MINISTER SHARES THOUGHTS ON IPP FUTURE

C O N F I D E N T I A L ABUJA 002005 NOFORN SIPDIS STATE PASS USAID/AFR/SD FOR CURTIS, ATWOOD AND SCHLAGENHAUF STATE PASS TO USTDA-PAUL MARIN, EXIM-JRICHTER STATE PASS USTR FOR AGAMA JOHANNESBURG FOR NAGY USDOE FOR GEORGE PERSON TREASURY FOR IERONIMO, BARCAN, SOLOMON AND RITTERHOFF E.O. 12958: DECL: 02/04/2029 TAGS: EPET ENRG EINV ECON ETRD PGOV NI SUBJECT: MINISTER SHARES THOUGHTS ON IPP FUTURE REF: A. ABUJA 1050 ¶B. ABUJA 0976 ¶C. ABUJA 0169 ¶D. LAGOS 0143 Classified By: Ambassador Robin R. Sanders for reasons 1.4. (b & d). -------------- MINISTER OF POWER ASKS FOR USAID ASSISTANCE -------------- ¶1. (SBU) Minister of Power Dr. Lanre Babalola met with USAID consultants from Nexant and Energy Officer October 22 to follow-up on the status of USAID projects requested at the Nigeria-U.S. Energy and Climate Change Dialogue in May (Reftel A). The Nexant consultants updated Babalola on the progress of USAID's Africa Infrastructure Program (AIP) and Nigeria Energy and Climate Change (NECC) program which together allow USAID to engage on a wider range of issues. ¶2. (SBU) Nexant highlighted its activities with Nigeria's independent power producer (IPP) sector, especially in capacity building and gas-for-power issues. The Minister asked if USAID could assist the Ministry's Power Holding Company of Nigeria (PHCN) to negotiate a gas supply agreement with Shell for the Sapele Oghorode Power Plant in Delta State. USAID Nexant Project Manager Alain Rosier said that the request appeared to be in line with the intent of the AIP and NECC programs and that he would discuss the request with both program offices and submit it to the appropriate office for approval. ¶3. (SBU) The Sapele Oghorode Power Plant was originally designed to operate both steam and gas turbines. There are six steam turbines with a capacity of 120 megawatts each (commissioned 1956) and four units of gas turbines with a capacity of 75 megawatts each (commissioned 1978). Total plant capacity is 1,020 megawatts. Rehabilitation of the steam turbines, which were abandoned, is in progress, and new construction for an additional 451 megawatts has begun. The first 226 megawatts phase of construction is expected to be complete by December 31, 2009. -------------- GON THOUGHTS ON THE FUTURE OF THE IPP SECTOR -------------- ¶4. (C) Progress for the IPP sector has been at an impasse for the past year. The Mission has assisted the IPP sector to overcome GON bottlenecks, but turned to USAID for technical expertise (Reftels B and C). Babalola discussed the GON's need for the IPP sector to provide power beyond the 12,000 megawatts that are expected by December 2011. He said a Nigerian IPP should be a multi-national/international company with a proven track record in building/operating power plants. He said the GON would require all IPPs to relicense next year, and that new licenses would be issued to applicants who already had a fuel contract to produce power. He added that the "29 or so IPPs holding licenses are not the type of IPPs that will be successful and the path is clear for the right kind of IPPs." (COMMENT: Shell General Manager for Gas Ubaka Emelumadu offered the same sentiment on the profile of what the right kind of IPP would look like in a subsequent meeting on October 23. END COMMENT.) SANDERS