Nigeria nears deal for private power producers

By Nick Tattersall

LAGOS (Reuters) - Nigeria is close to agreeing a framework to make private power generation for the national grid commercially viable, potentially unlocking billions of dollars of investment and helping end chronic power shortages.

Finance Minister Olusegun Aganga said a presidential task force had met with independent power producers in the capital Abuja on Friday and had agreed to establish a new power purchase agreement within six weeks.

The aim of the agreement is to guarantee that independent power producers (IPPs) will be able to sell power to a credit-worthy single off-taker, which will sell electricity on to distribution companies and in turn repay the IPPs.

The current intermediary, the Power Holding Company of Nigeria (PHCN), is not regarded as a credit-worthy buyer of power partly because it is failing to collect its own bills efficiently from consumers and partly because it is selling power at government-subsidised rather than market rates.

That means private companies wanting to build power plants in Nigeria are unable to find the funding to do so because they cannot guarantee that PHCN will have the capacity to repay them.

"The IPPs want to ensure that the single buyer is a credit-worthy entity, which in turn makes them more bankable," Aganga's office said in a statement.

"The timetable agreed at the meeting stipulates that the government side shall present ... key terms and conditions for the PPA between the single buyer and the IPPs. The stakeholders will then negotiate and perfect the term sheet to produce a power purchase agreement for signing in six weeks."

Nigeria is home to Africa's biggest oil and gas industry yet is plagued by chronic power shortages, leaving its 140 million people without reliable mains electricity, and businesses and wealthy individuals reliant on expensive diesel generators.