Details have emerged on the agreement between the Federal Government and the Azura Power Plant, indicating that the Power Purchase Agreement, PPA, became operational in April 2013 with other aspects of the agreement coming to force years before the present administration.
A Presidency official weekend, also confirmed that senior Federal Government officials would be communicating with the Senate to clarify some of the misconceptions that featured last week when the Chairman of the Senate Committee on Power, Senator Gabriel Suswam, presented a report on ‘Addressing Nigeria’s Power Sector Problems’ for debate at Plenary.
In the course of plenary, the Senators dwelled on the Azura Power Generating Company and what the transaction was costing the Federal Government. According to the source, “Neither Vice President Osinbajo nor Mr. Fashola signed any such agreement.
They were not even in office when the Azura 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 PPA, 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, TCN “is fairly standard, especially where, as in this case, the plant is a huge one requiring enormous set up cost and the country is in dire need of the power anyway,” the senior government official explained. In fact one report 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.”