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Transcorp suspends plan to build $1bn power plant

By on August 6, 2016

Transnational Corporation of Nigeria Plc has suspended plans to build one of the nation’s biggest power plants amid gas shortage and a downturn in the nation’s economy that is hindering efforts to raise funds for the project.

The company in 2014 said it would raise $1bn to build a 1,000-megawatt gas-fired facility. Two years earlier, it bought the Ughelli plant in Delta State from the Federal Government and more than doubled its output to 700MW.

Attacks on pipelines by militant groups have cut gas supplies to power stations in recent times and forced millions of Nigerians to either do without electricity or buy fuel for their generators.

Also, a dollar shortage blamed on a 15-month currency peg removed on June 20 has raised import prices and inflation, with the economy contracting in the first quarter.

The Chief Executive Officer, Transcorp, Emmanuel Nnorom, was quoted by Bloomberg to have said in an interview, “How do you make the investments when you are generating far below your current capacity due to gas problems?”

Transcorp, whose interests range from agriculture to energy, is owed over N20bn by the government-owned Nigerian Bulk Electricity Trading Plc for power generated and not yet paid for, he said.

“My number one problem will be gas, owing to much capacity available that is not put to use,” The Chief Executive Officer, Transcorp Power Limited, a subsidiary of Transcorp, Adeoye Fadeyibi, was also quoted to have said in the same interview.

Ughelli’s generation capacity slumped to 70MW this year before rising to 300MW, or less than half of what it is capable of generating, he said.

Transcorp is in discussions with some foreign companies to diversify its sources of electricity to include solar, which will enable it to lower constraints from gas supplies, Fadeyibi said.

The Federal Ministry of Power, Works and Housing signed agreements with 14 solar electricity generating companies last month to supply 1,125MW to the national grid.

While Transcorp is not part of the agreement, it is looking at deals that will be competitive based on its projections, Nnorom said.

The partial sale of 17 former government-owned power utilities three years ago was meant to attract investments needed to expand the grid and end daily blackouts. Yet, private investors have been hampered by increasing debt owed by the government and the inability to obtain foreign exchange.

The scarcity of gas has reduced the nation’s power generation to less than half of the installed capacity of 6,000MW, the lowest in a decade, even as the country holds the continent’s largest reserves of the fuel.

The power shortage has contributed to the contraction of the economy, which may shrink by 1.8 per cent this year, according to the International Monetary Fund.

 

[Punch]