‘Why Licensees For Independent Power Projects Failed’

Minister of Power, Prof Barth Nnaji

Managing Director of Chevy Chase Limited, Mr. Chukwude Okonjo said majority of the 34 operators licensed by the Federal Government to build Independent Power Plants (IPPs) failed because the authorities did not conduct adequate due diligence to determine their competence.

The Federal Government, through the Nigerian Electricity Regulatory Commission (NERC ) had licensed about 34 IPPs but six years after obtaining the licences, only few of the operators have demonstrated that they have the capacity to execute the projects.
Also a recent verification by NERC showed that some of the licensees could not be traced to the addresses they gave to the regulatory agency.
But Okonjo told THISDAY that both the government and the operators should be blamed for the failure of the licensees to perform according to their operating licenses.

According to him, the government did not provide adequate incentives to encourage private participation in the power sector.
“The problem lies on both sides – I don’t know how much due diligence that was conducted on the operators that were licensed to determine whether they have the capacity. Most of them also have funding problems – they were not able to access funding and this problem is also tied to the fact that the tariff or revenue that will accrue from power generation is too small to encourage people to actually invest. So, some of them were actually waiting to see if the government will revisit the issue of tariff. That is one major problem. The second major problem is the fact that the enabling environment was not just there,” he said.
He however noted that the government has stated putting adequate structures in place to enable the IPPs to thrive, adding that the recent creation of the Bulk Trader in the power industry will boost investment in IPPs.

“In fact, the government is also enhancing the transmission infrastructure to ensure that the power to be generated can be absorbed because even if we are to generate 30,000megawatts, we cannot transmit the power. So, we have to address this transmission problem,” he said.

He advocated for the creation of a buffer fund that will give private operators in the sector a sort of guarantee.
According to him, the buffer fund will assure the operators that that if they generate power and there is problem, there is a guarantee to take care of the problem.

“I think that is what the Bulk Trader is going to do. Again, there is the issue of Power Purchase Agreements (PPAs). If you don’t have proper PPA, which is your off-take agreement from the beginning, how do you expect that the financier will take u very seriously? They will not take you seriously until they know how they will be able to recoup their money if they give you the loan,” he added.