The presidency on Sunday rejected the call by the Senate, asking the federal government to pull out of its power purchase agreement (PPA) with Azura power plant and allow the company to pull $1.2 billion from the foreign reserves.

The presidency, in rejecting the call made by the legislature during its debate on the report of its committee on power last week said no investor could so cheaply pull any money out of the country’s foreign reserves.

The Senate Committee on Power, in its report presented by its Chairman, Senator Gabriel Suswam, had described the agreement as a drain on the country’s treasury and called for its immediate termination.

The power plant had signed the PPA with the federal government in 2013 with a clause that the federal government would “take or pay” for power generated as declared by Azura “whether or not it is taken by the government-owned transmission company.”

Reacting to the call, a top presidential source, who did not want to be named, said that contrary to the claim by the Senate that Vice President Yemi Osinbajo and former Minister of Power, Works and Housing, Mr. Babatunde Fashola, signed the agreement on behalf of the federal government, both men were not in office between 2013 and 2014 when the agreement was signed.

He explained that following the PPA signed on April 22, 2013, the Put/Call Agreement was also signed by the administration of former President Goodluck Jonathan with the power plant in October 2014.

Explaining the reason money could not be pulled from the foreign reserve, he said: “No investor can just pull out $1.2 billion or any amount from Nigeria’s foreign reserves like that. Yes, there was a Put/Call Agreement signed with Azura on October 22, 2014, whereby Nigeria reserved the option to buy over the assets or the company to give up the assets and seek payment if Azura defaults.

“However, the amount to be paid can only be determined when the option is exercised and nobody can simply pull out money from our foreign reserves just like that.”

The source described the claim that Osinbajo and Fashola signed the agreement as misplaced, wondering how persons who were not in office when an agreement was signed could have been accused of signing such an agreement.

The source also described as mischievous claims that Azura is draining the country’s financial resources, saying that such claims are mere attempts to blackmail the company, which has been generating 10 per cent of the country’s power supply.

He explained: “With the agreement having been signed before the inception of this administration, the questions one may ask are who profits from claiming that it was done by Osinbajo and Fashola?

“What is the motive behind this mischievous falsehood? And in their desperation to attack these gentlemen, why are they willing to rubbish a company that produces nearly a tenth of our nation’s power as things stand today?

“Neither Vice President Osinbajo nor Mr. Fashola signed any such agreement. They were not even in office when the Azura agreements were signed. Records show that the Power Purchase Agreement or PPA for the transaction in question was signed on April 22, 2013, during the tenure of the then President Goodluck Jonathan.”

On the “take-or-pay” agreement, he said the clause as contained in the PPA “is fairly standard, especially where, as in this case, the plant is a huge one requiring enormous setup cost and the country is in dire need of the power anyway.”

Speaking further on a claim that the federal government, by the agreement, was obliged to “pay $30 million and $33 million monthly to Azura for power generated, even if not dispatched,” he said: “Nobody would build a power plant, which is a very costly and capital intensive venture, and no lender would put money in one unless someone had committed to pay for the power.

“Much of the payment goes straight to Nigeria Gas Company, Nigerian National Petroleum Company and other gas suppliers who make the power generation possible.”

The source explained that it is the Nigerian Bulk Electricity Trading Company (NBET), which he described as a 100 percent government-owned company, that takes power from electricity generating companies (Gencos) and sells to distribution companies.

According to him, in 2013, when the agreement was signed, it was a good deal for Nigeria, which he said was desperate for stable power supply and simultaneously seeking the establishment of power plants.

Also speaking on how the transaction became complicated later, to the extent of generating the current controversy, he said: “I will imagine that no one quite envisaged the current situation where electricity generating companies are kept idle because when power is produced, the transmission company may not be able to wheel the electricity fully for distribution to customers.

“It is no longer news that even when the electric power is made available for distribution, the distribution companies (Discos) at times reject it because they have failed to improve their networks and to meter their customers.

“The fear of the Discos is that they might be unable to deliver the power to customers or to collect tariffs. On their part, customers are reticent to pay because service is appalling and most of them feel cheated by estimated billing.”

While dismissing the pull-out call by the Senate, the source said: “Over 80 per cent of Azura’s power is currently being transmitted and distributed, while the rest is being used by the Transmission Company of Nigeria to stabilise the national grid.” (ThisDay)

Update news