Nigeria’s quest to provide quality electricity supply to the populace and businesses was given a boost last week when the Niger Delta Power Holding Company (NDPHC) received bids from 66 prospective investors in the 10 National Integrated Power Plants (NIPPs) built by the company. However, Andy Nssien, Business Editor, reports that the expected output from the power privatisation exercise is still a distant cousin from what would keep the Nigerian populace and businesses out of darkness in the foreseeable future.
The 10 NIPPs now being privatized were built by the Niger Delta Power Holding Company (NDPHC) with the intention of selling 80 per cent stake to private investors who are believed to be better managers of such business.
The remaining 20 per cent will be retained by the three tiers of government who are the original shareholders of the company.
The NDPHC has assured that its ten power generation plants would be completed before handing over to new owners in June next year.
Managing Director of NDPHC, James Olotu, said the plants built under the National Integrated Power Project, would attain ‘fit for purpose’ status before that date.
He assured that the country’s electricity situation would improve greatly when the plants come on stream, stating that “Nigerians are already feeling the power supply now from the available power but we are adding more units every day. As more units are completed we are putting it into the system.
“Power supply is inevitable and is best handled by the private sector. That is the reason why we are privatizing the sector. The issues of gas not available sometimes, transmission not available sometimes is because government is the same person running the gas and same person running the transmission. But if it is the private sector and the rules of the game are adhered to, those gases that are scarce now will be available and the operation will be available”.
The ten NIPPs are expected to bring additional 4,700mw to the national grid when handed over to the new investors next year.
Even so, analysts, experts and public commentators are of the view that even at that level, the combined power generation, transmission and distribution apart from being a distant cousin from what is expected to power government’s development plans and aspirations pales out when compared with what obtains in other developed climes.
One of the experts said, in spite of the government’s posturing that Nigerians would enjoy steady electricity by 2015, darkness may persist until 2050, adding that stable power supply may never be enjoyed in this generation.
According to the expert who spoke to Reuters news agency, Nigeria would need about 140,000MW to guarantee stable power supply.
Nigeria is still scores of years away at this threshold as it generates at present, a meagre 4,000 MW for a population estimated at 170 million.
South Africa, with a population of about 50 million people, produces about 40,000 megawatts of electricity and has been trying in recent years to increase output, the report said.
“It will probably take Nigeria another 50 years before it attains the same level of electricity consumption per capita as South Africa currently enjoys today,” David Ladipo, whose company Azura is spending $700 million to build a 450 MW plant, told Reuters.
An electrical engineering consultant, Chime Orji told Sunday Independent that Nigeria cannot afford the resources to commit into the power projects to achieve the level of improvement needed to power its development aspirations, adding that some of the targets set by the government have not been achieved.
He said, it was because of lack of funds that the government had to first undertake the simultaneous privatization of the generating plants and the distribution companies, without addressing the issue of transmission.
Orji said, by the time the issue of transmission is being tackled, it would now dawn on the new investors of the defunct PHCN assets that most of the plants they bought were obsolete and some in a state of repair which needs funds to refurbish, a situation which he said could lead to another era of outages.
These aside, he said, the incidents of vandalisation of plants and equipments of the new owners, which hitherto, was not put under check would increase, as some disgruntled former PHCN workers who are not accommodated in the present dispensation would find a way to express their anger.
However, he expressed the hope that the power plants under the NIPP projects would not experience frequent breakdown as they are new.
The power stations which are owned by the Niger Delta Power Holding Company (NDPHC) are located in Abia State (450MW), Edo State (451MW), Cross River State (562MW), Imo State (338MW), Bayelsa State (225MW), Kogi State (434MW), Delta State (451MW), Ogun State (676MW), Rivers State (225MW) and Ondo State (451MW).
To ensure that the best calibre of both local and international investors were involved in the bidding and the priviatisation exercise, the Federal Government team in June this year addressed the international community at the Sofitel Hotel, New York City.
On the occasion, James Abiodun Olutu, Managing Director and CEO of Niger Delta Power Holding Company (NDPHC), said: “Eighty per cent of shares in the ten power plants are to be sold to investors providing an opportunity for growth as demand far outstrips current supply.”
