Azura Power Plant: Presidency, senator to meet, over signed agreement

Issues emanating on agreement reached between the Federal Government and the Azura Power Plant indicating that the Power Purchase Agreement became operational in April 2013 with the execution of the Power Purchase Agreement followed by several other aspects of the deal coming to force soon after, years before the Buhari Administration.

A top Presidency official also confirmed over the weekend that top Federal Government officials would be communicating at some point with the Senate to clarify some of the misconceptions that featured last week when the Chairman of the Senate Committee on Power, PDP Senator Gabriel Suswam, presented a report on ‘Addressing Nigeria’s Power Sector Problems’ for debate at Plenary.

In the course of that, the Senator dwelled on the Azura Power Generating Company and what the transaction was costing the Federal Government.

The Presidency source noted that contrary to speculation in one newspaper, the Vice President and the immediate past Power Minister did not feature in the agreement nor signed any contract as they were not in office when the agreement was signed in 2013.

According to the Presidency source over the weekend “Neither Vice President Osinbajo nor Mr Fashola signed any such agreement. They were not even in office when the Azura (power plant) agreements were signed. Records show that the Power Purchase Agreement or PPA for the transaction in question was signed on April 22, 2013, during the tenure of the then President Goodluck Jonathan.”

It must also be said that the Take or Pay Clause in the Power Purchase Agreement, which obliges the Federal Government to pay for power declared available by the company, whether or not it is taken by the Government-owned Transmission Company, “is fairly standard, especially where, as in this case, the plant is a huge one requiring enormous setup cost and the country is in dire need of the power anyway,” the senior government official explained.

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In fact, one report even said “The Presidential Power Reform Transaction, which was headed by Osibanjo when the deal was struck obligated Nigeria to pay between $30 million and $33 million monthly to Azura for power for powers generated, even if not “dispatched.”

But the presidency official explained that “The agreement in question which was already executed as far back as April 2013 is quite typical in Power Purchase transactions.

“Nobody would build a power plant, which is a very costly and capital intensive venture, and no lender would put money in one unless someone had committed to pay for the power.”

He added that “At any rate, much of the payment goes straight to Nigeria Gas Company, Nigerian National Petroleum Company and other gas suppliers who make the power generation possible.”

It would be recalled that in Nigeria, the company that takes power from electricity Generating Companies is the Nigerian Bulk Electricity Trading Company or NBET for short, which happens to be 100% government-owned.

And the source noted that because of that “the commitment to pay for the power was made by the Nigerian Government in 2013. It is NBET that buys power from generating companies like Azura and sells to distribution companies.

In 2013 when the deal was struck, it clearly appeared to be a good deal for Nigeria, which was desperate for power and feverishly seeking the establishment of power plants.”

On how the matter has now become quite problematic, the government official submitted that “I will imagine that no one quite envisaged the current situation where electricity generating companies are kept idle because when power is produced, the Transmission Company may not be able to wheel the electricity fully for distribution to customers.

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It is no longer news that even when the electric power is made available for distribution, the Distribution Companies (DISCOs) at times reject it because they have failed to improve their networks and to meter their customers.”

He explained further “The fear of the DISCOs is that they might be unable to deliver the power to customers or to collect tariff. On their part, customers are reticent to pay because service is appalling and most of them feel cheated by estimated billing.”

But he assured that payments made to Azura is by no means all for nothing. According to him, “over 80% of Azura’s power is currently being transmitted and distributed, while the rest is being used by the Transmission Company of Nigeria to stabilize the National grid.”

Regarding the report that $1.2B can be pulled by the Azura investors from the country’s Foreign Reserves as claimed at the Senate debate, the official disclosed that “No investor can just pull out $1.2 billion or any amount from Nigeria’s foreign reserve like that.

Yes, there was a Put/Call Agreement signed with Azura on October 22, 2014, whereby Nigeria reserved the option to buy over the assets or the company to give up the assets and seek payment if Azura defaults.

However, the amount to be paid can only be determined when the option is exercised and nobody can simply pull out money from our foreign reserves just like that.”

Concluding the top government official observed that “With the agreement having been signed before the inception of this administration, the questions one may ask are “who profits from claiming that it was done by Osinbajo and Fashola? What is the motive behind this mischievous falsehood?

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And in their desperation to attack these gentlemen, why are they willing to rubbish a company that produces nearly a tenth of our nation’s power as things stand today?

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