Aba IPP to yield government N25 billion in yearly savings

The implication is that the cost of the 188 megawatts power project, which is estimated at $385 million, will be recouped in savings in less than two years.

Barth Nnaji, a professor and chief executive officer of Geometric Power Limited, disclosed this yesterday in a paper delivered at the Lagos Business School, Lagos.

Delivering the paper titled ì Developing power infrastructure in Nigeria: Opportunities and Challengesî, Nnaji said aside improving economic activities in Aba, the IPP would also take 100 truckloads of diesel off the Nigerian roads daily.

Nnaji said the power project would deliver 140 megawatts (MW) when completed between December 2008 and January 2009.

He said an additional 48 megawatts would be generated from the project by September 2009 and another 300 MW by 2010.

Nnaji, who was optimistic that other IPP projects in the country would add about 2,000 MW to the national grid between 2010 and 2013, said electricity constituted 20 ñ 40 percent of the cost of production in a typical manufacturing company in the country.

According to him, cost of self generation of electricity to large companies is N20 to N30 per kilowatt per hour, while smaller companies and households incur over N30 per kilowatt per hour and N30 to N60 per kilowatt per hour, respectively.

It costs a Nigerian company more than double what a company in emerging or developed nation pays for the same unit of electricity.

He gave the concerns of private power investors as exorbitant cost of funds, inflation, foreign exchange risk, fuel supply risk, civil unrests, among others.

Nnaji also explained why IPPs would require power purchase agreement (PPA) guarantee. According to him, distribution companies should be credit-worthy, while distribution companiesí off-take should be back-stopped with guarantee such as sovereign country or crude oil guarantee.

The Aba project is being funded by international and local investors, with indigenous ownership and operation.

The project, which makes 100 percent of its benefits available to the surrounding community, is the only independent power project in the country without sovereign guarantee.

Nigeria ranks very low in per capita power capacity, which is the amount of electricity in watts consumed per person. With a population of 140 million, the countryís per capita power capacity stands at 29.1 watts, while Ghana with a population of 20.7 million has per capita power capacity of 85.1 watts.

South Africa has a population of 42.7 million and has per capita power capacity of 1, 046.7 watts, while India with a population of 1. 08 billion has per capita power capacity of 106.31 watts.

Other countries include United States, 2, 889. 3 watts; Germany, 1, 392.25 watts; Brazil, 480.30 watts, and China, 260 watts.