Essar plans $2bn Nigeria investment

Essar, the Indian conglomerate, is planning an investment of $2bn or more in Nigerian power plants if Africa’s most populous nation sticks to reform plans designed to overcome crippling energy shortages, people familiar with the matter said.

Several engineering and power groups have been linked with potential Nigerian investments in the months since Goodluck Jonathan, president, unveiled a blueprint to attract the tens of billions of dollars required to meet the electricity needs of the country’s 150m people.

Essar’s interest is among the most ambitious and would see it invest in power capacity of at least 2,000 megawatts, equivalent to two-thirds of Nigeria’s entire average output at present, at an estimated cost of $2bn.

“The feeling is that this market has a lot of potential,” said one person with knowledge of Essar’s plans.

But the person echoed the view of other potential investors who have warned that projects will only materialise if the government drives through market reforms to make the power sector commercially viable.

Once the reforms were in place, the person with knowledge of the plans said Essar was “ready to go”.

Essar would primarily seek to build new power plants but might also look to purchase assets in the planned privatisation of the Power Holding Company of Nigeria, the stricken former monopoly which is to be broken up into six generation companies, a transmission network and 11 regional distribution companies.

“Essar is looking for the right opportunity to invest several billion dollars in Nigeria,” a person familiar with the matter said. “They are working closely with the government and are ready to get things started as soon as possible.”

“They are definitely interested,” added a senior Nigerian power official of the Indian group.

Nigeria endures one of the world’s lowest rates of electricity production per capita, despite being a key oil and gas supplier to the US and Europe.

Officials forecast that on current trends the lack of power would cost the country an annual $130bn in thwarted economic activity over the coming years, hampering Nigeria’s ambitions to join the big emerging economies.

Thursday’s conference for potential investors at the presidential palace in Abuja, the capital, drew delegates from Chinese and Indian groups as well as western engineering companies such as Siemens and Rolls-Royce.

Nigerian financiers and others thought to include investors from the UK and the Gulf are looking to make power investments under the new regulatory regime, which aims to tap the country’s vast untapped stocks of natural gas.

India’s Power Grid Corporation, Canada’s Manitoba Hydro and Ireland’s Electricity Supply Board are the final three bidders hoping to manage the transmission network.

The sale of the distribution companies and power stations is scheduled to be concluded by May.

Essar said it was “looking at growth and investment opportunities … in India and other emerging and growing economies”.

Another person familiar with the situation said the Nigerian investment would come through Essar Energy, the London-listed group majority-owned by Mumbai-based Essar group.