Why there has not been another Azura type of project
It’s more than two years that the financial closure of Azura has been concluded and Nigerians have not seen more Azura type of project.
The process for the financial closure of Azura took about seven years to be concluded while the real work on the phase one of the projects started in 2016. But since the conclusion of the financial process there has not been another of such project coming up anywhere in the country.
The long and tortuous process it took the financial closure to be concluded is an indication of how difficult it is to structure large projects in the country. This is the first project financed independent Power project (IPP) with a template that other investor’s can easily use.
Industry experts believe that other future projects could benefit from the template immediately after the financial closure was concluded.
Unfortunately the first Phase of Azura has been built and completed by the German energy giant, Siemens and handed over to Azura West Africa but we are yet see other investors coming forward with projects they want to execute using the Azura template.
The only projects that are currently making use of the template of Azura financial mechanism are the 14 solar projects which have to key into the put call option agreement (PCOA), based on this, they have signed Power Purchase Agreements (PPA).
Observers have attributed the lack of investors’ interest at the moment in putting up large scale projects like Azura to perhaps the obvious fundamental problems associated with the power industry.
One of these fundamental issues is that the electricity market is basically flawed. The market is completely viewed as not functioning, and anybody building large scale power will require the contingent liability contained in the PCOA.
Investors in the power market would want to run for 20 or 30 years but the market is not functioning. The Nigerian Bulk Electricity Trader (NBET) is the primary consumer and paying generating companies would depend on what NBET is able to collect from the distribution companies.
The value chain of electricity is also defective. The electricity market is something that is built and marketed for consumers to buy. Power must be sold from the first day the concept was conceived.
If the ultimate consumers are not paying for electricity then, you cannot have a large scale electricity market in the country. Also tariff has to be cost reflective in order to allow more players to come into the power industry.
Of what use is having 20,000 megawatts and people are not paying for it or of what use is the power when it is not getting to the people and if supply is inconsistent to consumers? Of course, it would not be of any value as people would not be able to plan for its usage. The service must improve to enable developers to come into the industry.
Nigeria must also realize that it is not all about building power plants but about ensuring that the product gets to the end-users. Gas has to be paid for from consumers to generation and everybody has to be in line in order to get another Azura.
Industry observers have said that building large scale power projects in Nigeria is not viable, after all most of the independent power plants built by the federal government are not functioning because the electricity value chain is not functioning. Because of this, developers now go for captive power plants of about 50mw. As a matter of fact, developers are going for what could be describe as modular and breaking into smaller parts.
OLUSOLA BELLO