March 26, 2012

FG, GE sign deal on $10bn power projects

LAGOS—The Federal Government and GE Energy, weekend, signed a Memorandum of Understanding, MoU, for a $10 billion to be invested in various power plants with combined capacity of 10,000 Megawatts, MW.

Minister of Power, Prof. Barth Nnaji, insisted that the cost had not been padded or inflated in any way, as globally, it costs $100 million to generate 1,000MW of electricity.

Some sections of the media had reported that GE was constructing a 10,000MW plant in Nigeria.

But, at the agreement signing at the Nigerian High Commission in London, Prof. Nnaji, told journalists that GE only agreed to take up at least 15 per cent equity in each of the plants to be constructed.

He noted that GE’s support was the highest expression of investment support for government’s target to achieve 40,000MW generation capacity by 2020.

He said: “To have a company willing to work with us on delivering 10,000MW is a show of confidence in Mr President’s vision. Even if the equity is one per cent, it is still significant because it will take us somewhere. And, with 15 per cent, Federal Government will provide the balance.”

He clarified that government will not be involved in any of the projects, but will provide guarantees for the private sector participants.

According to him, “The local content will be huge  because GE and any other foreign investor must have local partners.”

Previous agreements

He explained that what government and GE had signed after a meeting with President Goodluck Jonathan in Abuja, was a series of general agreements for support in various sectors of the economy including power, transportation especially rail, and health.

“What we are doing is the culmination of a series of work done, some behind-the-scenes, and some in the open. With the meeting between President Jonathan and the Chairman of GE last month in Abuja, there was a narrowing of areas of focus for the country and GE to collaborate on specific areas of focus.

“Accordingly, GE developed MoUs specific to the various sectors, and today, the MoU we are signing relates to power alone.”

Agreeing that $10 billion was very ambitious in the face of cash crunch at the international capital market, Nnaji said with GE’s cash and government’s bank guarantees, the projects will become more bankable, as investors can approach financial institutions to raise funds.

He noted that the relationship between the Nigerian government and GE was a long-term one, as the energy company has moved from just being a supplier of power equipments in Nigeria, to  an equity investor.