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FG seeks $3.4billion foreign loan for power projects

By on April 23, 2013

The Federal Government is looking beyond Nigerian banks to raise $3.4bn needed to fund power projects in the country because of high interest rates being charged on loans by local banks.

The Chairman, Presidential Task Force on Power, Mr. Beks Dagogo-Jack, said Nigerian banks had not done enough in terms of understanding how the ongoing reforms in the power sector worked.

He spoke with journalists on the sidelines of the Presidential Power Reform Transaction signing ceremony in Abuja on Monday.

According to him, the international financial institutions that will fund the Transmission Company of Nigeria’s projects are willing to provide the capital at competitive interest rates.

Dagogo-Jack said, “The banks and institutions mentioned by the Minister of Power are coming with interest rates that are very low. This is different from the over 20 per cent rates that our own banks give. There are also other issues, which banks in Nigeria do not understand about the power sector and they need to take time to know these issues.

“If Nigerian banks want to compete, they should compete on all fronts. And I think this is something, which the Power minister and stakeholders in the banking sector should sit down together and discuss.”

Dagogo-Jack’s opinion was prompted by the Chairman, TCN, Mr. Tony Elumelu, who called on the Federal Government to start considering Nigerian banks as sources of financing power projects.

Elumelu, a former managing director of United Bank for Africa Plc, while speaking on behalf of the successful bidders for the power generating companies carved out of the Power Holding Company of Nigeria, said, “The Power minister made mention of banks that would fund the transmission grid project but did not mention any Nigerian bank.

“I think we should consider Nigerian banks in raising the over $3bn for this project as banks in the country have come of age.”

The Minister of Power, Prof. Chinedu Nebo, had earlier said a total capital outlay of $3.4bn was required up to 2016 to bring the country’s transmission grid to evacuate all generated power.

“Government is working out the funding of TCN’s long-term expansion plan from a mix, which will include the Transmission Development Fund, International Development Banks and multinational agencies,” he said.

Nebo observed that the massive increase in generation underpinned the need for a robust transmission grid, stressing that currently, the grid remained a weak link with a wheeling capacity of 4,800 megawatts.

“With government’s objective to achieve 10,000MW in 2014 and 20,000MW in 2016, the urgent need to expand our transmission capability to evacuate the projected additions becomes imminent,” he said.

The minister said installed available generation capacity had risen to 6,000MW, while generation capability had increased to 5,228MW with peak generation at slightly above 4,500MW.

“We expect to add extra generation capacity of about 2,200MW from NIPP projects; IPPs, 292MW; and the Federal Government of Nigeria’s legacy assets, 514MW, before the end of 2013,” he added.

Bidders who successfully paid the 25 per cent of their bid prices for five generating companies and 10 distribution companies were given payment certificate for the respective amounts they paid.

The execution of the World Bank Partial-Risk Guarantee Support Agreement for gas supply to the Egbin Power Plant was also signed between the firm and Chevron Nigeria Limited.

Stakeholders had observed that the absence of transaction agreements had affected the supply of gas to power plants, leading to power cuts.

Other power transaction agreements were equally signed at the event.

Meanwhile, investors in the generation and distribution companies have expressed worries over the lingering feud between the Federal Government and labour unions in the power sector.

Though Nebo gave an assurance that all labour-related issues would be resolved before the end of June, the investors said the whole privatisation exercise might suffer serious setback if the government ignored the unions.

Elumelu, who spoke on behalf of the investors said, “Labour issues should be addressed if we must make the desired progress.

“Some of us are ready to pay the balance of 75 per cent to take over the gencos, but we will want labour matters to be adequately settled before doing that.”