March 26, 2012 / 11:51 AM / 5 years ago

Nigeria, GE in power investment accord

ABUJA/BOSTON (Reuters) - General Electric Co (GE.N) and the government of Nigeria have signed a memorandum of understanding intended to help Africa’s second-largest economy to build up its power grid.

Nigeria aims to develop 10 gigawatts of additional electricity-generating capacity over the next decade, after it privatizes its power sector, which is seen as dilapidated and woefully inadequate.

The largest U.S. conglomerate denied an earlier statement by a spokesman for Nigeria’s power ministry who had said GE had agreed to invest $10 billion in new power plants.

“The (memorandum of understanding) does not outline investment amounts or commitments. GE will potentially invest 10 percent to 15 percent in individual projects,” the world’s largest maker of electric turbines said in a statement.

GE said it would supply power generating equipment and services to new electricity projects.

Nigeria estimates it will need $10 billion a year of investment over the next decade to meet its energy needs.

The oil-rich country has been seeking to build gas-fired stations that could tap its huge natural gas reserves. Its power sector only manages to supply the country’s 160 million people with the electricity equivalent to that required by a mid-sized European city.

Nigeria last month again delayed the time frame for selling state-owned power assets, dimming hopes of carrying out reforms any time soon.

It holds the world’s seventh-largest gas reserves, but a lack of power-generating capacity means the gas associated with oilfields is simply flared off by oil companies, while most of the rest remains underground.

GE has made Nigeria a focus of its expansion in Africa. During an investor briefing in Brazil earlier this month, top GE executives cited it as a market where the conglomerate aims to use what it calls a “company-to-country” approach, in which it aims to play a large role in infrastructure investment.

“GE is committed to working with the Federal Ministry of Power of the Republic of Nigeria, as well as private sector investors, to deliver sustainable energy,” said Jay Wileman, president and chief executive officer for GE Energy in Africa.

Nigeria’s president, Goodluck Jonathan, unveiled power privatization plans 18 months ago as a flagship policy and pledged state power generation and distribution assets would be sold off last year.

Since then, his presidency has become distracted by a violent Islamist insurgency that has swept across the north, disputes over the allocation of government oil money, and controversy over reports he intends to run again in 2015.

If he could fix Nigeria’s creaky power sector, which previous leaders have failed to do, it would unlock the huge potential of Africa’s second-biggest economy; many see power shortages as the main bottleneck to broad-based growth.

GDP growth was 7.68 percent in the last quarter of 2011, official statistics showed, and much of this was from growth in the non-oil sector.

Powering up Nigeria would also revive Jonathan’s presidency and make him a hero for many Nigerians, regardless of their tribe or religion.

Yet several deadlines to privatize the system have come and gone.

Nigeria plans to award a management contract for transmitting electricity from power plants to substations, and to privatize the bulk of six power generation plants and 11 distribution firms which supply end-users.

Manitoba Hydro of Canada, and state-owned Power Grid of India are the two companies short-listed for the transmission management contract.

Nigeria was hoping to produce 6,000 megawatts of power by the end of this year, up from 4,000 but still a far cry from the 40,000 megawatts needed.

Writing by Tim Cocks; Editing by David Hulmes and Gerald E. McCormick

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