Transnational Corp. of Nigeria Plc has suspended plans to build one of the nation’s biggest power plants as a local gas shortage makes it difficult to obtain fuel and a downturn in the economy hinders efforts to raise funds for the project.
The company in 2014 said it would raise $1 billion to build a 1,000-megawatt gas-fired facility. Two years earlier, it bought the Ughelli plant in the hydrocarbon-rich Niger River delta from the government and more than doubled its output to 700 megawatts. Since then, attacks on pipelines by militant groups have cut gas supplies to stations and forced millions of Nigerians to either do without electricity or buy fuel for their own generators. Also, a dollar shortage blamed on a 15-month currency peg removed on June 20 has raised import prices and inflation, with the economy contracting in the first quarter.
“How do you make the investments when you are generating far below your current capacity due to gas problems,’’ Chief Executive Officer Emmanuel Nnorom said in Lagos. Transcorp, which interests range from agriculture to energy, is owed over 20 billion naira (64 million dollars) by state-owned Nigerian Bulk Electricity Trading Plc, for power generated and not yet paid for, he said.
Niger Delta Minister Usani Usani said the government is in talks with militants about ending the attacks on pipelines, but could not confirm whether the group which has claimed most assaults, the Niger Delta Avengers, were part of the discussions.
The partial sale of 17 former state-owned power utilities three years ago was meant to attract investment needed to expand the grid and end daily blackouts. Yet, private investors have been hampered by increasing debt owed by the government and the inability to obtain foreign exchange. Electricity firms under the umbrella body Electricity Generation Companies in Nigeria said last month they may be compelled to shut down because of the gas and currency shortages.
The scarcity of gas has reduced Nigeria’s power generation to less than half of the installed capacity of 6,000 megawatts, the lowest in a decade, even as the country holds the continent’s largest reserves of the fuel. The power shortage has contributed to the contraction of the economy which may shrink 1.8 per cent in 2016 according to the International Monetary Fund.
“My number one problem would be gas, owing to much capacity available that is not put to use,” Transcorp Power CEO Adeoye Fadeyibi said in the same interview. Ughelli’s generation slumped to 70 megawatts this year before rising to 300 megawatts, or less than half of what it’s capable of generating, he said.
The nation, which has about 180 million people, generated an average of 2,464 megawatts of electricity in June, the Power Ministry said. Comparably, South Africa with a third of the population, has capacity to generate more than 40,000 megawatts.
Transcorp is in discussions with some foreign companies to diversify its sources of electricity to include solar, which will enable it to lower constraints from gas supplies, Fadeyibi said. Nigeria’s Power Ministry signed agreements with 14 solar-electricity generating companies last month to supply 1,125 megawatts of electricity to the national grid. While Transcorp isn’t part of the agreement, it is looking at deals that will be competitive based on its projections, Nnorom said.