Azura Defers 270MW Expansion Plan over Uncertainty in Power Market

Azura-Edo Independent Power Plant (IPP) has shelved its plan to expand its 461 megawatts (MW) capacity power generation plant in Benin area of Edo state by an additional 270MW, due to lingering uncertainties in Nigeria’s electricity market, THISDAY learnt.

Speaking in an exclusive interview with THISDAY, the Managing Director of the IPP, Mr. Edu Okeke, said the plan to expand the Genco’s capacity would have gone on save for indications that it could be uneconomical to go ahead with the project.

Okeke, said instead, the IPP’s parent company opted to invest in other energy jurisdiction with relative market stability. He explained the devaluation of Nigeria’s currency and uneconomical electricity price added to make the country’s electricity market tough for operators.

Azura, had a year ago achieved a remarkable feat with its completion of the 461MW IPP ahead of its planned delivery date. Electricity from the IPP has since been deployed to Nigeria’s national grid, however, the shelved 270MW would have added to Nigeria’s generation capacity.

“From our perspective, the biggest change in the market actually happened several years ago when the naira suffered a sharp devaluation at the same time as the government maintained the old price cap on electricity tariffs.

“As a result, the hard currency value of the Discos’ receipts fell precipitously and the sector as a whole became insolvent, pending future price deregulation and, or market restructuring. This market stagnation did not directly affect our existing plant - the 461MW Azura-Edo IPP, but it did have a serious impact on our capital allocation decisions vis-à-vis new investments,” said Okeke.

He added: “For example, our original plan was to keep the construction crew on site after the completion of the Azura-Edo IPP and commence work on the second phase of the plant, which would have added another 270MW to the grid.

“But, at the beginning of last year, as we began commissioning the Azura-Edo IPP, we decided that it would be more prudent to hold back on new investments in Nigerian power capacity until we could see a clear regulatory and political pathway back to sector-wide commercial viability.

“Our parent company, therefore, accelerated its investments in base load power generation capacity outside of Nigeria. But our first love was, and remains, Nigeria and in the medium to long term we believe the growth in Nigeria’s electricity sector will outstrip that of any country in the world, with the possible exception of China.”

Speaking further on the market’s challenges, Okeke

stated: “The reality is that the current tariff for the sector is far too low to cover the costs of the whole value chain.

“This has necessitated the government stepping in through the CBN (Central Bank of Nigeria) to provide debt facilities to enable NBET (Nigerian Bulk Electricity Trading) to settle the invoices of the generating companies. But, this is not sustainable in the long run. Government should, as matter of urgency, work through the regulator, NERC, to bring the tariff to a level where the market is self-sustaining. That’s the only way we can have a functional market.”