Page 42 - Energize October 2021

VIEWS AND OPINION

Resilience is the mother of all virtues, and the

key to unlocking successful IPP projects

by Nicolas Mathon, Wärtsilä Energy

he successful completion of the Azura Edo 450 MW gas-fired power project in 2016 was hailed
at the time as setting the blueprint for future independent power projects in Nigeria. The
TUS$900-million plant, which gathered 20 international banks and equity financing partners from
more than nine countries, took over six years of project development and construction. It was intended
to provide a pathway for others to enter into similar agreements and unlock financing for power sector
investment. But five years on, no new independent power projects have come to fruition.
Today, grid generating potential is just over 12 GW in Nigeria. More than 40% of the
population lack access to electricity, and those with access suffer regular power cuts and outages.
This is not due to a lack of projects or ambition. With its Vision 30:30:30 the government is
committed to deliver 30 GW of electricity with 30% renewable energy mix by 2030.
As the largest economy in Africa, with huge gas reserves and high solar energy potential,
Nigeria has all the natural resources necessary to meet these targets. However, there are three
major and interconnected challenges to overcome to complete successful IPP projects: the fragile
energy transportation and distribution infrastructures, the ambitious yet incomplete energy
reforms and the need to secure access to long-term international project financing. Nicolas Mathon
The fragility of the existing energy infrastructures and the relative immaturity of the power
sector reforms, combined with security and currency risks, create enormous barriers to entry for The resulting regulatory environment
IPP projects in Nigeria. While there is no simple answer to resolve this, our experience is that a is complex and still evolving today, creating
holistic approach to cover all project parameters is crucial and that demonstrating flexibility and significant uncertainty for project developers.
resilience over the long term is of paramount importance. Despite a strong legal framework and the
many government efforts to implement
An improving, but still complex regulatory environment reforms, project developers and sponsors
Nigeria’s power sector reforms began around ten years ago when the government launched an need to navigate multiple agencies and
ambitious privatisation and unbundling of the vertically integrated historical utility. Power generation government organizations, with sometimes
plants were transferred to privately held generation companies (GENCOs) and the distribution conflicting or unaligned processes.
network went to partially privately owned distribution companies (DISCOs), while the transmission To cope with this uncertainty,
network was kept under government ownership, managed for some time by the private sector. information must be checked and rechecked

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