VZCZCXRO7550
PP RUEHMA RUEHPA
DE RUEHUJA #0573/01 0921146
ZNR UUUUU ZZH
P 021146Z APR 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 5663
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 1068
RUEHZK/ECOWAS COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0157
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 000573 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR-AGAMA; USTDA-MARIN; EXIM-RICHTER 
DEPT PASS USAID AFR/SD FOR CURTIS AND ATWOOD 
BAGHDAD FOR MCCULLOUGH 
DEPT OF ENERGY FOR HAYLOCK, PERSON, AND SPERL 
USDA FOR FAS/OTP MCKENZIE 
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/CREED 
TREASURY FOR PETERS AND HALL 
 
E.O. 12598: N/A 
TAGS: ENRG EPET ECON EINV PGOV EAID NI
SUBJECT: NIGERIA: NEW MINISTER OF POWER BRIEFS AMBASSADOR 
 
REF: A. ABUJA 291 
 ¶B. ABUJA 262 
      ¶C. 08 ABUJA 2324 
      ¶D. 08 ABUJA 2264 
      ¶E. 08 ABUJA 2045 
      ¶F. 08 ABUJA 1942 
      ¶G. 08 ABUJA 1930 
      ¶H. 08 ABUJA 1563 
      ¶I. 08 ABUJA 1311 
      ¶J. 08 ABUJA 1082 
      ¶K. 08 ABUJA 840 
      ¶L. 08 ABUJA 815 
      ¶M. 08 ABUJA 402 
      ¶N. 08 ABUJA 351 
 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
 
¶1. (SBU) Summary: On March 19 the Ambassador met with the new 
Minister of Power Dr. Lanre Babalola to discuss opportunities for 
the U.S and Nigeria to improve the power sector.  The Ambassador 
provided a briefing paper on the USG's assistance to the GON in the 
power sector, encouraged that the bilateral working group on the 
power sector continue, and informed that the Nigerian Electricity 
Regulatory Commission (NERC) partnership with the U.S. National 
Association of Regulatory Utility Commissioners (NARUC) has been put 
on hold depending the outcome of the arrests of the NERC 
Commissioners by the Economic and Financial Crimes Commission 
(EFCC).  She added that the NERC/NARUC training slated for May 2009 
will be delayed until its leadership issues are resolved.  The 
Minister thanked the USG and pledged support for moving forward. 
Major bottlenecks remain for independent power producers (IPP), 
which the Ministry needs to address, in order for the IPPs to 
succeed.  President Yar'Adua promised to the Nigerian people that 
his administration would "fix" the electricity problem.  Two years 
later, the President and his Power Ministry have failed to deliver. 
End Summary. 
 
Framework for Partnership 
- - - - - - - - - - - - - 
 
¶2. (SBU) The Ambassador met with the new Minister of Power Dr. Lanre 
Babalola, the new Minister of State for Power Nuhu Wya, and 
Permanent Secretary (PermSec) Dr. Abdullahi Aliyu on March 19, 2009, 
accompanied by AIDOff and EconOff as notetaker.  The Ambassador 
provided an overview of USG efforts in Nigeria in the power sector 
noting that the objectives support efforts to address some of the 
challenges in the power sector.  She opined that adequate, reliable, 
and affordable power for Nigerians was the number one barrier to 
more U.S. investment in Nigeria. 
 
¶3. (SBU) Minister Babalola thanked the Ambassador and the USG for 
its support since 2008, specifically the ongoing liaison with the 
Mission, U.S. Trade Development Agency (USTDA), U.S. Export Import 
Bank (EXIM) and the U.S. Commercial Service (CS).  He was especially 
appreciative of USG assistance in developing a framework to 
encourage independent power producers and power sector reforms.  He 
noted how USTDA consultants worked with the ministry in March and 
April 2008 on overcoming roadblocks in these areas. 
 
