Uche Usim, Abuja
Plans to build a 540 megawatt Qua Iboe Power Plant (QIPP) in Kano received a boost yesterday as the Federal government okayed the project as part of the state’s re-industrialisation initiative.
The Minister of Finance, Mrs Zainab Shamsuna Ahmed conveyed the Federal government’s nod on Tuesday to the Kano State governor, Dr Abdullahi Umar Ganduje and his team in Abuja when they paid her a courtesy visit.
The minister said: “Let me assure you that it is not an issue of this project will take place but when, because we have a very huge power gap and it is more in the northern part than in the South. And when we see an opportunity like this, we have the responsibility to ensure it comes into fruition.
“We are looking at this as a pilot project as this will help mitigate Federal government’s plan. The ability to provide a counter guarantee will go a long way to reducing the burden on the Federal government,” she said.
The minister added that the power project would boost the industrialisation agenda of the state, while providing the platform for employment generation.
“I want to make a commitment that the Ministry of Finance will put up it best efforts to make it a success. I hope at the end of the day it will be on record that during my tenure I contributed to the industrialisation of Kano,” Ahmed added.
Earlier, Governor Ganduje in his opening remarks said he had been fully briefed of the meeting between the Ministry of Finance and the board of BlackRhino Group, which was chaired by the Emir of Kano, His Highness, Muhammad Sanusi II, assured that the Kano State government would provide protection against the financial risk of the power project.
The governor noted that the project worth billions of dollars and if completed would further the industrialisation drive of the state.
He said: “We wish to express the strong interest of Kano State government in purchasing the electricity generated by QIPP and providing protection to your ministry against financial risk. The Kano State government is committed to industrialising Kano as a critical component of its development plans. The shortage of electricity has been the principal factor hindering progress in this area.
“To this end, we welcome the opportunity offered to us by QIPP to have guaranteed stable supply of 540MW of electricity. We trust this will support the industrialisation of Kano and perhaps even neighbouring states (like Kaduna, Jigawa and Katsina) which have significant and critical unmet requirements for electricity.
“We shall set up Kano State Bulk Electricity Trading Company (KBET) which will buy all the power generated by QIPP from NBET in the form of a back-to-back Power Purchase Agreement (PPA). The Kano State government will use the period during which QIPP is being developed to ensure the establishment of eligible customers in the form of industries as part of its Industrial plan and, if necessary, agree to supply neighbouring states which identify eligible customers. KBET will be assuming the risk of finding customers for this power and collecting tariffs.
“We request you to kindly approve the request made by QIPP as the FG will not be assuming any risks before financial close. On our part, we are ready to start the process of setting up KBET through an Act of the State House of Assembly and once this is done, we will be in a position to provide the guarantee backing its obligations. We will also set up a steering committee and start engaging investors now that we can give them assurances of available electricity once QIPP comes on stream in three years. We consider this a win-win situation all round.
“It is our hope that you will expedite these approvals based on the understanding outlined in this letter. We are working closely with His Highness, the Emir of Kano in his capacity as Chairman of BlackRhino Group (the promoters of QIPP) and Chairman of the Kano State Investments Advisory Council to use this project to return Kano to its status as the industrial nerve-centre not just of northern Nigeria but the Sahel. We count on your support and cooperation to make a success of these truly transformational plans.
The governor had in a proposal to the Minister of Finance dated January 7, 2019, highlighted the understanding reached with other partners in the project. According him QIPP has secured firm commitment of equity funding of $350 million from Globeleq and project Finance of $850 million from IFC, OPiC and AfDB for the construction of a thermal power plant located in Qua Iboe in Akwa Ibom State with a capacity of 540MW.
The letter reads in part: “This funding is conditional upon the guarantee of your ministry for a power purchase agreement (PPA) to be executed between QIPP and the Nigeria Bulk Electricity Trading Company (NBET) and further backed by a Partial Risk Guarantee issued by the World Bank.
“Exxon-Mobil is also prepared to commit about $500 million to build a gas pipeline from its deep off-shore platforms to supply the gas needed for QIPP to operate, thus bringing total Foreign Direct Investment (FDI) for this project alone to $1.7 billion. QIPP has also assumed completion risk of a transmission line from Ikot-Abasi to Ikot-Ekpene in order to ensure supply of power to the national grid.
“The managing Director of the Transmission Company of Nigeria (TCN) has given firm assurance that, once power is delivered to Ikot Ekpene, TCN will be able to deliver an equivalent amount of power to Kano on a binding contractual basis for a fee. TCN will assume full liability for power delivered to the grid and not transmitted as contracted. The MD of TCN has further confirmed that based on already approved funding from development partners, TCN will be technically competent to do this before QIPP starts generating power as the transmission lines from Shiroro to Kaduna and from Kaduna to Kano will be fully operational with enhanced capacity within two years from commencement of project.
“We further understand that the country is at risk of losing this huge investment of $1.7 billion because of the reluctance of the Federal government to assume additional unhedged financial risk on the power sector given the current experience with Azuru and other players.”