Speaking at the Event, the Minister of Power, Professor Chinedu Nebo, said: “This New York event is the last stage of the international investment drive for the divestment of government stakes in the generation assets of the NDPHC.
“To provide you some background as to how we got here, two important tools that led to the reforms of the sector, the Nigerian Electric Power Policy (2001) and the subsequent Electric Power Sector Reform Act 2005, were products of about five years’ work by sterling experts in the field of electricity and utility reforms. The Act was a necessary foundation for charting a new course for a sector that had delivered far below the most liberal expectations of Nigerians.
“Privatisation of all public generation and distribution companies is one of the pillars of the efforts of the Federal Government of Nigeria (FGN) to reform the power sector. The recent privatisation of the Power Holding Company of Nigeria successor electricity distribution and generation companies is a testament to the commitment of the FGN to the reform process.”
He added that this privatisation offered international investors an opportunity to be a part of a great economic revolution comparable to that of the telecommunications sector in Nigeria.
In answer to questions about transparency and security the Chairman, Senate Committee on Privatisation, Senator Gbenga Obadara said: “We will provide security for your investment in Nigeria and we are giving enough assurance of opportunities to investors in the country. Investors have been expressing interest in the ten gas-fired power plants with a combined design capacity in excess of 5,453 megawatt. Fifty three per cent of the NDPHC plants are owned by states and the local governments, while the Federal Government owns the remaining 47 per cent.”
The determination to ensure sale of the power plants has led to a series of policy reforms and incentives such as tax holiday and exemptions, pioneer status, reparation of profits, research and development as well as low value added tax which is the lowest in the world.
However, a common denominator problem that has threatened to put a spoke in the wheels of the entire privatization exercise is the issue of power transmission.
Chairman of the NERC, Dr. Sam Amadi said he was scared of possible risks from the sluggish attitude of the Transmission Company of Nigeria (TCN) to its tasks, noting that the TCN and its staff were yet to come to terms with the obvious paradigm shift in Nigeria’s power sector as a result of the privatisation exercise.
He expressed concern over the slow pace at which the board of the TCN was handling the Federal Government’s mandate to swiftly attain sustainable efficiency in Nigeria’s emerging electricity sector.
The NERC expressed concern that the TCN’s inefficiency and sluggish attitude to its responsibilities could undermine further investments in power generation and distribution.
According to him, “Funding is a big deal or a risk because it is still government-owned, but because its inefficiency will undermine further investments in generation and distribution and what is paramount now is to allow transmission to be regulated, which means you don’t appoint people without approval but appoint based on competency”.
However, Minister of Information, Labaran Maku rose stoutly in defence of government’s commitment towards ensuring that the issue of transmission does not constitute a cog in the wheel of achieving quality power supply in the country.
He said in Abuja last month that the Federal Government would spend $2.86bn (N457.6bn) between now and 2017, in order to give the nation a power transmission infrastructure that can carry 16,000 megawatts of electricity.
He said this figure emanated from a transmission expansion blue print prepared by the Presidential Action Committee on Power which committed the government to a transmission capacity of 16,000 megawatts.
According to the Minister, the government was committed to funding the programme, which will cost $2.86bn, listing the sources of funding as the African Development Bank, $150m; World Bank, $290m; and Eurobond of $150m.
He mentioned other funding sources as, a $500m loan from the China Export Import Bank; proceeds from the sale of the National Integrated Power Plants, $1.6bn; and budgetary appropriation, $170m.
Announcing that the end of darkness was near in Nigeria, Maku said different steps taken by the government would soon begin to yield results, but urged the citizens to exercise some patience as time was still needed to usher in a new era.
“The distribution companies are going to ensure that there are meters and the meters will be prepaid so that nobody will come and charge you for darkness, which was the case in the past. You buy your credit and when it finishes, your light goes off. You don’t need anybody to come and disconnect you.
“You can be sure now that you will pay for every light you use. People will ensure that they put off light that they don’t need. The importance of this is that the power you don’t use will go to the industry. When you waste electricity, it is a national waste, not just to the person that is paying for it. If you save it, it goes into production.
