Economy
FORTY percent of the $30 million paid monthly to the Azura-Edo Power Plant for 452Mw energy and capacity charges returns to the Federal Government, through the Central Bank of Nigeria (CBN), Nigerian Gas Company and the Nigerian Petroleum Development Company (NPDC).
About five power plants have their Power Purchase Agreements with the Nigerian Bulk Electricity Trading Company (NBET).
Speaking with reporters during a tour of its 461Mw plant in Ahor, Benin, Edo State, the Managing Director, Azura Power West Africa Limited, Mr. Edu Okeke, explained that it is the nature of the 20-year take or pay gas agreement that has necessitated the payment of the $30million.
The House Committee on Power had recently summoned the company over the collection that the government must pay for the capacity whether it is delivered or not.
Okeke explained: “There is take or pay. What does take or pay mean? For us to generate electricity, we have to have constant gas. Now for you to make sure you have gas, there is take or pay. That is how it is structured in every project of this nature.
“Normally, that take or pay is not the quantity of gas you use. It is likely below it. And if you are generating power, that take or pay is immaterial.’’
Now, Azura is not the only company that has take or pay. Every plant in Nigeria that has effective PPA has take or pay. Afam, Okpai, Omotosho, Olorunsogo, they all have it.”
He added: “The oil companies don’t actually call it take or pay. This is because the oil companies own the plants and also supply the gas.”
The managing director said the unused gas from the contract had never been lost as the NPDC, and that a government company, is always in custody of it.
He recalled that for the two years the Take or Pay lasted, it was only a name that it was Azura that benefited the undelivered gas because it came through it but eventually the supplier, NPDC, which is the senior partner in a Joint venture with Seplat gained it.
Okeke said “Again, when people talk about this take or pay, what they don’t realize is that if Nigeria pays for that gas, they even have two year. That money that was paid in 2018 and 2019, Nigeria used the gas. It is not that if you don’t use this gas in two years, you lose it.
” But they won’t tell you that. The gas was finally used. That is not even the interesting part of it. That money even it goes through Azura, the contract goes through Azura. Who supplies the gas that bears that take or pay? Seplat and NPDC Joint Venture.
“NPDC is the senior partner. So that money is from government purse. But people won’t tell you that NPDC is actually NPDC not Azura. So, that is the notion. Since 2020, there has not been take or pay. They have corrected it.”
On the payment of $30 million monthly, said there is no denying that the firm earns it although it could be lesser in some months.
He said about $10million of the payment is for gas which goes to Seplat and NPDC.
According to him, the CBN is the highest of all the 16 lenders of Azura loan.
“His words: “What they haven’t told you about that $30million is that the day they pay us that $30million, 40 percent goes back to government immediately.
“So when people talk about the Azura, We signed the contract is a value chain, you pay us we’ll make sure we settle everybody… which goes the next day to Seplat and NPDC. So NPDC was about 60% of that. So NPDC is $6 million. About $4 million is NGC.
“Which is the biggest lender to Azura? There are 16 lenders, you know, the biggest lender ? That is the CBN through the Bank of Industry. But they don’t tell you.”
Asked whether the money is paid in dollars, he admitted and however explained that they are of two parts: naira and dollar components.
The Azura boss said “Because we estimated the cost of building the plant and everything. There is the naira portion, there is the dollar portion. So, we raise forex to match the forex cost and naira the local. That is why the CBN cost is in naira.”
Okeke noted that should Azura attempt to produce energy at its full capacity, there could be system collapse.
According to him, any switch off of production is technically due to instructions on grid challenge from the Transmission Company of Nigeria.
Okeke however said the switch off from Azura does not affect other power plants from operating.
He added that “the frequency should be 50Hz and it shouldn’t be changing much. But at Azura we are actually bearing a higher burden than we should, unfortunately.”
The Managing Director said “The plant all year now is producing the capacity we contracted for. I have my 452Mw capacity available at all time to be used by the grid. If I am in top PFI, I will be blasting 452Mw but if I do it TCN will lose the grid. The frequency will jump till it gets to the time every turbine will start tripping till they lose the grid.
“They trust us because of our mechanism because they trust Azura to do it. Some plants have it but they don’t turn it on. This is also part of the problem we have in the sector because some plants do have capacity charge. Because they don’t get capacity charge, it is not on their interest for their turbines to if it can produce 450 to produce 430 because they are loosing money. The unfortunate thing is that we don’t have SCADA in Nigeria. SCADA is a means for TCN to monitor the network.”
He revealed that the policy direction of the next administration will determine the commencement of the phase two of the project.
“We are doing the feasibility study for phase two. We have to look at the policy direction,” he said.
He was grateful to the present administration for signing the legal opinion for the $900million phase one project, which commenced in 2010.
-The Nation
KN
Tags: Azura-Edo Power Plant Edu Okeke NPDC
