentives to attract investment in the
development and construction of independent power plants. Dr Ransome
Owan, Chairman of the NERC made the disclosure recently, explaining that
based on the number of licenses issued to investors, 8,000 MW is
expected to be generated.
“Based on the number of licenses issued so far, the quantum of
electricity to be generated is about 8,000 MW of power. By our
standards, every 1,000 MW costs a $ 1 bn. So the 8,000 MW is equivalent
to $8bn worth of investment.”
“If you use the exchange rate of N 130 to $ 1, it would amount to over N
1.04tn so that is the investments that Nigerian companies are willing to
put up to help us solve the power problems.”
He pointed out that the Commission is currently reviewing new
applications which relate to alternative sources of power supply such as
coal, wind and solar energy.
“On Friday, an application came in for a coal power plant in Enugu. So
we are having expression of interests in alternative power, which
includes wind power and solar energy. Although the latter have not
formally come to us but we believe in the near future, our energy mix
will be improved. I believe we need to improve on our energy need other
than hydro and gas to coal power, wind power and other renewable such as
solar to improve our energy mix and energy security.”
Dr Owan, an American trained technocrat of no mean repute also disclosed
that in line with plans to attract more investment into the sector, the
Commission is considering tax holiday of sort as well as floating a
utility bond on the stock market which investors could have access to at
very low interest rates.
“We are doing a number of things to support our IPPs. One of them is, we
are coming up with a package of incentives, which includes tax holidays,
customs, importation of spare parts, even intellectual property that
they would need, techniques, which would help them reduce their tax
burden and give them some tax breaks. The second area that we are
working on is to try and come up with a power utility bond, that we can
introduce into the capital market that would allow the Nigerian
population and institutional investors such as PENCOM and estate
managers and other hedge funds managers and use them as utility bonds
and help us provide more money for the sector.”
Dr Owan noted that power was a capital-intensive industry and that
investors were finding it difficult accessing funds from financial
institutions to execute power projects, adding however, that with such
utility bonds, which would be backed by the Federal Government, it would
be easier to attract more investments and attain set national power
goals.
“If power has debt equity involved, there is plenty of debts, but there
is lack of equity, and if we trade the power utility bond and it is
backed by the Federal Government, we can use that as an instrument to
leverage and get private investors and PENCOM to buy these bonds and
give us the money in naira, and our IPPs can access that money at a
lower interest rate that is currently possible, and that would help to
reduce transaction cost,” he said.
Dr Owan disclosed that the Commission has opened discussions with sister
government agencies including the Security and Exchange Commission
(SEC), the Central Bank of Nigeria (CBN), the Ministry of Finance, the
Federal Inland Revenue Services (FIRS) and the National Assembly.
He said these are stakeholders which have to support the plans of the
Commission if it was to succeed in attracting investment to the power
sector within the shortest possible time.
The Chairman explained that no percentage of tax relief has been
determined yet, noting that this has to be done through negotiations.
“We do not have a percentage amount yet because it is subject to
negotiation. Any tax holiday that is less money to the treasury, so
those who have the responsibility like the Finance Ministry and FIRS
must have to agree to make it into a law. But we are going to use a
benchmark of what other industry people are enjoying, and ask for
similar treatment.”
