The document discusses public-private partnerships (PPPs) for infrastructure projects in Nigeria's power sector. It defines PPPs and outlines their benefits, such as additional funding, improved planning, and better value. The key areas for potential PPP investments are identified as gas production and transportation, power generation, transmission infrastructure, and maintenance workshops. Financing options and the roles of the public and private sectors are examined. Risks are identified and a proposed risk allocation matrix presented. The bidding process and ensuring overall project success are also covered. Lessons from South Africa's renewable energy PPP program are noted.

2. Diagnosis

3. Infrastructure Deficit

4. Infrastructure Deficit

5. What is Public Private Partnership?
―A public-private partnership (PPP) is a long-term contract
between a private party and a government entity, for
providing a public asset or service, in which the private party
bears significant risk and management responsibility, and
remuneration is linked to performance.‖
Source - PPP Knowledge Lab

6. The Need…
PPP in Nigeria’s Power Sector
• Governments need to enter into public-private partnerships
(PPPs) to increase the availability, quality, and resilience of
infrastructure in the power sector, while sharing the risk
involved in providing them with the private sector.
• Additional funding for infrastructure
• Improved planning, coordination and power projects
• Regular maintenance of power infrastructures
• Better value for money
• Ensure transparency
• Reduce construction time and costs
• Improve service delivery
Well structured PPP can help achieve

7. PPPs: The better alternative
Source - Public-Private Partnerships Policy and Practice: A reference guide (Version 2.0)

8. PPP Investment in the Power Sector
The privatization of the generation and distribution assets in
Nigeria‘s Power & Energy sector narrowed the 3 possible area of
PPP investments to:
• Fuel Supply for Power production
• Power generation and
• Power transmission
Note:
Power distribution is not a place for PPP investment.
Because Government continues to hold a percentage of distribution assets
despite the privatization program saw the sale of all the gas fired plants in
the country, the concessioning of all the hydro-power plants, and the sale
of distribution infrastructure such that only the private owners are
expected to invest in them.

9. Core Areas of PPP Investments
• Gas production and transport - Many power plants being
developed in Nigeria that do not have visibility for gas supply. Yet we have
fields with associated and non associated gas which can be utilized for
this purpose.
• Trunk pipeline for transportation of gas - to various parts
of the nation for power generation as well as other industrial processes.
• Hydros-power plants
• Coal plants
• Transmission Infrastructure - Building the network especially at
higher tension, including a super grid network for both intra (internal)
and inter (between nations).
Other areas include: Investments in large maintenance workshops,
training facilities etc. (Private sector can do much better on their own provided such
projects are financially sustainable).

10. FINANCING the PPP Investments
• Equity provided by the project‘s company shareholders
• Debt provided by emerging economies such as China through EXIM
bank
• Government loans or Grant Finance
• Bonds
• Development Finance Institution e.g African
Development Bank (AFDB), etc.
Finance Structure
Non- Recourse Financing
• lenders can be paid only from the project company‘s revenues,
without recourse to the equity investors.
Adapted Non- Recourse Financing
• usually by smaller PPPs; used to achieve greater contractual
flexibility, or lower the financing cost.

11. INVESTOR PARTICIPATION IN THE PROJECTS
The government as well as the private sector proponent can take certain
steps to enable projects attract adequate financing:-
• Proper Project Appraisal - emphasis on identified public
needs that will provide the requisite cash-flows from which private sector
investment will be recouped
• Government Intervention - providing support (guarantee
continuity of project – which assures investors; raising bonds for projects)
• Viability Gap Fund - a sovereign grant to close the commercial
gap on a PPP infrastructure development project usually necessary where
the cost of infrastructure financing is so high that the revenue stream
therefrom may be insufficient to yield sufficient returns
• Excellent Legal Framework - risk allocation and mitigation
strategies, institutional roles and responsibility.

12. PRIVATE SECTOR MOTIVATION for the projects
• Large and lucrative market - for infrastructure finance
from a vibrant population yearning to leverage on better
infrastructure.
• A considerable number of projects with varying risks
to choose from.
• International investors see the growing power sector
needs in Nigeria as a unique opportunity to invest long
term capital.
• Banks preference to finance stable long-term
infrastructure development projects.

