The Azura power plant, an independent power project located in Edo State, came on the scene when Nigeria was desperately in search of ways to raise the level of electricity generation in the country. Its entry raised the hope of a nation where poor power supply had become a great constraint on the economy. At that time, the country’s power supply was put at about 4,000MW, and the populace was reeling from the impact of the deficiency.
Construction of the project commenced in 2016 and was completed in April 2018. Operations began in May, 2019.
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However, years after it commenced operations, the hope it held for the country seems to have been dashed. In its place what the country is getting is tons of excuses why the plant cannot operate at the expected minimum level of power supply. Besides, revelations have emerged that the agreement between the Nigerian government and the owners of the plant contained in it a clause that obligates the country to dole out between $30m and $33m monthly to the company, whether or not the country takes power from it.
The conditions prevalent in the nation’s power at the time perhaps explain the hasty provision in the agreement. At that time, the Azura plant’s initial expected output of 450MW was estimated to add about 10% of the nation’s power output.
Azura was the first Nigerian power project to benefit from the World Bank’s Partial Risk Guarantee structure, created to meet the developing needs of emerging markets worldwide, and political risk insurance for equity and commercial debt from the Multilateral Investment Guarantee Agency, a member of the World Bank Group.
The parties that signed this guarantee were Azura Power, the World Bank, the Federal Ministry of Finance, and the Nigerian Bulk Electricity Trading (NBET) Plc.
The owners of the power company are Amaya Capital, and American Capital Energy & Infrastructure.
Financing for the project included $220 million of equity and another $530 million of debt, which were provided by a consortium of local and international financial institutions.
The overall transaction was strengthened by financial support provided by the Nigerian government through a Put and Call Option Agreement. Under the PCOA, Nigeria is under obligation to pay between $30 million and $33 million monthly to Azura for power generated, whether the power is transmitted or not, through the national grid by the Transmission Company of Nigeria.
While the initial power output of the plant was set at 450MW, the target plant capacity was 1,500MW, a milestone that was expected to be reached about five years from the inception of the plant.
Unfortunately, investigations into the activities of this power plant have shown, quite to the consternation of Nigerians, that the plant, far from being a solution to Nigeria’s power problem, is actually a drain on the nation’s meagre resources. Members of the Finance Committee of the House of Representatives, who are investigating the planned sale of power assets under the National Integrated Power Project, have discovered that for all the period they have examined the activities of Azura plant, there was no month in which it generated up to 450MW. Despite this, the committee members noted that the PCOA subsists, with the implication that Nigeria has to make the monthly payment to the power company.
Daily Trust condemns this horrendous provision in the power agreement in its entirety. Just like the committee members have done, we ask why this special provision had to be made for this power plant. It is true that the country was and is still in desperate need of adequate power supply, but a contract that drains the country of scarce resources is definitely not the way to go.
In any case, even if the provision of a PCOA was absolutely necessary, in the sense that it was needed to help the investor to sell off the project at a pre-determined price, what was the justification for putting it at such a huge amount per month?
Surprisingly, none of the senior officials who have appeared before the committee has been able to provide an explanation as to why the plant is unable to generate the quantum of power agreed upon for the controversial payment to be made.
This newspaper, hereby, calls for a thorough investigation into the project. The Committee of the House has alleged that the agreement was signed on behalf of the government by just three persons. If so, they should be made to provide answers to several questions.
There should be sanctions on those who signed the agreement. Such sanctions should also apply to the lawyers who contrived, designed, or advised the country to sign this kind of agreement.
This incident shows that Nigeria has not learnt any lessons from its experience in the P&ID saga, which was created by an agreement in which a failed music producer was supposedly awarded a contract to build a gas processing plant.
Nigeria has lost enough money through these contrivances and the time has come for them to end. The amount being lost in this present case could have been used to beef up the country’s infrastructure, even in the same power sector.
