The September 30 handover of share certificates to the new owners of five generating companies, GENCOS and 10 distribution companies, DISCOS, by President Goodluck Jonathan no doubt elicited a lot of hope and enthusiasm among Nigerians.
At the event President Jonathan said, “To the Nigerian people who have demonstrated such great patience and confidence, putting up often with darkness, noisy power generating sets, the related pollution and the daily disruption in their lives, I say better days are coming.
“Today, we embark on a new journey, a journey that will usher us to a destination of enduring gain and fulfillment.”
However, one month after handing over the certificates, the euphoria may have faded as reality has set in. Sweetcrude gathered that many of the new owners are grappling with the fact that the power plants were overpriced. They were said to have submitted their bids without taking into cognizance of the fact that the power plants have been in bad condition for decades due to poor maintenance. Their bids were more of a show of status rather than a realistic business submission. Now they are saddled with responsibility of raising funds for the business.
Foreign financiers distance selves
It was learnt that many of the foreign financial institutions are reluctant to lend money to the owners of the power plants due to what they described as unpredictability of the Nigerian economy, which is often seen as volatile.
The financial institutions are mostly worried about government’s regular policy reversal, which they feel may also affect the power privatization. As a result, the new owners of the power plants are finding it difficult to raise funds for their new found projects.
Transmission, gas issues
Apart from that, the unresolved issue of gas supply to the power plants is seen as another factor that would affect the operations of the companies.
For example, when the former President Olusegun Obasanjo’s regime approved the construction of some plants like the Alaoji 1074 mega watts (MW), Egbema 338MW, Geregu 848MW and Omotosho 786MW gas turbines, the government did not factor in the issue of gas supply to those plants. As a result, the plants remained unutilized long after they were commissioned.
They have been in that position till the present administration privatized them. Speaking on the state of the power plants, Chairman, Technical Committee of the National Council on Privatisation (NCP), Mr. Atedo Peterside, warned that if the problems of weak transmission and gas constraints are not dealt with, the country’s aspiration to achieve steady power supply after its power sector privatisation will be hampered.
Peterside, who spoke at a recent forum on Financing the Power Sector Reforms for Economic Development, organized by The Bankers’ Committee, also said that transmission, which is the ‘life-blood’ of the entire electricity eco-system is potentially the weakest link at present.
He noted that unless Nigeria’s power transmission weakness is dealt with by 2014, there will be a crisis when the 10 National Integrated Power Plants (NIPPs) come on stream.
According to him, “Transmission is the life-blood of this entire electricity eco-system, and it is also potentially the weakest link at present. I am reliably informed that currently, stranded capacity due to transmission evacuation constraints is in the region of 100MW.
“The other weak link is gas supply and gas transportation, as Nigeria is predominantly reliant on gas-fired power plants. While gas supply constraints arising from capacity shortfalls/lags can be foreseen, the impact induces damaging shocks to the health of the entire electricity value chain.”
He expressed concern over the slow pace at which the board of the Transmission Company of Nigeria (TCN) is handling the federal government’s mandate to it owing to squabbling and infighting. “Unfortunately, the Board of TCN is yet to get its act together. Since the appointment of a chairman and some initial board members was first announced some months ago, so much time appears to have been lost in squabbling over who does what, when and how,” he said.
Alternative supply sources
Gas supply has really hampered the implementation of regular power supply in Nigeria, and the unreliability of power has caused some companies to resort to private arrangement to meet their production needs.
Will the privatization of power lead to the loss of such customers?
Oando Gas and Power, a subsidiary of Oando Plc, supplier of gas to some industrial concerns in mainland part of Lagos does not think so. According to the Head Corporate Communications, Mr. Ainojie Alex Irune, it should be noted that privatization does not guarantee regular power supply, but it is a step in the right direction.
He also said that a large portion of the company’s gas customers are industrial and commercial users, not necessarily users for power generation.
“Gas is used mostly for industrial processes such as process heating and for boilers, thus, our customer base will not really be affected. We actually anticipate the provision of regular power supply to increase with our rapidly growing economy and expect to continue to grow and expand along with it,” he said.
Irune explained that Oando is not seeking to compete with the power sector, but to complement it. “Through Independent Power Plants (IPPs), we look to support the sector by providing captive power solutions to our customers who will continue to need gas as the fuel for their plants.
“Most of the large scale gas users, who are mainly industrialists, have been connected to our grid. The challenge has been satisfying the needs of smaller users that may not have the volume requirements to justify the high capital outlay of developing pipelines. We are looking to continue to grow the market and address this by creating modular supply solutions, like our Compressed Natural Gas (CNG) mother station in Ilasamaja, Lagos that will allow us to supply our small scale customers in areas that are currently unconnected to our expanding gas pipeline grid,” he said.
For Mr. Michael Adebayo, the General Manager, Haffar Industrial Company Limited, a company that has been generating its own power in the last nine years, it is high time the country had regular power supply. This is because Haffar, which uses gas to power its production, spends a lot of money as the company is charged in dollars.
According to him, “In Haffar, we have been generating our own power in the last nine years. The pipeline was laid from Ilupeju down to Haffar, in Mushin. The gas is supplied by Gaslink. We are compelled to pay in dollars. We pay $6.44 per standard cubic feet, but by January next year, it will be increased to $7.21 scf according to the domestic natural gas pricing by the Nigerian Gas Company Limited.
“We bought two gas generators, each, worth about N65 million. We also have 13 diesel generators. We welcome any development that will ensure constant power supply and reduce our dependence on gas supplied by a private company.”
Adebayo therefore called on government to exhibit the political will to save manufacturers from the high cost of production. “The government should intervene and exhibit a political will by reducing the cost of gas supplied to manufacturers in Nigeria. How can the federal government generate employment if the private sector is not encouraged? Some companies have closed shop in Nigeria, and relocated to other African countries. Companies only invest in a conducive environment,” he said.
Pushing ahead with investments
While the new owners of the power plants are still grappling with the teething problems emanating from privatization, Geometric Power Limited, an integrated power company established by Barth Nnaji, former Minister of Power, appears to be the only company that is set for power generation and distribution in Nigeria.
C.Don Adinuba, spokesman for Geometric said the company has no issue with gas. According to him, “We have no issues with gas supply. Everything we did was in line with global best practices. We built a 27-kilometre gas pipeline from Awaza, in Ukwa to Aba. It is being supplied by Shell. Shell has its operations in Awaza. In addition, we built four brand new sub-stations and took the three we inherited from PHCN and overhauled them. They became practically brand new. They are called legacy sub-stations. We brought them back to life and modernized them. That brings the total number of sub-stations in Aba to seven. What we did is independent of the Nigerian Gas Company.
It cost us more to do that, but what we want is reliability.”
Adinuba did not foresee any major challenge for Geometric as the company is set to start operation. “The moment we take off, there will not be any question of power failure. That will be history in Aba. We do not foresee any challenges as such, unless natural disasters. In which case, you call it an act of God. There is nothing anybody can do about it. We are not looking for excuses to give to people. It is not just regular power supply but the quality that can compete. Sometimes you have regular power but the quality may not be able to power a four feet florescent tube. But Geometric will provide regular power supply and quality electricity,” he said.
Information from Vanguard was used in this report.