Lagos state government on Tuesday signed an agreement with investors to generate 3,000 megawatts of power over the course of seven years, sources say
Tagged the “Lagos State Embedded Power Programme,” has the objective to deliver 3,000MW incremental electric power to drive the burgeoning economy of Lagos at the cost of $3billion, subject approval by the Nigerian Electricity Regulatory Commission (NERC).
The first phase which will be commissioned before the end of the first quarter of 2018, is expected to deliver 520MW incremental power, while additional 1,070MW will be delivered by the fourth quarter of 2018. The balance of 1,410MW will be completed by 2022.
According to details of the agreement seen Lagos state government will provide 3 months rolling bank guarantees to support the Power purchase Agreements (PPAs), which will be signed between the distribution companies and the embedded power providers (EPPs), to enhance bankability of the projects.
In the agreement, Lagos state government will secure gas for the projects through provision guarantee to gas suppliers using its Ibile Oil & Gas company.
“Given the intractable challenges of local gas market, and to guarantee uninterrupted gas supply to the EPPs, Lagos State has finalised arrangements with reputable international gas suppliers to deploy a floating storage and regasification unit (FSRU) to be moored on Lagos waters and this will be further supported by trucking of LNG from the South-South (in the short-term),” said the document.
According to the agreement, the required liquidity for the transaction volume of about N4trillion is largely private sector funded, self-liquidating and employing series of contingent financial instruments.
The state will carry out a comprehensive power audit exercise in Epe, Ikorodu, Ikeja, Badagry, Marina, Ibeju Lekki, Apapa and Ikoyi where the embedded project will be deployed.
In the arrangement, prospective EPPs will generate and inject off-grid power for distribution through the network of Eko and Ikeja DisCos. Huge investments are anticipated in upgrading distribution infrastructure of the DisCos such as 33/11kv, step down sub-stations, distribution transformers and feeders.
Lagos and its joint venture partners plan to recover costs from the wheeling charges due to the DisCos based on agreed terms. Proposed tariff is N52.52 per kWh.