“Government will subsidise power for the poor people. The rural dwellers and poor urban dwellers; there is a subsidy for you. In the course of the new tariff, which will come in the beginning of the market, the tariff will not take electricity beyond the capacity of the poor people. It is the bridge to ensure that everybody has access to electricity”, he added.
Uninterrupted power supply is the issue of gas supply to the generating plants. Accusing fingers have been pointing at either the Nigerian Gas Company or the Nigerian National Petroleum Corporation (NNPC) or both, the two major sources of gas supply in the country.
However, some experts who spoke on the issues said that inadequate gas supply posed serious threats to the new National Integrated Power Projects (NIPP).
The Managing Director, Seacorf Engineering Ltd., Mr. Fashola Charles told News Agency of Nigeria (NAN) that one of the major challenges facing the power sector was inadequate gas supply to power stations.
He said that the issue of inappropriate commercial pricing had deterred gas producers from investing in the country. Charles said while the nation was experiencing acute power shortage, some projects were ready but could not come on stream due to inadequate gas supply, explaining that the 500MW Olorunsogo Phase 11, 450MW Sapele and 561MW Calabar projects were ready, but had no gas to run them.
According to him, other projects, which had been commissioned, were still facing the challenge of gas supply. Charles urged the Federal Government to parley with gas producers in order to forge ahead to realise the objective of the gas master plan.
His words: “Government should intervene by ensuring adequate gas supply to all power stations and the newly-inaugurated NIPPs projects.
“There is the need for government to sanction all contractors or companies saddled with the responsibility of supplying gas to IPP stations, but failed,’’ he said.
Even so, the Federal Government came out with a soothing balm, assuring that the end was near for the nation’s current power crises, as more gas would be released to feed the power generating plants in the country.
Minister for Petroleum Resources, Diezani Alison-Madueke, who gave the assurance in her presentation titled: “Moving the oil and gas sector to the next level,” delivered at the 2013 Ministerial Platform in Abuja recently noted that for decades, Nigeria had been plunged into a seemingly endless energy crisis on account of a plethora of reasons including gas supply shortages.
However, the minister said that this challenge was gradually being overcome by some giant strides recorded since the President Goodluck Jonathan put in place strident measures to address the issue.
According to her, gas flaring has reduced significantly from about 25 per cent of production in 2010, to about 12 per cent currently, explaining that this was possible because every new oil project has a gas flare reduction programme.
Also, the minister hinted that the volume of gas available for domestic use has also increased, noting that before now, volume available was less than ten per cent of total gas produced.
She disclosed that the quantity available for domestic consumption has increased to about 1.6 billion standard cubic feet, SCF, a development she attributed to the fact that gas pricing was almost at par with international market price put at $1.50/1000 British Thermal Unit (BTU).
Explaining further, she said, while the power sector was paying $1/1,000BTU, the non-power was paying $2/1000BTU, adding that by next year, the average domestic price of gas would be over $2/1000 BTU.
Noting that the issue with the Nigeria’s power sector was not really gas supply shortages, but transmission and distribution issues occasioned by systems collapse, the minister recalled that an Emergency Gas Supply Plan introduced by government in April 2012, yielded significant results, as power generation peaked at 4.2 Gigga watts by August 2012, before it started dropping again.
On Gas reforms, she said the Federal Government has taken decision to transform the gas sector, and put it in a better position to contribute meaningfully to the development of the Nigerian economy.
Her words: “Recognising the potential for tremendous economic growth inherent in the nation’s vast natural gas resources, President Goodluck Jonathan outlined a three-point mandate for natural gas, comprising boost in gas supply to the power sector, stimulation of gas based industrialisation around Fertilizer, Petrochemicals, Methanol etc., effectively leveraging gas as feedstock for key industries, thus creating jobs and selective investment in high value regional pipeline and LNG export opportunities to boost revenues from gas sales”.
She assured that the Federal Government has developed a strategic objective to link gas to the development of the Nigerian economy, such as ensuring that gas was delivered for at least a threefold increase in Nigeria’s power generation capacity by 2015.
With huge investments and high expectation by the Nigerian populace for uninterrupted power supply to homes, businesses and other human endeavours, it would not be too long before uncovering which linkage in the entire power privatisation chain was loose.