Big investors court Nigeria’s electricity market on new reforms


Investors are taking positions in Nigeria’s electricity market and staking big deals at the industrial, commercial and residential segments, on the back of reforms that private sector players consider attractive.

Last year, BusinessDay reported that local and international investors see opportunity in the off-grid sector and are making early bets. Rubitec Solar was the biggest beneficiary with 500 million euros from GIZ, a German development agency.

Nigeria’s off-grid is estimated at over $9.20 billion and offers infinite opportunities for companies willing to take a risk in a market where over 75 million Nigerians are without access to reliable electricity. This market has been enabled by the Nigerian Electricity Regulatory Commission’s (NERC) Mini-Grid Regulations of 2017.

The Mini-Grid Regulations, (2017), enables mini-grids with distributed power of 100 kilowatts (kW) and below to operate without a permit. But a licence is required for distributed power of over 100kw and generation capacity up to or more than 1 megawatts (MW).

“This regulation has been very successful. It sets out clear rules regarding the requirements for setting up a mini-grid, made the licensing process simpler and returns on investment clearer,” Wiebe Boer, chief executive officer of Shell backed All On, an impact investment company said. “The regulation comforts investors because it specifies the rules of engagement with electricity distribution companies.”

All On is the only local investor focused solely on Nigeria’s off-grid energy sector. Last year, it gave four early-stage energy companies $40,000 in funding for innovative renewable energy solutions.

Twelve months ago, Copenhagen-based A. P. Moller Capital with a market capitalisation of $24.14 billion set up shop in Nigeria to fill the growing gap among industrial electricity customers who consume a minimum of 2 – 5 megawatts per hour (MW/hr) and self-generate power at costly rates.

Although A.P. Moller Capital invests in ports and shipping infrastructure through its subsidiary Impala Energy has mapped out $1 billion for the African market and is actively searching for big industrial customers in the Nigerian electricity market. The off-grid company specialises in gas-fired power plants and has installed 10 MW of electricity in Lagos and its environ.

“We fund, build and manage independent power plants for industrial customers. We also supply the natural gas needed. This is done through virtual pipelines, that is, compressed natural gas (CNG) transported in gas canisters,” Dare Osaloni, senior country sales manager of Impala Energy told BusinessDay on phone.

The off-grid energy firm’s model is built around saving companies about 3 percent of the amount spent on energy and about 30 percent energy savings through medium and long-term power purchase agreements.

“Our gas-fired power plants are reliable and cost-effective. We liberate companies to focus on their core competencies, while we take care of their energy needs with flexible contracts,” Chudi Obianwu, vice president A.P. Moller Capital told BusinessDay.

The investment opportunity has partly been enhanced by the Ministerial Directive on Eligible Customers (2017) that has outlined four categories of end-users who can buy directly from electricity generation companies (GenCos).

These categories of eligible customers include end-users whose consumption is no less than 2 MW/hr connected to 11 (kilovolts) kV or 33kV power transmission lines. End-users connected to 132kV or 330kV. End users with consumption over 2MW/hr every month connected to a 33kV line and end-users with consumption over 2MW/hr for one month and connected to the meter of a GenCo.

However, there are still grey areas in the off-grid generation regulations, which experts want addressed. According to analysts at Detail Solicitors, Nigeria’s first commercial solicitor, there are still some uncertainties and lack of clarity in the off-grid legal framework.

For example, there is no regulation specifically covering Off-grid IPP generation (save for mainly Captive, Mini Grid and Embedded regulations). It is unclear whether isolated urban independent electricity distribution networks (IEDNs) can exist within a DisCo’s franchise area. It is also unclear whether a captive generator can easily convert its permit to embedded generation license/generation license to sell excess power.

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