Investors are working out financing arrangements to sink $8 billion into new power projects capable of generating some 8000 Megawatts (Mw) of electricity -  part of a wider plan to address perennial supply.

The National Electricity Regulatory Commission (NERC) has also disclosed it is working on fresh incentives to attract investment in the development and construction  of independent power plants.

Dr. Ransome Owan, Chairman of the NERC made the disclosure while briefing newsmen in Lagos recently, explaining that based on the number of licenses issued to  investors, 8000 Mw is expected to be generated.

“Based on the number of licenses issued so far, the quantum of electricity to be generated is about 8,000MW of power. By our standards, every 1,000MW costs a  billion dollars. So the 8,000MW is equivalent to $8bn worth of investment.

“If you use the exchange rate of N130 to $1, it would amount to over N1.04trn. so that is the investments that Nigerian companies are willing to put up to help us  solve the power problems.”

He pointed out that the Commission is currently reviewing new applications which relate to alternative sources of power supply such as coal, wind and solar energy.
“On Friday; an application came in for a coal power plant in Enugu. So we are having expression of interests in alternative power, which includes wind power and  solar energy. Although the latter have not formally come to us but we believe in the near future, our energy mix will be improved.

“I believe we need to improve on our energy need other than hydro and gas to coal power, wind power and other renewable such as solar to improve our energy mix  and energy security.”

Dr. Owan, an American trained technocrat of no mean repute also disclosed that in line with plans to attract more investment into the sector, the Commission is  considering tax holiday of sort as well as floating a utility bond on the stock market which investors could have access to at very low interest rates.
“We are doing a number of things to support our IPPs. One of them is, we are coming up with a package of incentives, which includes tax holidays, customs,  importation of spare parts, even intellectual property that they would need, techniques, which would help them reduce their tax burden and give them some tax  breaks.

“The second area that we are working on is to try and come up with a power utility bond, that we can introduce into the capital market that would allow the Nigerian  population and institutional investors such as PENCOM and estate managers and other hedge funds managers and use them as utility bonds and help us provide more  money for the sector.”

Dr. Owan noted that power was a capital-intensive industry and that investors were finding it difficult accessing funds from financial institutions to execute power  projects, adding however, that with such utility bonds, which would be backed by the Federal Government, it would be easier to attract more investments and attain  set  national power goals.

“If power has debt equity involved, there is plenty of debts, but there is lack of equity, and if we trade the power utility bond and it is backed by the Federal  Government, we can use that as an instrument to leverage and get private investors and PENCOM to buy these bonds and give us the money in naira, and our IPPs  can access that money at a lower interest rate that is currently possible, and that would help to reduce transaction cost,” he said.

Dr. Owan disclosed that the Commission has opened discussions with sister government agencies including the Security and Exchange Commission (SEC), the  Central Bank of Nigeria (CBN), the Ministry of Finance, the Federal Inland Revenue Services (FIRS) and the National Assembly.
He said these are stakeholders which have to support the plans of the Commission if it was to succeed in attracting investment to the power sector within the shortest  possible time.

The Chairman explained that no percentage of tax relief has been determined yet, noting that this has to be done through negotiations.
“We do not have a percentage amount yet because it is subject to negotiation. Any tax holiday that is less money to the treasury, so those who have the responsibility  like the Finance Ministry and FIRS must have to agree to make it into a law. But we are going to use a benchmark of what other industry people are enjoying, and  ask for similar treatment.”