Encon Pulls Out Of The Captive Power Market - Africa’s premier report on the oil, gas and energy landscape.

Encon Pulls Out Of The Captive Power Market

Encon withdraws from captive power market

Energy Company Nigeria(ENCON) is withdrawing from the Captive Power Market.

The country’s top private electricity producer is staking its immediate future on two 144MW gas fired plants, each to be located in the west and east of the country. The first of the two plants, under construction at the company’s own site in Ikorodu, near Lagos, is for supply to the national grid. The second is to be sited at the Onne Oil and Gas Zone in Rivers State, in the east of the country. Encon hopes to begin construction of the Onne Plant by mid- 2013. The plant is as a result of the company winning the bid for 25 years power supply concession with the Nigerian Ports Authority(NPA), Federal Ministry of Transport.

Encon considers these two plants its flagship projects, going forward, as it weans itself from the captive power projects on which it built its reputation. Between 2008 and 2009, the company completed a Power Plant each for various companies, including Academy Press, the country’s largest book printing firm; Unilever Plc, the fast moving goods company, and African Steel Nigeria Limited, the steelmaker, all located within and around the outskirts of Lagos, the country’s commercial hub. Encon also installed and maintained a 15MW plant each at Lafarge’s Cement Factory in the southwestern town of Ewekoro and another 15MW  plant on the Lagos Marina, christened “Island Power”, to supply various facilities of the state government, including the General Hospital and the City Hall, located in a cluster around Lagos Island.

Encon’s exit from this “direct -to –the-heavy- user type of electricity supply” will be gradual. It sold out its stake in the  Island Power project because its foreign partner decided it was leaving the fossil fuel business. It found itself having to leave the Lafarge project because the cement company built its own power plant.  Encon is of the view that the major risk of installing a power plant on the premises of a heavy user is that the user may change its mind anytime and the provider would have to seek another user for the plant.

With the ongoing electricity reform agenda of the Nigerian state(including reflective pricing and market deregulation), provision of power direct to the grid, or long term Build Own and Operate facilities, seem the way to go. Encon, which has been a pioneer in the Captive Power Market, hopes to prosper with the reconfiguration of the electricity supply market. “The two projects (2x144MW) will cost about $45MM”, Abidoye Ayoola, the company’s Executive Chairman, told shareholders at a meeting in Lagos. “They will bring about a quantum leap in return on investment, capital appreciation and robust balance sheet”.

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