The first phase of the $1billion Azura-Edo power plant project which was meant to be of significant benefit to millions of Nigerians was flagged-off by the Goodluck Jonathan administration in the fourth quarter of 2014.
The Azura-Edo power plant is the first fully privately financed Independent Power Plant (IPP) in Nigeria and is located in Ihovbor/Orior Odemwende communities of Edo state.
Consuming about a billion dollars, mainly in foreign direct investment, with $700 million being pumped into construction of the power plant, and $300 million in associated gas supply infrastructure, the IPP 450 MW project, was expected to be completed in the first quarter of 2017.
Just recently, the senate committee on power discovered that Nigeria was losing $30 million to $33 million to Azura West Africa, for power generated, notwithstanding if it is distributed or not.
Following a lengthy deliberation, the Senate moved to call for a review of the agreement between the Federal Government and the power companies, that is Azura and ACU gas.
Nigeria is already obligated to pay between $30 million and $33 million monthly to Azura for power generated even if it is not transmitted through the national grid by the Transmission Company of Nigeria (TCN).
Also, Nigeria pays about N700 million monthly as the exchange rate differential in the deal with Azura.
Nigeria is also footing a yearly N5 billion bill for gas supply to Azura-Edo power plant, even though the cost of gas is already part of the tariff approved for the plant.
Based on the Pull/Call options agreement (PCOA) signed between the two parties and sighted by THE STREET JOURNAL, Nigeria will have to pay Azura West Africa, a whooping sum of $1.2 billion if it decides to breach or exit from terminate the contract.
In the agreement, a number of clauses that may result in a breach of the contract were itemized.
The former AGF and Minister of Justice, Mohammed Adoke (SAN), took note of the clauses, which he relayed in a letter to the then Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala.
The AGF wrote:
“…There are a number of provisions which have to be reviewed because of the financial obligation that the government may have to bear if the agreement is enforced. They are inimical to the interest of the FGN. An investigation of the provisions on local political force majeure in the PPA revealed that certain events that ordinarily ought not to be under force majeure were included.
“…One of the reasons that can lead to early termination of PPA is an election (option to terminate following a local political force majeure event or change in Law).
“…The following provision is listed as a local political force majeure: the issuance or making of either any order, injunction, direction or instruction, having the force of law issued by any relevant authority, or any declaration pursuant to a statutory instrument, in either case, in respect to archaeological or paleontological remains discovered on or under the site.
“…Radioactive contamination or ionizing radiation originating from a source inside Nigeria to the extent it exceeds applicable standards, (this is not within the powers of the government).
“…The purchase price for early termination as a result of a prolonged NGC Gas Transportation Constraint is buyer default purchase price.
Regarding the purchase price, the PCOA contained a provision that allows the seller and the shareholder to adjust or gross-up the purchase price so as to accommodate any tax or deduction they are required to pay on the purchase price.
In the agreement, as part of the Federal Governments obligation, Nigeria irrevocably waives its immunity over its asset or revenues from the suit, execution, attachment or other legal processes. This means that the FGN has irrevocably and expressly waived all its immunities like immunity from suit, immunity from attachment in aid of execution and from execution upon judgement and immunity from attachment prior to judgement.
With the power sector in a deplorable state and lawmakers pushing for the termination of the power privation contract, there are fears that Nigeria will have to pay $1.2 billion as fine if that is done.
The Chairman, Senate Committee on Power, Gabriel Suswam said that the deal was signed to generate 450 megawatts of electricity and that Nigeria is currently losing $30 million every month to the firms for power.
Suswam said:
“The implication of the agreement is that even if we are unable to take that 450 megawatts, we will still pay full price for that 450 megawatts and that is what has been happening. The agreement is called ‘take or pay’.
“The same thing for the ACU Gas which is a gas agreement signed with Calabar Power Plant and it is guaranteed by the World Bank.
“Azura has about three generators. If only one is producing, it is not their fault; it is because TCN cannot evacuate the power. They are generating; they are ready to give power but unfortunately, we are not prepared. We signed that agreement and so if they can only give 100MW, we pay for the full 450MW; the same thing for ACU gas.
“The way we are so tied in that the danger in Azura and ACU gas is that if we default, they can draw down about $1.2 billion immediately from our foreign reserve.”
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