POWER PROJECT INTERVIEW: “There is ample opportunity for investment in the production of mini-grids, solar panels, hybrid electricity and in the supply and manufacturing of meters.”

Ayodele Oni, Bloomfield Law Practice, African Utility WeekLet's start with some background on Bloomfield Law's activities in Nigeria.
Bloomfield Law Practice is a commercial law firm which offers practical legal solutions to companies, governmental entities and individuals.

Bloomfield offers cutting-edge legal solutions for contemporary business and economic needs. We pride ourselves in our quick turn-around time and solution-oriented approach to legal solutions, as well as our years of experience cutting across key industry areas in the Nigerian economy – from energy and financial institutions to aviation and shipping as well as telecommunications. Over the years, we have provided solutions to all cadres of businesses that have charted our course as a key legal practice for their 21st Century requirements.

Our practice areas include:
•    Asset management and private equity;
•    Aviation and logistics;
•    Corporate, finance and securities;
•    Dispute resolution;
•    Energy and natural resources;
•    FinTech;
•    Immigration, employment and labour;
•    Intellectual property and information technology;
•    Shipping and oil services; and
•    Taxation.

Please tell us more about your current projects in Nigeria.
Bloomfield Law Practice is a stakeholder in the Nigerian power sector, and we provide solutions to challenges in the Nigerian transmission and distribution as well as generation power sectors. We are currently advising on the following key projects as set out below:

We are providing guidance to Middle Band Solar One Limited on its development of a solar PV power generation company in Lokoja and Kogi State. Middle Band Solar One Limited is an energy company with a number of international and Nigerian shareholders.

We are consulting with Geogrid Energy Limited, who recently signed a power purchase agreement with one of the largest off-takers of power in Nigeria, the Manufacturers Association of Nigeria, for provision of off-grid power solutions to different off-takers. Geogrid Energy Limited is a company developing modular embedded power projects in Lagos and Ogun State

We are also advising Mainstream Energy Solutions Limited in connection with its proposed acquisition of a number of dams currently put up for concession by the Federal Government of Nigeria and the preferred bidder is required to use the same for power generation.

We are also advising Milhouse International with its development of a 60MW coal-fired power plant within the campuses of the University of Nigeria. Our services further cut across the provision of legal support for the incorporation of a Nigerian subsidiary and the development of corporate governance policies and code of conducts for the regulation of the Nigerian subsidiary company.  

How are power purchase agreements encouraging the sale of power to the Nigerian national grid?
Interestingly, there has been major success in developing template power purchase agreements (PPA) for on-grid electricity supply (especially when selling through the Bulk Trader). Prior to this time, several challenges had affected the bankability of PPAs. Critical amongst these challenges was the shortcoming of the PPAs, in addressing proper allocation or risks and other key issues like transmission losses, payment security and connection standards. Notably, the template PPAs developed by the Bulk Electricity Trader has now fully recognised these shortcomings and catered to same. Also, the recognition of the peculiarities in the different modes of power generation has further influenced the development of PPA models to fit both the conventional power generation systems i.e. thermal power generation and various forms of renewable power generation.

What are the main challenges to working in this region?
The main challenges to working in West Africa, particularly in Nigeria, relate to the lack of follow through on key power and energy projects in Nigeria and in West Africa. As a result of the financial commitments involved in these capital-intensive projects, some developers face insurmountable financial constraints in between project conceptualisation and delivery, which often halts the progression of such projects. There are frequent issues around the lack of comfort in government, or the relevant sovereign, especially where the projects require government support. In Nigeria, there have been issues around the bankability of the Put Call Option Agreement. 

Also, project developers have sometimes commenced power projects without adequate due diligence on the appropriate technology to employ in a region like Nigeria, which has an adverse effect on project completion. Inadequate due diligence has also rendered entire projects or project structures not bankable. It is expedient to note that Nigeria is a peculiar country that often requires tailored due diligence efforts that are different from the conventional diligence practised elsewhere; hence, the need for local expertise like ours. Other challenges include lack of consistency or clarity of the requisite investment laws in the region.
 
The disadvantage to us, as legal professionals and consultants in this industry, is that we often feel demoralised when a power project that we had been advising on is not completed.

What in your view are the current opportunities in the power sector?
The current opportunities in the power sector surround the potential for investment as a result of the privatisation and unbundling of the sector over ten years ago. The opportunities for investment in sources of power, most especially in more recent times, renewable energy sources, is an opportunity that has been largely under-utilised in the Nigerian power industry.

Investment in renewable sources of energy, such as the construction of solar farms; coal-fired plants; renewable resources and the investment in gas or gas pipeline infrastructures, have recently drawn awareness. These projects also have the ability to provide opportunities that could revive the sector.

