Who are the sponsors of Azura-Edo?
The majority shareholder and lead sponsor of the Azura-Edo IPP is Azura Power Holdings Limited, an investment holding company developing a portfolio of world-class IPPs in Africa. The other minority shareholder of the company is the Anergi Group. Azura Power Holdings shareholders are Actis (majority shareholder), Amaya Capital (the original founder of the Azua Edo project), and Africa 50.
What is the Azura-Edo IPP?
The Azura-Edo IPP is a 461MW open cycle gas turbine power station and the first phase in a 1,500MW Independent Power Plant facility being developed near Benin City in Edo State, Nigeria. The plant is being executed in three phases: Phase 1 is now complete and was delivered eight months ahead of schedule in May 2018; Phase 2 will be the conversion of the plant into a combined cycle with a capacity of 670MW; and Phase 3 will be an extension to Phase 1 and 2.
What’s the difference between an open cycle and a combined cycle gas plant?
Open cycle gas turbines draw air from outside of the plant and compress the air in a centrifugal or an axial flow compressor. The compressor heats the air and feeds it into a combustion chamber where the gas is burnt at a specified temperature. The pressure from the burning gas causes rotation in the plant turbines. The rotational movement in the turbines generates electricity as well as driving the compressor, while the burnt gas fumes are released back into the atmosphere.
Combined cycle gas plants use both gas and steam turbines and can generate significantly more electricity than open cycle plants. These plants are capable of generating 50% more electricity because the ”waste heat” generated by the gas turbine is fed through a waste heat boiler to generate steam which is then fed to the steam turbine to generate additional electricity.
What are the key strengths of the Azura-Edo IPP?
The Azura-Edo IPP benefits from the following strategic attributes:
- Access to a secure and reliable source of gas. The Azura-Edo IPP is situated close to substantial mature and proven domestic gas reserves and located only 1km from the path of the country’s main gas trunkline, the Escravos Lagos Pipeline System (ELPS).
- Access to evacuation capacity to the electricity grid. The location of the Azura-Edo IPP was specifically chosen to ensure that all the power generated can be safely and easily evacuated onto the national grid, as a result of close proximity to the existing Benin Main Sub-Station and the new Benin North Sub-Station.
- Support from the Edo State Government. The Edo State Government is a minority shareholder in the Azura-Edo IPP through its provision of land and infrastructure. Furthermore, the EDSG has been instrumental in enabling Azura to work closely with the local communities.
- Best-in-class partnerships. Azura has established close relationships with world-class suppliers, contractors, service providers and advisors who have deep experience in their respective industries and in operating in Nigeria and Africa.
- Commercial Power Purchase Agreement with the Nigerian authorities. Azura signed a Power Purchase Agreement (PPA) with the Nigerian Bulk Electricity Trading PLC (NBET), the Federal Government parastatal established for the purpose of acquiring the bulk of the power generated from new IPPs.
- Strong financial support from the World Bank Group. The Azura-Edo IPP participates in the World Bank’s Partial Risk Guarantee program and has Political Risk Insurance placed with MIGA, both of which ensure the bankability of the project to lenders and investors
Why did Azura choose Benin and Edo State to locate its plant?
Azura conducted a comprehensive study of various locations in Nigeria before deciding to build a plant in the North Eastern outskirts of Benin City. The main reasons why this location was chosen were:
- Benin is one of Nigeria’s key nodal points for evacuation with the city located within a radius of multiple high voltage transmission interconnections. Azura will evacuate its power through the adjacent Benin North Substation.
- The project site is located only 1km from the path of the country’s main gas trunkline, the Escravos Lagos Pipeline System (ELPS). Compared to building a dedicated pipeline, this means that significantly less capital and time is needed to connect the gas required to the power station. Furthermore, the capacity of the ELPS pipeline is being doubled from 1 billion scfd to 2 billion scfd through the addition of a second (twinned) gas pipeline, which means there will be sufficient capacity to transport fuel for Phase 2 of the project.
- The site is located in close proximity to Koko Port, which has a proven capacity to handle the inward shipment of the heavy equipment required at the site.
- There is good road access directly to the site and excellent road access between Koko Port and the site with bridges that have a proven capacity to withstand the transportation of heavy equipment.
- From an environmental and social perspective, there is minimum disruption to local communities and the environment resulting from both the actual site location and the routing of the second ELPS pipeline (which is using the same ‘rights of way’ as the existing ELPS pipeline).
- From a security perspective, over the past two decades Edo State has been less exposed to acts of civil disturbance than the other major oil and gas producing states in the Federation, providing a secure working environment for both local and international workers.
Why does the Edo State Government have an equity stake in the project?
Azura has acquired approximately 100 hectares of land which is large enough to facilitate the construction of both phases of the plant. The Edo State Government (EDSG) has provided this land to the Azura project in exchange for a small minority stake in the project, equivalent to the value of the land and associated infrastructure support.
