Offshore gas facility:Power reform: ‘World Bank’s guarantee is no subsidy’

Clara Nwachukwu

The Presidency has explained that the Partial Risk Guarantee, PRG, being offered by the World Bank, for power financing is not another type of subsidy, but a facility that will ensure continued investment in the power sector, particularly with regard to generation in line with the ongoing reform of the power sector.

Offshore gas facility

Explaining what the guarantee is all about at a one-day workshop for energy journalists in Lagos on Thursday, a member of the Presidential Task Force on Power, Mr Eyo Ekpo, said the facility will enhance access to credit for investors in the sector.

Ekpo said that the World Bank, in the event that the bulk buyers were unable to pay for power generated, the Bank under the PRG will pay on their behalf to be reimbursed at a future date.

He said, the fact that the Federal Government would pay back the sum owed the Bank in the event that the bulk buyers could not pay, does not mean that it is a subsidy, because according to him, “the bulk traders or distribution companies will make a commitment that they must pay every penny utilised on their behalf.”

This, he said further is because the power middlemen will have an obligation imposed on them to help them reduce their losses, adding that the World Bank’s guarantee is a last resort for the power middlemen in view of the poor revenue collection by the distribution companies.

Epko also note that the guarantee only applies to the existing independent power plants to improve on their current capacities, adding that under the reforms, the bulk purchaser in expected to help the distribution companies to improve on their revenue collection.

Under the Power Sector Reform, a Nigerian Bulk Electricity Trading Company Plc was recently incorporated. The government_owned bulk buyer “will carry out contract management and bulk trading on behalf of distribution companies (until the industry develops settlement, accounting, managerial and governance systems required for successful bilateral contracting).”

With regard to the exclusion of the development of alternative energy power like solar, wind and a host of others to complement the energy power mix in the Roadmap on Power Sector Reform that was launched by President Goodluck Jonathan on August 26, Ekpo said that for now investment in this sector is strictly the investors business decision.

He argued that what the reform wants to achieve is the most cost-effective power to the people, adding that gas-to-power or thermal power remains the cheapest form in the energy mix, and that Nigeria, with its abundant gas resources is trying to maximise the economies of scale offered by its gas resource.

This, he said, is part of the reasons the Presidency is organising a retreat for power investors both within and outside the country on October 14, with a view to highlighting all the potential there are in Nigeria’s power sector.

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