22nd November, 2013
New owners of power distribution and generation companies face an arduous task on the way to stable electricity supply
The privatised power generation and distribution companies were handed over to their new owners on Friday, 1 November 2013. But with the initial bridge crossed, even more daunting tasks lay ahead. While the successful handover of the assets, facilities, generation and distribution plants of the unbundled Power Holding Company of Nigeria, PHCN, to new investors is expected to mark a new era of stable power supply, inherited challenges may be a major drawback. Although the private investors had to shell out $2.5 billion as the total bid price to acquire the companies, taking stock of the assets in preparation for even more funds to be expended will be the next hurdle. Estimated post-privatisation sums required to sustain operations and revamp the agelong rot in the power sector towards boosting electricity supply amount to more billions of dollars. While each Generation Company, Gencos, may need to raise over $4 billion in the next five years toward this purpose, the Distribution Companies, Discos, will require sums in the region of N60 billion each. The mandate of raising full-installed capacity by 6,976 megawatts may be unattainable without enough funding for the necessary upgrade. About $3.5 billion is required for upgrading the transmission grid to evacuate generated power in the next three years. This buttresses comments from government sources at the Ministry of Power and the Transmission Company of Nigeria, TCN, that the neglect of power transmission infrastructure in particular, by successive governments, led to the weak state of the nation’s transmission network.
For the last ten years the quantum of power being generated across the country, despite being extremely insufficient, exceeds what the transmission capacity can handle. In tune with pundits, the Minister of Power, Chinedu Nebo, considers power transmission as “the weakest link in the power equation”, with increased power generation now making appropriate transmission capacity an urgent assignment. Past projects to boost transmission infrastructure have suffered inexplicable delays. Through the TCN, the federal government has completed about 21 power transmission projects in the last three years. Sixteen of the projects were completed in 2012, while the remaining five were inaugurated this year. But several projects finished last year dragged on for over a decade before completion. For instance, the 2×30/40MVA,132/33kv substation in Umuahia and the 132kv double circuit line in Alaoji-Umuahia, both in Abia State, were commenced in November 2001 but not completed until May 2012. The Mbalano-Okigwe 132kv single circuit line also in Abia State suffered same fate. It was started in September 2001but dragged till November 2012 before completion. The 150MVA, 330/132/33kv transformer and the 330kv bays in Onitsha, Anambra State, and Benin, Edo State, were also completed last year, though the project started in May 2001. The completion of the 2x150MVA, 330/132/33kv substations and line bay at Alaoji, Cross Rivers State took six years.
Charles Momoh, Chairman of West Power & Gas Limited, the new owners of the Eko Electricity Distribution Company, which is set to invest $250m in metering, cabling and transformers for proper distribution in Lagos State, blames current woes on government’s past disregard for transmission facility upgrade. “The case of neglect of this sector has led to a total collapse of the infrastructure upon which the sector lies,” he said. Till date, the transmission system is yet to cover every part of the country. And in most locations in the country, the distribution network and voltage profile poor, while the billing is inaccurate.
An energy expert, Ariyo Oshe, hinges transmission and distribution lapses on outdated sections of the grid, blocking the free flow of the required mesh arrangement in the system. Besides, regular vandalisation of the transmission lines was encouraged by low level of surveillance and security on electrical infrastructure persists. Other transmission shortcomings identified include inadequate power evacuation at newly completed power plants. “Apart from poor utilisation of existing assets and deferred maintenance, and the delay in the implementation of new projects, another bane of transmission that the new private owners must quickly tackle is the hitherto poor and hardly practicable relationship between international oil companies and the Independent Power Producers, IPPs,” Oshe told TheNEWS.
The country’s power supply levels has often been affected by the maintenance schedules of the oil companies as inconsistent gas supply from these companies translates to unending power shutdowns. Since last week, some parts of the country have suffered prolonged blackout that is yet to end, courtesy of an ongoing routine maintenance work on the Okoloma natural gas station in Afam, Rivers State. Shell Petroleum Development Company, SPDC’s scheduled maintenance work on the Okoloma Plant that feeds gas to Afam VI Power Plant, led to a shutdown of the plant and the consequent power rationing.
Power distribution and generation companies constantly face the threat of unceasing gas shortage, which may mar the viability of their operations. Although their wish is yet to be granted, stakeholders in the industry have been calling for an adjustment of the current fixed gas prices which is also strangling exploration and production in Nigeria. The fresh Petroleum Industry Bill, PIB, may also not help matters as it hinders gas projects commencement, limiting access to the product. Gas inadequacy confounds energy pundits, especially as Nigeria boasts an estimated 176 trillion cubic feet of proven natural gas reserves, making the country one of the top ten globally in terms of natural gas endownments.
Despite the huge existing challenges and pitfalls, President Goodluck Jonathan prefers to look on the brighter side, leaning on expectations of foreign investments. He said, on 1 November, that Nigeria would overcome its power challenges soon, following the transfer of the assets of the four generation companies and 10 distribution companies to the private sector. According to him, more than $40 billion worth of investment would be generated by the power sector in the next 10 years. “These are coming from the companies like China Power that has invested over 20,000 megawatts of power and General Electric Company investing another 10,000 megawatts,” Jonathan said, in an attempt to dampen doubts about enormous challenge of funding.
However, the new owners of the successor companies of the PHCN would be operating under government’s threat of sanctions upon default on the delivery of a performance agreement they signed with government. The affected companies are: Abuja Distribution Company (KANN Consortium Utility); Benin Distribution Company (Vigeo Power Consortium); Eko Distribution Company (West Power&Gas); Enugu Distribution Company (Interstate Electrics Ltd, and Ibadan Distribution Company (Integrated Energy Distribution & Marketing Ltd).
Others are: Ikeja Distribution Company (NEDC/KEPCO Consortium); Jos Distribution Company (Aura Energy Ltd); Kano Distribution Company (Sahelian Power SPV Ltd); Port Harcourt Distribution Company (4 Power Consortium), and Yola Distribution Company (Inegrated Energy Distribution & Marketing Ltd).
The generation companies are: Shiroro( North-South Power Company), Kainji (Mainstream Energy Solutions Ltd), Geregu (Amperion Power Distribution), and Ughelli (Transcorp Ughelli Power plc). The privatisation programme started in 1999 with the inauguration of the Electricity Power Implementation Committee, which led to the development of the National Electricity Power Policy of 2001.
—Funsho Balogun