Fresh crisis rocks N12.6bn monthly deal for Azura Power 8 years after AGF faulted pact

On August 19, 2022, the House of Representatives Committee on Finance discovered that the country was committed to a monthly payment of $33m in a take or pay power generation deal with the Azura plant. It had summoned the parties including Nigerian Bulk Electricity Trading Plc (NBET), the Transmission Company of Nigeria (TCN), minister of […]

On August 19, 2022, the House of Representatives Committee on Finance discovered that the country was committed to a monthly payment of $33m in a take or pay power generation deal with the Azura plant. It had summoned the parties including Nigerian Bulk Electricity Trading Plc (NBET), the Transmission Company of Nigeria (TCN), minister of finance and other parties. By Monday, after a hearing, it further summoned heads of the parastatals to appear before it Tuesday for further clarification.

At the resumed hearing yesterday, the committee directed TCN to provide details of the $33m payment with the Azura power plant and other plants under the Niger Delta Power Holding Company (NDPHC).  

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Chairman of the committee, James Faleke, told the Managing Director of TCN, Engr Sule Abdulazeez, who was present at the Tuesday hearing, that Azura power plant failed to deliver the 450MW of electricity to the national grid which he said was a breach of the agreement signed with TCN for power transmission. 

Faleke also directed TCN to present its budget allocation from 2002 and the contract awarded and the certificates by TCN on power transmission line, as well as details of its Internally Generated Revenue (IGR) from 2010 including its audit report. 

The committee also summoned the Minister of Power, NDPHC, NBET, the Nigeria Electricity Regulatory Commission (NERC) and the Bureau of Public Procurement (BPP). 

However, at the previous hearing, the Managing Director of NBET, Nnaemeka Eweluka, said the ‘take or pay’ deal was an incentive for investors in the power sector.    

How firm raised $750m, got FG buy-back guarantee 

The federal government through the Nigerian Bulk Electricity Trading Plc (NBET) signed a Pull Call Option Agreement (PCOA) along with a Power Purchase Agreement (PPA) obligating Nigeria to pay between $30 million and $33 million monthly to Azura for generating electricity whether such is transmitted and consumed or not. 

The Azura Edo Independent Power Plant (IPP), according to its website, generates 461MW just as the operators are developing the Edo phase II combined cycle expansion for another 275MW. Its subsidiary, Azura-Nova, has a 125MW solar power plant being developed in Katsina State. 

Construction work for the Azura Edo plant with a World Bank’s Guarantee of about N47 billion started in January 2016; the plant was backed by the PCOA before the construction began. The agreement gave the investors the guarantee that the federal government would buy back unused power and also buy the plant when the need arises. 

By March 2016, NBET signed a pact with the University of Benin in Edo State to monitor and evaluate the construction works for the 450 megawatts (MW) Azura gas-fired power plant. 

However, the paper work began in 2014 when Azura Power Holdings Ltd, an international consortium, signed a $750 million contract and debt financing for the Independent Power Plant (IPP) project. 

The project worth $750 million, involved a $220 million of equity and $530 million of debt from a consortium of local and international financiers. According to Sundeep Bahanda, a co-founder of Amaya Capital and David Ladipo, the Managing Director of Azura, the project construction was ready for take-off after signing the pact. 

Also party to the deal was Seplat in a joint venture with Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC Ltd. Seplat/NPDC invested $300 million on the gas facility from its Oben Gas Plant to the power plant. 

As at May 2014, the project handlers disclosed that Siemens and Julius Berger Nigeria got the Engineering, Procurement and Construction contract; Seplat had the Gas Sales and Purchase Agreement, and an Operations & Maintenance contract with PLC Marubeni. 

The lead sponsors are Amaya Capital, and American Capital Energy and Infrastructure, while the co-sponsors include Edo State government, Aldwych International, Africa Infrastructure Investment Fund 2 (AIIM) and Asset and Resource Management (ARM). The key lenders to the project include Standard Chartered, Rand Merchant Bank, Siemens Bank, KfW, World Bank, StanbicIBTC, and FCMB.    

How AGF declined pact over non-compliance 8 years ago 

In a letter of response dated  December 23, 2014 to then President Goodluck Jonathan on the Azura deal, the then Attorney General of the Federation (AGF), Mohammed Bello Adoke, said he could not give a legal opinion as requested by the then Coordinating Minister of the Economy and Minister of Finance, Ngozi Okonjo-Iweala, because, “the PCOA was executed without due regards to my Legal Opinion of 24th July 2014, wherein I highlighted significant issues that needed to be incorporated and changes required”. 

He said there was non-compliance with his recommendations for the PCOA. He insisted that arbitration for the power purchase deal, if any, should be in Nigeria and London, and frowned at clauses that insinuate that the government will purchase the energy or plant if there is a halt (force majeure) in gas supply or in the case of radioactive contamination 

He also objected to Clause 13.1.2 of the PCOA which he wanted deleted but was not. It stated that the federal government ‘irrevocably waives its immunity over its assets or revenues from suit, execution, attachment or other legal process. 

Adoke also said the arrangers of the deal failed to insert the indemnity clause directed by the Secretary to the Government of the Federation (SGF), which gives Nigerian agencies backing in the case of any foreign litigation. 

He requested Jonathan to direct Okonjo-Iweala to ensure his recommendations were followed in conformity with extant laws, policies and circulars of government, but Daily Trust could not verify if this was done before the plant was operationalised from May 2018.