$10 Million Power Plant in Banana Island Idles Away as Residents Union, IPP Owners Tango

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Its glistering appearance in the Lagos sun and the calm around the location belie the power and raging controversy surrounding a completed $10million, 6 megawatts gas-fired power plant which idles away in Banana Island, an enclave of the rich and powerful in Lagos.

The modern power plant, the envy of many less endowed Nigerian communities, is rotting away over a laughable dispute, despite residents saying they groan under massive energy bills arising from the galloping cost of diesel, according to investigation by BusinessDay.

 Unlike anywhere else in Lagos, Banana island via a strange deal with EKO Disco, enjoys up to 18-19 hours of power supply daily from the grid but a survey of residents in Banana shows that average monthly cost of power from Eko Disco plus additional diesel cost amount to N199,977  monthly while the proposed combined GELMARK tariff for a 24-hour supply stands at N96,012, translating to 52 percent savings for the residents. Now many of the residents are furious at their leaders.

The construction of the power plant, scalable to 15MW, was fully funded by GELMARK Power solutions Limited promoted by Akinwole Omoboriowo, following an agreement with the management of Banana Island Property Owners & Residents Association (BIPORAL) Lagos, who negotiated and signed the contract on behalf of the residents.

 According to contract documents seen by BusinessDay, in 2013, GELMARK agreed and undertook to build a plant to generate and distribute electric power for the exclusive use of BIPORAL, for 15 years under a Build, Own, Operate and Transfer, (BOOT) investment structure, which means ownership of the plant will revert to the residents after 15 years.

 Everything seemed to have gone well until the project was completed and then the shocker came when in a surprise repudiation of the agreement it entered into, the resident association leadership declared the contract illegal.

The executive gave as grounds for disowning the contract, the claim that GELMARK had no license from Nigerian Electricity Regulatory Commission (NERC) and that the contract terms violated provisions of Electric Sector Power Reform Act (ESPRA) and Multi-Year Tariffs Order (MYTO) made by NERC.

 “The aforesaid agreement was therefore entered into in violation and contravention of the mandatory provisions of the applicable laws and the agreement is therefore illegal, null and void, invalid, unenforceable and of no effect whatsoever,” said a November 5, letter signed by BIPORAL management which until this time, had committed no funds and so had nothing tangible to lose even if the dispute were to last a lifetime.

 GELMARK, in a January 8, 2016 response, refuted these claims, stating that the Electricity Power Supply Agreement (EPSA) with BIPORAL was not entered into in violation of any law in Nigeria, or in disregard of any known or existing process in BIPORAL, and that some of the  members of BIPORAL management with whom the negotiations took place are in the current exco of BIPORAL Management now questioning the transaction.

 “The GELMARK IPP was established following due diligence and is not in breach of any process in place by BIPORAL for the engagement of our services or investment. The transaction was negotiated by the entity and representatives empowered and authorised to do so on behalf of BIPORAL,” states the letter signed by Gbenga Adeyeri, GELMARK’s deputy general manager, commercial and fuel operations.

 The ESPRA 2005 mandates that a power asset owner is required to obtain a requisite license, a duty GELMARK says falls squarely on BIPORAL, who owns the asset, according to the EPSA entered into by both parties.

 A surprise Federal Ministry of Power, Works, Housing and NERC which are desperate to get every available power in Nigeria into homes and offices, have not condemned parties to the Banana island transaction, or impugned the integrity of the contract signed by BIPORAL and GELMARK.

Several leading authorities contacted by BusinessDay raised several issues with the position of BIPORAL, including the fact that it is wrong for it to embark of a unilateral pull out of a contract it duly signed and it is doing so without any economic benefit to the members it claims to be representing.Others, especially those in government, worry the dispute means many more Nigerians cannot be served with power.

In two separate letters dated February 25, signed by Louis Edozien, a permanent secretary from the Federal Ministry of Power, Works, Housing and made available to BusinessDay, the ministry commended the arrangement and called for urgent but amicable resolution. BIPORAL’s chairman and property magnate, Chudi Uboi told BusinessDay he did not get the letters.

 BusinessDay’s cost/benefit analysis which assumed 85 percent power availability from Eko Disco at N33/kWh inclusive of a N4/kWh BIPORAL levy, an average 5-bedroom house on Banana island expends over N60,000 for public power and must spend an addition N150,000 per month for own power from a 27-Kva generator at a diesel cost of N170/litre.

GELMARK claims and analysis independently done by BusinessDay, show that this same average household will be saved as much as 52% of its current energy bill if the dispute is resolved and supply provided by the IPP and this is on the basis of a N54/kWh IPP charge of N40 plus BIPORAL levy of N4/Kwh and agreed Eko Disco charge of N10/kWh for its distribution assets in the island.

The average monthly cost of power from Eko Disco and diesel cost amount to N199,977  monthly, while the proposed combined GELMARK tariff stands at N96,012, translating to 52 percent savings for the residents, many of whom hitherto were unaware of this huge savings.

 On top of this, a resident moving into Banana does have to bear the burden of coming along with a generator and the sunk cost involved; he or she will not require the about 12-20 metres sq. of space to house the generator and the resident will be free from the significant health hazard associated with generator noise and diesel fumes, which is today the case.

Most of the residents interviewed by BusinessDay  said they were ignorant of the full facts of the dispute and some did not even know there was a power plant which they will own and which had been completed and ready to provide uninterrupted power to the island.

 However, a prominent early resident in Banana island told BusinessDay that the executives do not have the support of the majority of residents in their conduct in relation to the power supply agreement but the residents are either too rich or too busy to care.

 According to him, “it is like what is happening in the larger Nigeria, where a handful of people or leaders are elected and you struggle to find any alignment between what they do and the will or desire of the people they claim to lead.”

 Independent power projects undertaken by Genesis Group include: 10MW IPP in Guinea Bissau (2006) Co-development of 50MW Emergency Power Project (EPP) Ghana (2007) 20MW on-Grid Generation in Sao Tome and Principe, 84MW Off-Grid Distributed Power Project (DPP) at NNPC’s Port Harcourt Refinery.

 On-going projects include a 360MW Gas-fired multiple projects concession for the Republic of Benin, Expansion of the existing 84MW at the Port Harcourt Refinery with additional 120MW (204MW Capacity in total), Calabar Free Trade Zone Off-Grid 15.3MW Project 58MW Multiple embedded generation for the EKO Electricity Distribution Company.

 “We are glad to say as a company, that since then, the stress of providing power for our operations has been completely eliminated and we can focus on the business of refining crude oil and making petroleum products available to Nigerians without distraction,” stated Bafred Enjugu, managing director of NNPC’s Port Harcourt Refinery after the construction of its 84MW Off-Grid distributed power project by Genesis Group.

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