By Afeez Olawoyin
The dust raised by the controversy surrounding the 461MW Azura-Edo Independent Power Project (IPP) is yet to settle as the Federal Government has said it was not liable to pay $1.2 billion to the promoters of the project.
Special Adviser to the President on Infrastructure, Engr Ahmed Rufa’i Zakari, said the Azura-Edo IPP is a functional 461 MW power plant that is owned by a group of investors led by an internationally reputed firm – Actis and includes the Edo State government as part of the investment consortium.
According to him, the plant supplies over 8 percent of the power on Nigeria’s National Grid, adding that the controversy as to who signed the agreements has no real basis, if indeed the only quest is for the plain truth.
‘‘Those who argue that the signing of the World Bank Guarantees makes the Federal Government under Buhari responsible for contracting Azura need only to look at the two basic transaction documents.
Another curious mischief in this controversy is the assertion that Nigeria will become liable for the sum of $1.2billion if it defaults on the Azura contract. Nowhere in any of the documents signed from 2013 to 2015 is any such figure mentioned.
The only possible payout indicated in any of the agreements is in case the put and call option is activated. In that event, the cost of the plant would be worked out using a formula and become due for payment but at least Nigeria will get in return a functional 461 MW plant.
The claim of the Presidency was further corroborated by the Managing Director of Azura Power West Africa Limited-promoters of the IPP, Mr.Edu Okeke, during a live interview on TVC Business Nigeria at the weekend.
Okeke had during the interview said there was nowhere in the Azura contract where it expressly stated that the Federal Government was liable to pay Azura $1.2 billion.
‘’I think this fictitious figure came from the Chairman of the Senate Committee on Power on the floor of the National Assembly when all of a sudden, he started dropping figures that I don’t know where it came from or he got them from.. And I think it would be nice if he is invited to this programme to come and tell Nigerians where he got the figures from’’
Okeke said Azura was proud of the agreement it signed with the Federal Government with discussions starting in 2010 and terminating in 2015, which he said involved two Governments.
The Presidential Adviser explained further that since the Buhari government had chosen not to repudiate the deal, it went ahead to issue the required legal opinion and signed the World Bank guarantees that had been initiated in April 2014, stating that the main Power Purchase Agreement(PPA) was signed in 2013.
Without that assurance, he said nobody would invest money in such a huge power plant, explaining that large infrastructure projects are executed using project finance principles and debt, and guarantees of repayment are always needed to reach financial close.
‘‘On October 22, 2014, the second agreement was signed. That is the Put Call Option Agreement (PCOA), which establishes the formula for determining the amount payable by the government if it has to take over the Plant. The PCOA for power plants is actually a novel approach pioneered in Nigeria.
It ensures that, unlike other contracts where a contract default would trigger penalties alone, in the case of Azura, a default would allow Nigeria to purchase the asset. This ensures that the country has a contingent asset alongside a contingent liability. The PCOA approach has now become standard in West Africa and is being adopted across the developing world.
Apart from these signed contracts, Nigeria as the host country also made a commitment to back up the transaction. The Ministry of Finance issued a letter of support to the World Bank Multilateral Investment Guarantee Agency (MIGA) in April 2014.
He lamented, that, indeed, there are challenges in our power sector that the Government is actively working to mitigate, but making the Azura contract a scapegoat is not the answer.