- FG unable to commit to contractual obligations
- World Bank pulled out of PRG
- The plant will add at least 500MW to national grid
The Qua Iboe Independent Power Plant has hit a brick wall. The Federal Government cannot commit to the provisions of the Power Purchase Agreement (PPA), sources have said. The PPA will bind the FG to financial liabilities arising from the Take or Pay component of the PPA. According to the Cable, sources in the Ministry of Finance have said, with the current economic situation in the country, the FG is reluctant to sign the agreement. The FG under the Take or Pay component of the PPA will pay the sum of $30 million monthly in the event of a default.
Qua Iboe, a 540MW IPP is a gas-fired power plant in Ibeno, Akwa Ibom state. The plant has a proposed 58-kilometre transmission line infrastructure connection to the national grid. The project is estimated to cost about, $1.1 billion. Following negotiations on the Partial Risk Guarantee (PRG), the International Bank for Reconstruction & Development (IBRD) has withdrawn its proposal of a $150 million PRG facility.
The $30 million default payment is outrageously high and discouraging, which makes the deal for a take or pay supply of 500 MWh/h (based on my calculation) surprisingly unexpected.
GenCos are losing just as much with the liquidity issue. They have to pay for the gas whether or not they use it.