Lagos — Failure of the Federal Government to put in place effective security mechanism to allow international oil companies recover their costs of investment in Independent Power Projects (IPPs), has stalled execution of such projects, THISDAY has learnt.

The situation is further worsened by government's refusal to provide guarantee of payment for power sold to the Power Holding Company of Nigeria (PHCN), in the event that the ailing power giant is not able to pay.

THISDAY gathered that before an IPP is constructed, there is an urgent need to reach appropriate agreements with a number of parties that would play central roles in the generation, transmission and distribution of power that is going to be generated from the project.

Prominent among such agreements is the Power Purchase Agreement (PPA) to be signed between investors and PHCN since the power to be generated is supplied to consumers through PHCN, via the national grid.

THISDAY checks revealed that after the signing of this agreement, funding institutions and other investors always demand for securitisation for power evacuated, as back-up in the event that PHCN is unable to pay.

Securitisation is a mechanism that allows an investor to have something to fall back on if one of the parties within the market fails to meet its obligations.

Outgoing Chairman and Managing Director of Mobil Producing Nigeria Limited, Mr John Chaplin, told THISDAY yesterday in Bonny Island, Rivers State, that the absence of securitisation was frustrating the company's efforts to build a 500 megwatts IPP at Qua Iboe Terminal at the cost of $500 million.