The land was compulsorily acquired pursuant to Sections 28 (1) and 38 of the Nigerian Land Use Act of 1978, the applicable legislation which vests legal ownership of land in State Governors, held in trust for the people. The actual acquisition process commenced with the revocation of all existing rights and interests in the land, and a call for comments and complaints from affected parties for the purpose of paying compensation. The notice of revocation of extant rights and the government’s intention to make use of the land was published in the official Government Gazette of 16th June 2011 and national newspaper (Vanguard) and State newspaper (Observer) both on 23 June 2011. The land acquisition process was officially completed with the transfer of title to Azura by the issuance of a Certificate of Occupancy in June 2012.
In addition, EDSG’s equity stake in Azura enables the State Government to ensure that its and its peoples’ interests are aligned to that of Azura, thus promoting the corporate and social responsibility that both EDSG and Azura are committed to upholding.
What steps has Azura taken to ensure that local communities have been taken care of and that all key environmental and social issues have been addressed?
Azura is fully committed to ensure community rights are respected and all environmental and social matters are addressed, in line with international best practice and local legislation and regulation.
To this end, Azura works with leading experts such as ERM, a leading environmental consultant approved by the World Bank, to conduct the technical assessments required by the World Bank, IFC and all investors in the project, specifically:
- An Environmental and Social Impact Assessment (ESIA), which assesses the key impacts of the project on the environment and society in and around the location, and
- A Resettlement Action Plan (RAP), which assesses the impact upon the local communities that arise from the relocation of house-owners and businesses and outlines a clear action plan to relocate the communities as well as the levels of compensation payable.
Azura has also prepared a Community Action Plan, with a leading NGO and ERM, to implement the recommendations of the ESIA and RAP. Furthermore, Azura is committed to providing long term support to the community and will shortly be conducting an assessment of the needs of the local communities to ensure that adequate resources are dedicated to those areas of support that are most needed.
Does Azura have a license for its power plant?
Yes, a 10 year power generation license was awarded to Azura by the Nigerian Electricity Regulatory Commission (NERC) in November 2011. A subsequent extension of 5 years was awarded by NERC, taking the license term to 15 years.
Who supplies the gas for the power plant?
The gas for the Azura-Edo IPP is supplied under a long term Gas Sales & Purchase Agreement signed with Seplat Petroleum Development Company PLC (SEPLAT).
How does the gas get to the power plant?
The gas supplied to the Azura-Edo IPP is transported via the country’s main gas trunkline, the Escravos Lagos Pipeline System (ELPS) which is run by the Nigerian Gas Company. The interconnection point with the ELPS is only 1km away from the Azura-Edo IPP.
How much did the plant cost and where did the money come from?
This is a $890million dollar project that has been financed from both equity and debt investors. There are 16 lending institutions providing the debt to the project and four equity investors. Our equity investors are Actis, Africa50, Anergi Group and Amaya Capital.
Who built the power plant?
The Azura-Edo IPP was constructed by a consortium composed of Siemens AG; Siemens Nigeria Ltd; and Julius Berger Nigeria PLC.
When did construction begin?
Construction started on 5 January 2016. Operations began in May 2018, eight months ahead of schedule.
Who operates and manages the power plant?
Azura signed an agreement with PIC (Marubeni) who perform the role of the Operations & Maintenance Contractor. They report directly to Azura’s management team who supervise and manage the operations and maintenance of the plant.
How has Azura managed the risks of the project?
Azura has taken a number of steps to de-risk the execution and operation of the project. These include the following:
- Limiting the company’s exposure to major supply chain constraints or interruptions through its considered choice of site location and through the purchase of political risk insurance and contingent business interruption insurance.
- Limiting its exposure to delays or deficiencies in construction by structuring agreements with its EPC contractor where a portion of the payments are retained until successful completion and through close involvement in the choice and management of the civil works contractor; and
- Protecting its revenue stream through World Bank & MIGA payment guarantees, letters of credit and contract termination insurance.
Who buys the power generated by the Azura-Edo IPP?
A Power Purchase Agreement (PPA) at fair commercial terms was agreed and executed with the Nigerian Bulk Electricity Trading PLC (NBET), a Nigerian government entity that purchases the electricity supplied by the Azura-Edo IPP for on-sale to the country’s eleven distribution companies (DISCOs).
Which parties have you worked with to make this happen?
The development of a power station requires close cooperation with a diverse set of Government bodies that have a commercial or regulatory interest in the industry. The key Ministries, Departments and Agencies with whom Azura interacts are the following:
What are the employment opportunities at the power plant?
Azura and its various partners directly employed up to 1,000 people during the construction of the power station with many more jobs being created in and around the communities as a result of more power being available to local businesses and government.