Gas Supply Failure Stalls Private Investment in Nigerian Power Plants

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The failure of Nigeria's Bureau of Public Enterprises (BPE) to sign share purchase agreements with prospective core investors on the sale of up to 10 power plants is the result of the failure to secure gas supplies for the plants.

The power stations were owned by three tiers of government, and built by Niger Delta Power Holding Company of Nigeria (NDPHC). According to BPE, the absence of gas supply agreements also is affecting the sale of one of the successor companies of the now-defunct Power Holding Company of Nigeria. Without securing gas supply, the prospective core investors would not be able to muster the financial resources to pay for the plants.

"Without gas supply agreements, the plants are simply not bankable," said Chigbo Anichebe of BPE. "It will not make sense to the banks to lend money to an investor who is not sure of gas supply in the next two years. It is expected that when they pay, they should start production and selling power--but without gas supply, they cannot do this. That is why gas supply is critical to the transaction."

In November 2013, 66 proposals were received from prospective investors in the plants. In March 2014, the financial bids of 42 prequalifiers were opened. Following this, seven bids were approved, and three were left, pending the resolution of legal issues.

View Project Report - 84600081

For related information, see July 9, 2014, article - Nigeria Continues Power Development, Despite Toxic Conditions, and June 6, 2013, article - Nigeria's 5,000-Megawatt Power Plant Privatization Could Challenge Power Shortages

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