New Energy market report from Business Monitor International: "Nigeria Power Report Q2 2014"
Boston, MA -- (SBWIRE) -- 05/01/2014 -- We have largely maintained our optimistic forecasts for Nigeria's power sector this quarter and forecast annual average growth in electricity generation of 9% through to 2023. With the unbundling of PHCN all but completed, attention is now turning to the auctioning of 10 gas-fired power plants under the NIPP strategy - supporting our upbeat outlook. That said, there are certainly considerable downside risks to our forecasts, as highlighted by concerns about the condition of T&D infrastructure and the fact the launch of a transitional electricity market (TEM) has been delayed due to disputes over tariffs and gas supply shortages. We believe a failure to secure adequate gas feedstock remains the biggest risk to Nigeria's efforts to ramp up power generation capacity, which is needed to meet pent-up demand.
In a move that indicates Nigeria's power sector could be on the verge of realising some of its considerable potential, state-owned Power Holding Company of Nigeria (PHCN) ceased to exist in late 2013 after the federal government handed ownership of successor companies to the private sector. Although it had been eight years since the laws were passed to facilitate the process, the news was hugely significant for Nigeria as it attempts to draw vast sums of private investment into the power sector. Investment is needed to establish the generation capacity required to meet surging demand for electricity and support rapid economic growth. Nigeria possesses a host of attractive power sector specific and macroeconomic fundamentals that underpin our forecast, with huge untapped demand for electricity among the country's 180mn people, and BMI's Country Risk team forecasting average annual real GDP growth of close to 7% between 2013 and 2023.
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Taking these factors into account, we have maintained our cautiously optimistic view of the Nigerian power sector and continue to forecast annual average growth in electricity generation of 9% over our forecast period to 2023. Most of this growth will be driven by gas-fired generation capacity, with attention now focused on the sale of 80% stakes in 10 gas-fired power plants that have been constructed under Nigeria's National Integrated Power Plant (NIPP) strategy. The plants, which have a combined capacity of more than 5,000MW, will not only double Nigeria's operational capacity, but are also pertinent examples of the opportunities which underpin our outlook for the power sector. At the time of writing 42 bidders had prequalified to proceed to the bidding phase for the plants, with the auction set to open to bidders on March 7 2014 - marking another important milestone for the country's power sector.
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