VZCZCXRO0877
PP RUEHMA RUEHPA
DE RUEHUJA #0976/01 1561449
ZNR UUUUU ZZH
P 051449Z JUN 09 ZDK
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 6193
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 1440
RUEHGB/AMEMBASSY BAGHDAD 0353
RUEHZK/ECOWAS COLLECTIVE
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 000976 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTDA-PAUL MARIN, EXIM-JRICHTER 
DEPT PASS TO USTR-AGAMA 
DEPT PASS TO USAID AFR/SD FOR CURTIS, ATWOOD, AND SCHLAGENHAUF 
BAGHDAD FOR MCCULLOUGH 
TREASURY FOR PETERS ANDIERONIMO 
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/CREED 
 
E.O. 12598: N/A 
TAGS: ENRG EPET ECON EINV EAID PGOV NI
SUBJECT: NIGERIA: INDEPENDENT POWER PRODUCERS OFFERED USG 
ASSISTANCE 
 
REF: A. ABUJA 573 
 ¶B. ABUJA 169 
 ¶C. 08 ABUJA 1311 
 ¶D. 08 ABUJA 840 
 
ABUJA 00000976  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
 
¶1. (SBU) The Independent Power Producer Association of Nigeria 
(IPPAN) met with EconOff and USAID Consultant on May 19 to discuss 
the challenges they are facing in the industry and propose a plan to 
overcome the obstacles, which included: an authorized power purchase 
agreement; loan guarantees; an authorized credit worthy off taker 
(buyer); and a new tariff model that reflects market pricing and 
would account for currency fluctuations. It was agreed that the 
power sector is characterized by a strong government monopoly and 
what appears to be weak government support for private sector 
participation. USAID concluded that it would be important to provide 
assistance to accelerate energy sector reforms. A request will be 
made for funding assistance through USAID's Africa Infrastructure 
Program (AIP) and will be incorporated as part of the FY 2009 
bilateral USAID program.  End Summary. 
 
¶2. (SBU) The membership of the Independent Power Producer 
Association of Nigeria (IPPAN) met at the Embassy with EconOff and 
USAID Consultant on May 19 to discuss the status of the industry and 
their public-private partnership (PPP) with the Mission.  They 
reported that there was no positive movement from the government of 
Nigeria (GON) on: 
 
-- Nigerian Electricity Regulatory Commission (NERC) to approve 
outstanding power purchase agreements (PPA); 
-- A designed "off-taker," (buyer) for generated electricity; 
-- Addressing loan guarantees to ensure payments to the IPPs; or 
-- 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. 
 
¶3. (SBU) IPPAN members lamented that they feared their years of work 
and investment in developing power projects will be lost if 
something does not happen soon. EconOff shared that the Ambassador 
had met with Minister of Power Babalola (reftel A) and discussed 
these issues.  Babalola briefed that PPA and "off-taker" 
arrangements are still under review.  The GON is in discussions with 
the World Bank on partial risk guarantees to the public sector power 
plants and IPPs. Regarding the multiyear tariff order, the Minister 
had agreed to reexamine the model (reftel D) and, indeed, sponsored 
a meeting between the industry and NERC on May 8.  [Note:  The 
potential PPA/Off-taker agreements will likely be with the 11 
Nigerian distribution companies (DISCOs), through a proposed 
indemnity agreement between the World Bank, the International 
Development Association (IDA) and the GON with guarantee payments 
through local banks. Moreover, this indemnity along with the recent 
direct budget issue to the DISCOs may place the DISCOs as credit 
worthy in the eyes of the financial sector; which is critical to 
attain long-term financing. End Comment.] 
 
¶4. (SBU) USAID's Africa Infrastructure Program (AIP) Consultant Alan 
Rossier briefed IPPAN on the AIP program. The briefing netted a good 
discussion about the various problems in the IPP sector and possible 
solutions.  Professor Bart Nnaji, IPPAN President, stated that the 
industry had suffered serious setbacks and frustration due to 
government's lack of support and backing for independent power 
producers (IPP). He emphasized that without necessary GON support 
all technical assistance and consultancy will not be achievable. 
IPPAN agreed that the hegemony of the GON in the power sector is the 
reason for the continued delay in full deregulation of the power 
sector. 
 
¶5. (SBU) IPPAN again set a plea for USG assistance (reftel B) and 
requested the USG provide support to IPPAN through the AIP program 
and that a Nexant Energy (USAID) Consultant should be an adviser to 
the IPPs through IPPAN and provide reports and briefings as 
necessary to accurately tell the story of what the industry needs in 
order to provide the next 10,000 megawatts of power Nigeria is 
desperate for.  Rossier agreed to submit the request for review and 
disseminated questionnaires on the specifics of each stalled power 
project. 
 
ABUJA 00000976  002.2 OF 002 
 
 
 
COMMENT 
------ 
¶6. (SBU) USAID Nexant consultant also met with USAID Director for 
Economic Growth and Environment to discuss the needs of IPPAN and 
opportunities to accelerate energy sector investments.  It was 
agreed that Nexant will prepare a detailed work plan for possible 
support through the AIP with USAID Washington funding, an initial 
round of assistance would be provided through AIP, and that 
additional support will be seriously considered under the new USAID 
Nigeria energy program that will start with FY 2009 funds. 
 
¶7. (SBU) Nigeria's power sector is plagued with setbacks in the 
quest to deregulate.  Personal and political interests play out in 
Nigeria, usually at the cost of the societal needs.  We continue to 
work closely with the Ministry to provide support.  Getting the 
private sector on track to build power plants and continue working 
with the Minister of Petroleum Resources to secure gas for the power 
plants is critical to Nigeria's current and future economy. END 
COMMENT. 
 
¶8. (U) This cable was coordinated with Consulate Lagos. 
 
SANDERS