The Federal Government, the World Bank and Seven Energy International Ltd, an integrated gas company in south-east Nigeria, have signed a $112 million World Bank ‘Partial Risk Guarantee’, PRG, for the supply of natural gas, delivered by its wholly owned subsidiary Accugas, to the Nigerian Integrated Power Project (NIPP), Calabar, Cross River State.
The signing has several implications, all positive for solving the power generations issues in Nigeria. First and foremost, the immediate returns of an additional 560 MW of electricity to the national grid, approximately 20 percent of current power generation in Nigeria is an immediate benefit that results from the deal.
Another positive implication from the deal is that the nature of the deal, a Partial Risk Guarantee, is the first of its kind for gas supply in Nigeria and is a demonstration of the Federal Government’s commitment to increasing power supply in the country and stabilizing the ‘gas to power’ value chain.
This is because the Partial Risk Guarantee is a financial instrument which guarantees payments to the supplier. Of course, this will come as a boost to potential investors in the gas sector in Nigeria.
This was aptly put by Phillip Ihenacho, Chief Executive Officer, Seven Energy when he said “The big challenge for people who are investing in the gas sector today is the worry about payment risk. If I build my infrastructure and I am supplying gas to my customer, will my customer pay me on time? This structure enables the investor to be confident that they will get paid on time because there is a guarantee from the World Bank and that unlocks a lot more investments in the gas and power sectors in Nigeria.”
Thus, with this new deal, things are beginning to look up for both investors and consumers of power in Nigeria.