¶4. (SBU) PermSec Aliyu reported the ministry will respond to 
unaddressed issues between the USTDA consultants working on the 
technical assistance to Shiroro and Egbin Power plants soon.  The 
Ministry expects the USTDA report to become templates for all 
existing and future power plants.  Regarding future collaboration, 
the Ambassador and Babalola agreed that AIDOff, EconOff, and the 
PermSec would continue with the U.S.-GON bilaterally working group 
on the power sector under the overall Framework for Partnership. 
 
NERC Discussion 
- - - - - - - - 
 
¶5. (SBU) The Ambassador explained that the NERC partnership with 
NARUC on a mentoring program is on hold pending the outcome of its 
current leadership (CEO Ransome Owan and six NERC Commissioners) 
problem with the EFCC.  On February 19, President Yar'Adua approved 
the suspension of the NERC CEO and 6 commissioners on pending fraud 
 
ABUJA 00000573  002 OF 002 
 
 
charges.  Subsequently, Yar'Adua and Babalola approved a two-man 
caretaker committee pending the conclusion of the EFCC 
investigation.  The NERC/NARUC training slated for May 2009 is 
delayed until the leadership issues at the NERC are resolved (reftel 
A). 
 
IPPs Stalled: Ball in Minister's Court 
- - - - - - - - - - - - - - - - - - - - 
 
¶6. (SBU) The Ambassador asked the Minister what his plans were to 
address some of the issues with the IPPs, citing a few of the issues 
such as the need for: 
 
-- NERC to approve outstanding power purchase agreements (PPA); 
-- A designee "off-taker," (buyer) for generated electricity; 
-- Addressing loan guarantees to ensure payments to the IPPs; 
-- A new tariff model that reflects market pricing and accounts for 
currency fluctuations because the current wholesale price in the 
multiyear tariff order (MYTO) is not sufficient. 
 
¶7. (SBU) Babalola replied that the PPA and "off-taker" steps are 
still under review.  Regarding the multiyear tariff order, he agreed 
to reexamine the model (reftel K).  Moreover, the GON is in 
discussions with the World Bank on partial risk guarantees to the 
public sector power plants and IPPs. (Comment:  This potential 
agreement is thought to be with the 11 Nigerian distribution 
companies, through a proposed indemnity agreement between the World 
Bank, the International Development Association (IDA) and the GON 
with guarantee payments through local banks. End Comment.) 
 
DOE HEATMAP Workshop 
- - - - - - - - - - - 
 
¶8. (SBU) The Ambassador urged Babalola to take advantage of the 
Department of Energy's (DOE) HEATMAP Econometric Model training 
workshop in Accra, Ghana on May 13-15, 2009.  She provided a 
courtesy copy of the letter of invitation from DOE's Acting 
Assistant Secretary for the Office of Policy and International 
Affairs Jonathan Shrier.  (Note: The original letter was delivered 
via diplomatic note to the Ministry of Foreign Affairs on March 4. 
End Note.) 
 
Electricity is the Key Deliverable 
- - - - - - - - - - - - - - 
 
¶9. (SBU) Comment: Babalola is a "technocrat" without a political 
base and in a low performing and difficult sector.  However, in the 
last six months, the Ministry has developed a workable strategic 
plan that will install modern dispatch facilities in the 
transmission sector, expand the transmission grid, shore up the 
fragile and overloaded distribution network, and complete 
construction of GON owned gas power plants (Reftels D and H).  The 
construction of two hydro-power plants are also planned and may 
boost electricity generation to 14,700 megawatts (MW) by December 
2011 (reftel I).  It is unclear whether the Minister and his 
ministry have the staying power to fully implement this strategic 
plan.  The Mission Working Groups with the Power Ministry had been 
on hold when the previous minister was removed in the November 2008 
Cabinet reshuffle.  Babalola was not only receptive to the things 
the Working Group had accomplished, but also looked forward to the 
group moving forward on a number of power-related issues, even 
noting that he would chair many of the initial sessions to ensure 
things were resolved.  Babalola, more than former Minister Ibrahim, 
has the skills to get things done; the question is what he can 
accomplish over 2009 to move the megawatt issue from 3,000 to 6,000 
per day - a constant GON promise.  End Comment 
 
¶10. (U) This cable was coordinated with Consulate Lagos. 
 
SANDERS