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BusinessDay 16 Apr 2018

4 BUSINESS DAY C002D5556

4 BUSINESS DAY C002D5556 Monday 16 April 2018 Commodities Brent Oil $70.61 Cocoa US $2,524.00 NSE Biggest Gainer Biggest Loser Seplat Intbrew N698.3 4.99pc N50 -6.80pc 40,928.70 businessday market monitor Bitcoin Everdon Bureau De Change 2,827,022.17 +8.81pc Powered by $-N £-N €-N BUY SELL 360.00 363.00 501.00 511.00 435.50 445.00 FOREIGN EXCHANGE TREASURY BILLS Market Spot $/N 3M 6M I&E FX Window 360.32 0.00 -0.01 CBN Official Rate 305.55 13.18 14.31 FMDQ Close 5 Years -0.27% 13.24% FGN BONDS 10 Years -0.10% 13.51% 20 Years -0.18% 13.34% Azura IPP deploys 450mw full capacity to national grid ... as generation loss hits 1940mw OLUSOLA BELLO The country’s yearning for improved electricity generation inched closer to reality at the weekend as Azura Independent Power project (IPP) successfully deployed all it three turbines with combined generating capacities of 450 megawatts on the national grid. This is expected to improve power generation a great deal and subsequently impact positively on electricity supply generally across the country. This happened a day after the power sector suffered partial system collapsed and a severe generation drop by 606 megawatts hour (MWh/h) leading to all the generating stations sending out on the average 3,370602MWh/hour last week Thursday. There was nothing to suggest that the situation was much better on Friday even after Azura had deployed its 450 mw to the national grid, as power supply to Lagos and its environs has been poor in the last few days. According to a presidency source 1325.5MW was not generated due to unavailability of gas while lack of transmission infrastructure was responsible for 40MW not generated. Another 485MW was not generated due to high frequency resulting from unavailability of distribution infrastructure just as reduced water level at the hydro at power stations also caused the loss of 190 MW, thereby indicating that there is a shortfall of 1940mw in generation. On the whole the power sector lost an estimated N979,000,000 on April 12, 2018 due to insufficient gas supply, distribution and transmission infrastructure as well as water reserves. The Federal Government through the Nigerian Bulk Electricity Trading Plc (NBET) recently paid Azura Power the sum of N8m being twelve percent of about N66 million for test power sent to the national grid in January, sources with knowledge about the transaction told BusinessDay. Meanwhile, Nigeria’s other generating companies (Gen- Cos) will today hear judgement on a suit they filed against the Federal Government for prioritising settlement of its commitment to Azura Power in the N701billion power guarantee instituted to assuage DisCos failure to settle market invoices. The rest of the GenCos have received settlement up till October 2017 and since then their invoices have remained unsettled according to Joy Ogaji, the executive secretary of Association of Power Generation Companies (APGN). “The situation remains the same, we still have not received payment for our invoices since October last year,” she told BusinessDay by phone. Ogaji said that the legacy power plants which have the capacity to generate over 7,000MW of electricity were denied a sovereign risk guarantee only for the Federal Government to give Azura the same guarantee including a partial risk guarantee from the World Bank even when it has capacity to generate only 450MW. But Jubril Kareem, energy analyst at EcoBank does not agree with this view. “Part of the reason the Azura project was able to get funding and construction started was because the government committed to it and it has a very solid power purchase agreement based on the realities on ground. “Nigeria is one of the most expensive places to generate power and if they are being paid according to the terms of the power purchase agreement, there is nothing wrong with that. Kareem further said, “The agreement with Azura was so tight that if government defaulted on payment it has serious implications. This is unlike the other power plants which were mostly acquired from the government, it was built brand new and they had the time to mitigate all risk about not being paid.” Azura Power is the first Nigerian power project to benefit from both the World Bank’s “Partial Risk Guarantee” structure ($237 million of debt used to build the plant) and the political risk insurance supplied by the Multilateral Investment Guarantee Agency. Azura delivered on budget ahead of schedule by 7 months and could increase Nigeria’s peak generation from 5,155MW to over 