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Powering progress: How Elektron Energy’s first-of-its-kind power plant will drive economic growth

Powering progress: How Elektron Energy’s first-of-its-kind power plant will drive economic growth

Nigeria, despite being Africa’s most populous nation, has been grappling with significant challenges in its power sector for many years.

The demand for electricity in Nigeria far exceeds the supply, resulting in a substantial gap between the two. This gap leads to frequent power outages, inadequate access to electricity, and reliance on alternative and often unreliable sources of energy like generators. It poses a significant hindrance to economic growth, industrial development, and the overall quality of life for Nigerian citizens.

These challenges have necessitated the involvement of private stakeholders to bridge the power generation gap. Rising to the occasion is Elektron Energy Development Strategies Limited (Elektron Energy), an energy infrastructure company that acquires, develops and owns energy infrastructure projects in West Africa. Partnering with Eko Electricity Distribution Plc. (EKEDP), Elektron Energy has embarked on a 30-megawatts (MW) embedded natural gas-fired power plant in Lagos, Nigeria worth $50 million.

This power project is a welcome development for the residents of Victoria Island who live and do business in this part of Lagos state and this is owing to the fact that gas-fired power plants are widely used around the world due to the abundance of natural gas reserves and their flexibility in responding to fluctuations in electricity demand. They can be quickly started, stopped, or adjusted to meet changing power needs, making them suitable for both base-load and peaking power generation.

In addition to this is that this embedded Independent Power Plant (IPP) will supply uninterruptible electricity through dedicated 33kV and 11kV distribution networks exclusively to identified customers within the Victoria Island franchise area of Lagos state and it is regarded as the first of its kind because a natural gas IPP will be directly embedded into Disco’s distribution network for supply to identified end-user customers.

Furthermore, this project would uniquely address two critical areas of focus in the Energy Sector: first, natural gas utilization and second, dedicated power generation. The project has the potential to eradicate up to 1000 diesel generators within its coverage area, drastically reducing emissions and promoting a greener environment.

Considering that private stakeholders play a crucial role in bridging the power gap in Nigeria and their involvement is essential for increasing power generation capacity, improving the efficiency of the power sector, and expanding access to reliable electricity, encomiums have poured in for Elektron Energy’s collaboration with Eko Disco to solve the country’s power challenges.

Babajide Sanwo-Olu, the Executive Governor of Lagos State in particular, while speaking at the groundbreaking ceremony held in Victoria Island on Tuesday, July 11, through his representative, Olusola Shasore, the Permanent Secretary of the Ministry of Energy and Mineral Resources said, “We understand that reliable steady power builds commerce, commerce builds capital and capital brings industrialisation and industrialisation brings employment to our youths, which is our area of interest.

Read also: NESI constitutional amendment: Making the difference in Nigeria’s electricity crisis

“We are available to whoever is interested in bringing power to the state because we have to do everything we really need to do for Lagos to have power as the economic hub of the country. We are in very interesting times with the New Electricity Act and it can be very good times for us if we are very collaborative. We believe that it is the private sector that would drive this achievement for us.”

Tola Talabi, the CEO of Elektron Energy, in his speech during the groundbreaking ceremony acknowledged the presence of notable dignitaries such as Tariye Gbadegesin, the Managing Director and Chief Executive Officer of ARM-Harith Infrastructure Investment Limited, the co-equity sponsors of the embedded IPP; the Board and Management of Elektron Energy including the Chief Operating Officer (COO), Mr Jide Onakoya; the Board and Management of Eko Disco; the Debt Providers: FBN Quest, Bank of Industry (BOI), Infra Credit; and the technical partners, Wartsila.

He also said, “We are excited about this project because we believe it will mark a significant turning point in the Nigerian power sector. It would be the first time that an embedded power plant would be built in partnership with a distribution company. We expect to and we look forward to commissioning this project in 18 months’ time.”

Talabi added that the journey to this project started eight years ago and it is proof of the removal of the regulatory and legislative roadblocks that existed years ago, labelling the project a major milestone and turning point in the Nigerian power sector.

This power project, according to the Principal and Chief Financial Officer of Elektron Energy, Deen Solebo, would cost $50 million, with a construction timeline of 18 months in addition to the potential to eradicate up to 1000 diesel generators within its coverage area.

He said at the ceremony, “VI Power is meant to be a 30-megawatt power plant that we will build on this site and it will serve maximum-demand customers who are commercial off-takers that have intense electricity needs fundamentally. We signed a power purchase agreement with Eko Disco last year and a connection agreement which allows us to jointly manage with Eko Disco the distribution network in the Victoria Island power area and also to help regulate the billing and revenue collection from the customers.”

Solebo mentioned that the site of the power project belongs to Eko Disco, revealing that the partnership with the Disco is quite extensive. He added that “it effectively allows us to fulfil one of the Nigerian Electricity Regulatory Commission (NERC)’s policies of encouraging embedded generation power in the country. This is the first of its kind that has seen daylight in this country and we hope this can be an example of how you roll them forward.”

Solebo also disclosed at the groundbreaking ceremony that the project has two phases: a distribution aspect that involves more than five dedicated feeder networks which allow power to be taken directly to the customers and the building of the Independent Power Plant (IPP) itself.

Tariye Gbadegesin, the managing director and chief executive officer of ARM-Harith Infrastructure Investment Limited, the co-equity sponsors of the embedded IPP, while speaking also extended appreciation to the Board of Elektron Energy for releasing the initial capital while commending Eko Disco for their foresight on the project.

Founded in 2011 and headquartered in Lagos, Elektron started as an energy trading outfit and morphed into an energy infrastructure platform company engaged in developing and operating prime energy infrastructure projects in West Africa, with a key focus in its home market, Nigeria. Elektron also considers strategic opportunities in complementary energy ventures that leverage the company’s expertise and relationships to yield outsize returns.

The concept of “prime” projects refers to sustainable infrastructure assets designed for long-term contractual off-takes with credit-worthy counter-parties; in stable regional markets supported by realistic economic and geo-political fundamentals.

Elektron’s business model is based on a staged development plan to create value by combining its indigenous knowledge and execution capabilities in consultations with strategic, technical, regulatory and financing players.

The company has devised comprehensive strategic roadmaps across the power, oil and gas infrastructure verticals; leading to a near-term project bank of four viable projects representing approximately $150M of total assets. Elektron owns Alausa Power Limited (“ALPL”), a special purpose vehicle that operates a leading 10.6MW IPP in Lagos State.