New Incentives For Nigerian Power Projects

Nigeria’s electric power sector has historically been incapable of meeting the needs of Africa’s largest and most populous nation. The country has roughly 3,500 megawatts of installed generating capacity, but insufficient maintenance, intermittent gas supply, grid instability and other factors routinely reduce available capacity to less than 2,000 MW.

To its credit, Nigeria adopted sweeping regulatory reforms in 2005 aimed at the unbundling of the national utility as well as the creation of a deregulated and competitive market for generation and distribution, with open access to transmission and transparent wholesale power sales. Nearly six years after the enactment of the landmark Electric Sector Power Reform Act (the Act), the federal government has finally gotten serious about attracting foreign private capital to its ailing power sector

On Aug. 26, 2010, President Goodluck Jonathan’s Presidential Action Committee on Power (PACP) launched the Roadmap for Power Sector Reform, outlining a comprehensive plan to develop 37,000 MW of additional generating capacity over the next nine years. Acknowledging that it cannot support the immense capital requirements to meet its generation targets, and recognizing that independent power is the most reliable piece of Nigeria’s generation portfolio, the Roadmap includes several features designed to support nonrecourse project financing of independent power projects.....--By Keith Larson, Hogan Lovells

Key Issues To Consider In Project Finance Transactions

Project finance is a complex financing structure used to finance the construction of capital intensive and long-term infrastructure projects such as pipelines, power plants and airports. Project finance typically involves multiple parties who are subject to a variety of risks and who have conflicting interests that must be protected and obligations that must be clearly defined. It is the role of counsel to identify the specific risks associated with the project and determine the project participant best able to assume such risks. Failure to do so may result in higher project costs, delays in the project’s construction schedule or a default under the loans. To ensure each risk is properly identified, counsel should prepare a matrix setting out (1) each project risk, (2) the party responsible for assuming that risk and (3) how that risk assumption is reflected in the documents. This guest column discusses some key project finance risks.... --By Erlyne J. Nazaire, Practical Law Company