NIGERIA: NEW MINISTER OF POWER BRIEFS AMBASSADOR

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