13. RISK IDENTIFICATION on the PPPs projects
• Design, construction and commissioning: risk of construction
delays construction, cost overruns, or poor design or construction quality
• Operation: the risk of interruption in service or asset availability, or that
costs are higher than expected
• Demand, and other commercial risk: risk that demand for the
service is not as predicted or revenue collection
• Legal, Regulatory or political: risk that laws or regulations or
political winds will change that affect the project
• Default: risk that the private party is not financially or technically
capable of implementing the project
• Economic or financial: risk of changes in interest rates, exchange
rates, or inflation
• Force Majeure: risk from natural disasters, war or civil disturbance
• Asset value: risk that the value of the assets at the end of the contract is
not as expected.
The Risk register includes:

14. ALLOCATING RISK on the PPPs projects
2 main goals of Risk Allocation:
• To create incentives for the parties to manage risk well—and thereby
improve project benefits or reduce costs.
• To reduce the overall cost of project risk by ‗insuring‘ parties against
risks they are not happy to bear
The Risk Allocation Principle:
Allocation is based whoever can manage it best.
“management” is defined as:
• Best able to control the likelihood of the risk occurring
• Best able to control the impact of the risk on project outcomes, by
assessing and anticipating a risk well and responding to it.
• Able to absorb the risk at lowest cost, if the likelihood and impact of
risks cannot be controlled.
(To achieve better value for money)

15. Proposed Risk Matrix for PPPs projects in
the Power Sector Nigeria
RISK Private Partner Public/Government
Construction ●
Operation ●
Commercial Risk ●
Legal/Regulatory ●
Default ●
Economic ●
Asset Value ●
Force Majure ● ●
Note: This risk matrix is my proposition based on the information available having considered successful
completed PPP projects in Nigeria and other sub-saharan African countries.

16. The Bidding Process for the PPP
The bid evaluation should involve a two-step process to
ensure value for money considering Price, Quality,
Risk & Whole Life Cost
• Bidders must satisfy certain minimum threshold requirements
in six areas: Environment, Land, Commercial and Legal,
Economic Development, Financial, and Technical.
• Bids that satisfied the threshold requirements can then proceed
to the second step of evaluation, where bid prices can count for
70 percent of the total score, with the remaining 30 percent of the
score given to a composite score covering job creation, local
content, ownership, management control, preferential
procurement, enterprise development and socioeconomic
development.

17. Institutional Roles of the Public in the PPPs
• Right level of public involvement in the PPP process
and program can make or break the legitimacy of a
PPP program, and directly contribute to good
governance.
• Direct public participation by service users/other
stakeholders in the PPP process helps improve project
design and performance.
• Making PPP projects transparent enables PPP
performance to be a factor in public policy debate,
and in the formation of public opinion on the
government‘s overall performance.

18. Ensuring a successful PPP in the Power Sector
Economics
- Sound economic fundamentals; basic elements of the business case
have to work
- Structure & choose the right partnership that optimizes cost, quality &
service.
Politics
- High level political support and commitment by the government
- Building stakeholder support
- Attention to Social & Environmental impacts
- A stable and supportive regulatory environment.
Execution
- Using a disciplined approach
- Securing the right mix of global and local experts
- Supporting a transparent and competitive bidding process
- An effective plan for ongoing contract monitoring and review.
3 Basic Ingredients

19. This artifact does not profess to be anything more than a thought
provoker regarding the delivery of better infrastructure in Nigeria’s
power sector leveraging on Public-Private Partnerships It should
also be pointed out that the thoughts shared in this artifact may
also be applicable outside of the Nigerian context.
South Africa's Renewable Energy PPP program provides a
valuable opportunity to learn how to procure energy projects
quickly and effectively in developing countries. Of course, not all
of the success factors can be easily duplicated, particularly in
Nigeria. Some can be replicated with proxies; others may be
ignored.
Lessons from South Africa : PPPs projects

20. Email: olaniyandamilola@gmail.com