Dr. Bart Nnaji, 51, holds a Doctorate in Industrial and Systems Engineering from Virginia Polytechnic Institute and State University in the United States. He is also a tenured professor of Computer Integrated Manufacturing and Robotics in the Department of Mechanical and Industrial Engineering at the University of Pennsylvania, also in the United States.
In 2003, Nnaji began traveling back and forth to Nigeria to build a world-class, indigenous power company. He is currently Chairman and CEO of the company, Geometric Power Limited, or GPL, a US$250 million, 140 MW, integrated generation and distribution power plant.
Nnaji built upon his previous experience in Nigeria’s power sector to create his company. In 1993, he served as Nigeria’s Federal Minister of Science and Technology. In 2000, along with his joint venture partner Renatech International Limited, Nnaji built and managed a successful 15MW emergency power station in Abuja.
Challenges to Starting the Business
For Nnaji, his wife and friends, the challenges of starting his company were enormous:
- He entered a sector that is typically unreceptive to entrepreneurial activity and is a bastion of established power companies.
- The sector is a very problematic infrastructure sector in Nigeria primarily served by a poor performing state monopoly.
- While the legal and institutional framework for the sector was enacted in 2005, there is no real track record and the regulations are in development.
- As head of an indigenous company, Nnaji faced peculiar problems in the area of project development – garnering credibility among experienced Engineering Procurement Contract contractors, negotiating with affiliates of oil majors such as Shell, and negotiating power purchase agreements with major industrial companies.
- Negotiating financing agreements for bridge finance with local financial institutions and long-term financing with international lenders groups proved difficult.
- Managing the sometimes major contradictions in ensuring the right political support for GPL versus completing the contractual underlying agreements for such a major private company.
The Changing Nigerian System
Nigeria’s banking industry consolidation, which took place in 2005, reduced the number of banks from 89 in 2004 to 25 at the end of 2005, putting the banks in a better position to undertake large and complex deals previously unimagined. The country’s opening economy has also increased foreign direct investment inflow, increased oil prices and has increased Nigeria’s BB-rating by international rating agencies. Local and international investors are now more confident in investing in Nigerian businesses including GPL. With these positive developments, GPL has been able to complete its bridge financing plan and has made significant progress on its longer-term financing.
“I have a fundamental belief that there is nowhere that it is written ‘on the forehead of Nigeria’ that ‘thou shall not have reliable quality and affordable electricity’,” said Nnaji. “Our goal is to build Power projects that make economic sense and at the same time have social value that can lift the quality of life of our customers and the community.”
The World Bank Group’s Role
The World Bank Group worked with Nigeria’s federal government in developing and enacting the Electricity Act of 2005, and in unbundling the National Electric Power Authority thereby paving the way for private sector participation in the power sector. The International Finance Corporation (IFC), which is the private sector arm of the World Bank Group, also played an important role in guiding GPL through the project development process from the onset, as its team lacked the requisite experience. With Trust Funds and internal power expertise from IFC, external consultants were retained to assess the commercial, legal and economic aspects of the project. IFC also worked with and assisted the company in identifying strategic and financial partners. The presence of IFC in the transaction has encouraged investors who before were not confident about the project or the experience of its developers. IFC is considering a total investment of about US$60 million in a combination of equity, senior debt and quasi-equity.
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