There is ample opportunity for investment in the production of mini-grids, solar panels, hybrid electricity and in the supply and manufacturing of meters. Statistics indicate that most Nigerians are currently unmetered, which presents a huge investment opportunity for the manufacturers and suppliers of meters. Herein also, there is the opportunity for vendor financing.

Coupled with the opportunities specified above and the incentives available to investors in the Nigerian electric power sector, a grant of pioneer status is available to companies involved in independent power generation using gas, coal and renewable energy sources under the Industrial Development (Income Tax Relief) Act 2004. This Act encourages investment in all sectors of the Nigerian economy.

Nonetheless, the true opportunities are found where the investors commit to the long-term growth of the region, by partnering with local industry, to ensure sustainable growth in the long term.

What support do the Nigerian project developers require to complete project plans in the power sector?
The Grid Code contains minimum standard requirements in relation to the day-to-day operating procedure for connecting to the national transmission system. This perhaps provides the primary technological requirement for investors in the provision of power generation solutions in either thermal or renewable energy. As a result, project developers would be required to conform to the technological and connection requirements contained in the code prior to supply power to the grid.

Similarly, in order to implement efficient and faster execution of power projects, it is essential that the right choice of technology is provided. For example, complying with international best standards for employable technology would help ensure that power projects are sustainable. Knowledge of clean coal technology in power generation, durable solar photovoltaic systems, as well as thermal plants are essential in achieving a successful power project.

Beyond the technological standards, investors are advised to understand the employment policies applicable in the jurisdiction of investment. In Nigeria, for example, under the Nigerian Electricity Regulation Commission (NERC) “Guidelines on National Local Content Development for the NESI”, all licensee involved in any project, operation, activity or transaction in the Nigerian Electricity Supply Industry (NESI) are mandated to consider Nigerian content as an important element of their overall project development and management philosophy for project execution. As a result, the employment of Nigerians and the contracting of Nigerian service providers are expected to be giving first consideration.

Another important thing to bear in mind is the culture of maintenance. On this note, maintenance of depreciating power infrastructure is of high importance in completing project plans for the sector. Regular replacement, maintenance and repairing failing power infrastructure should be made an immediate priority to reduce or prevent future failures and breakdowns which could stall operations in the project plans of the sector.

Finally, it is important to note that prior to commencing a power project, a list of regulatory permits are required and imposed under Nigerian Law. For example, there is basic requirement to obtain a NERC-issued Generation License for Generation prospecting to develop a power generation plant above the capacity of 1MW. Other licenses like a Distribution License (for distribution companies) may be required as applicable.

What are the future plans for the solar developers in Nigeria?
In recent times, the shift in governmental and regulatory policies is centered on encouraging renewable energy as a major solution to the electric power challenges in Nigeria. The reason is not far-fetched. The inability of thermal power solutions to meet the total power consumption requirement has become overwhelming. The foregoing is worsened by the saboteur and damage to gas pipeline and infrastructure. In responding to these challenges therefore, certain regulatory policies have been put in place to encourage investment into renewable energy solutions to reduce reliance on gas and gas pipelines and to generally encourage a robust energy mix.

To start with, NERC had issued the Renewable Energy Feed-In-Tariff policy which is aimed at providing several requirements for renewable energy power generation. Critical amongst these requirements is the obligation on the bulk electricity trader to purchase power from renewable sources under a “must-buy” policy, as well as the preferential tariff structure available to power generation companies under the REFIT.

Secondly, there is a proposed amendment to the National Grid Code, to the extent required to recognise the peculiarities and base-line grid connection expectations for renewable energy sources, more particularly, solar PV power parks.

Thirdly, several policies have been issued to encourage dependence on renewables. The Nigerian Renewable Energy and Energy Efficiency Policy (NREEEP) for example, incorporate provisions to increase the percentage contribution of solar energy to the total power generation mix. By so doing, the policy’s objective would be to encourage programs to facilitate solar home systems, as well as rural and industrial off-grid solutions.

We are confident that the shift in governmental and other institutional policies will inadvertently favour solar power generation. This is evident in the approval of several infrastructure bonds to fund renewable power projects by both government and private institutions.

Why did you decide to partner with African Utility Week?
It is our opinion that partnering with the African Utility Week would create the much sought-after avenue for us to provide the requisite insight into the legal and regulatory framework for investing in the Nigerian Electric Power Sector. This would in turn alleviate the risks of potential investors on the legal requirements of the sector, provide much-needed comfort for investors and in turn expose our firm to partnerships with different pan-African and international institutions. 

What will be Bloomfield’s main message at the event?
Bloomfield Law Practice’s main message at the event will focus on the plethora of untapped opportunities in the economy particularly as those related to electric power.
 
Anything you would like to add?
Bloomfield Law Practice is honored to be part of this historic meeting of minds, and values the contributions that will be made by the different speakers at African Utility Week. The opportunity to network with key players and partners in the utility industry globally, is also of keen interest for the firm.