5,500MW. However, analysts are concerned about the ability of the Federal Government to sustain payment for Azura Power considering the huge cost involved in settling the test power for one month.. Azura secured a $900m debt financing from a consortium of 15 banks from 9 different countries, including most of the European development finance institutions to build a 450MW Open Cycle Gas Turbine in Benin City, Edo State, Last month, it sent NBET, the market bill for test power from a single turbine of 153MW delivered to the grid on December 20, 2017. L-R: Ladi Balogun, group chief executive, FCMB Group plc; Tinuade Awe, executive director, regulations, Nigerian Stock Exchange (NSE); Oladipupo Jadesimi, chairman, FCMB Group plc; Olusegun Odubogun, non-executive director, FCMB Group plc, and Olutola Mobolurin, non-executive director, during the closing gong ceremony in commemoration of the newly appointed chairman of FCMB Group plc, at the Exchange in Lagos. Cement makers see profits drop to 5 year... Continued from page 1 ket capitalisation of N4.4 trillion has gained 13 percent year to date and trades at a price to book ratio of 5.4xs, according to Bloomberg data. Lafarge Africa has a market capitalisation of N385.96 billion, has returned -0.87 percent ytd, and trades at a price to sales ratio of 0.87Xs. Data gleaned by BusinessDay shows the major drag on industry profit growth is Large Africa Plc, a company grappling with rising costs and leverage that eroded margins. For the year ended December 2017, Lafarge Africa posted a loss after tax of (N34.60 billion) from a profit position of N16.89 billion the previous year, the lowest in five years since BusinessDay started compiling data. Lafarge profits for 2014, 2015 and 2016 were N34.66 billion, N26.98 billion and N16.89 billion respectively. Lafarge had finance costs or interest expense of N43.02 billion for the period, the highest in 7 years, brought on by interest on borrowing incurred while paying the loans of subsidiary company, UNICEM. A breakdown of the combined profit in the period under review (2017) showed Dangote Cement Plc, the largest producer of the building material recorded net income of N204.24 billion, flat from the N201.19 billion recorded in 2013. Dangote’s 2014, 2015 and 2016 profits were N159.50 billion, N181.52 billion and N186.62 billion respectively. CCNN’s profit after tax stood at N3.22 billion as at December 2017, representing a 106.50 percent surge from the N1.56 billion recorded five years ago. Industry experts are upbeat that economic growth underpinned by an increase in crude oil price and production and the introduction of foreign exchange system that help curb the crippling dollar shortage will boost future earnings of firms operating in the sector as they expect an uptick in the demand for building materials. The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017. The International Monetary Fund (IMF) has projected that Nigeria’s economy will grow by 2.1 percent in 2018. The forecast which represents 0.2 percent increase from the 1.9 percent projected in October 2017. “We expect revenue growth to be sustained amid a faster recovery in Nigeria, thanks to increased government infrastructure spending ahead of the 2019 general election notwithstanding stiff competition,” said analysts at United Capital. President Muhammadu Buhari has presented a record budget of N8.60 trillion to the National Assembly for 2018. Out of the total budget figure, N2.4 trillion has been earmarked for capital spending. Nigeria has infrastructure deficit of $2 trillion, according to the Africa Finance Corporation. Also, the 17 million housing deficit is a low hanging fruit for cement makers to grow sales volume. “We estimate that an additional two million housing units by 2020e from the public sector alone (as highlighted in the economic recovery plan), will unlock about 20-24 million tonnes (mt) of cement over 2018e-2020e,” said analysts at RMBNS, in a recent report on Nigeria’s cement industry. Lafarge Africa is spending more to produce each unit of product as cost to income ratio increased to 83.03 percent, the highest in 5 years; driven by the construction of Mfamsong evacuation road at UNICEM in Calabar which failed as well as a full impairment taken on a Pre-heater project in ASHAKACEM which the cement maker hinted it has discontinued. The company is working to reduce energy and transportation costs as part of a turnaround plan, according to Michel Puchercos, the Chief Executive Officer of Lafarge Holcim Plc.

Monday 16 April 2018 BUSINESS DAY 5

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