13 February 2013

Nigeria: FG Mulls Alternative Funding Structures for Transmission Network

The Federal Government has said that it is considering a number of potential funding measures to bridge existing infrastructural gaps in Nigeria's electricity transmission network managed by the Transmission Company of Nigeria (TCN).

It disclosed that such funding alternatives which may include issuance of bond, contractors finance and Public-Private Partnerships (PPP) would help reposition the TCN to effectively undertake its responsibilities in Nigeria's emerging electricity market.

Chairman of the Presidential Task Force on Power (PTFP), Beks Dagogo-Jack, said Tuesday in Abuja that Nigeria's transmission network had remained relatively inefficient due to obvious misalignment across the power generation, transmission and distribution value chain in terms of infrastructure development.

He noted that the Federal Government did not have unlimited funds to bridge the gap and so would opt to include alternative sources of funding expansions in transmission infrastructure within the sector.

"Transmission segment will become a dominant factor of success simply because the upstream (the generation assets) are now in private hands, the downstream (the distribution assets) are now in private hands; so the midstream which is the transmission assets must be as efficient as the two if you want an alignment that you can call efficient.

"To that extent, we need to have a bold and robust midstream; that means funding, because over time, there has been so much misalignment between the upstream and the midstream, between the mid stream and the downstream," Dagogo-Jack said.

In August 2012, the Chief Executive Officer (CEO) of Manitoba Hydro International, Don Priestman, the Canadian firm that is contracted by the Federal Government to reposition the operations of TCN for efficiency, disclosed that its preliminary study of TCN showed that it was insolvent and would require massive financial bailout to remain in operation.

Dagogo-Jack however explained that: "Government does not have unlimited funds so government is being creative. There have been a lot of talk and a lot of models, a lot of engineering going on there just to underscore the fact that there is consciousness of the fact that we have a major challenge here.

"We are looking at for instant bond issuance; we are looking at getting buyers credit, contractor finance. Virtually all of these end up being liabilities one way or the other but some of them are better liabilities than others.

"We are also looking at PPP, but if you look at this other model, you realise that the money is not like a regular loan facility which is dropped with the TCN or any of the successor companies which has already had its own history of project delivery and all the risks of performance.

The project is contactor finance, so if you say to him do me a line from point A to B, he does the line and then you start paying him, he doesn't do the line no money drops. So, he will bring in the best project delivery vehicle to make sure that he delivers that project."

Dagogo-Jack also gave reasons why key transmission projects embarked on by the TCN have taken so long to complete saying: "Typically, some of the reasons projects take that long for TCN is because of the budgetary funding cycles. You award a project for two billion naira and in that year the provision for such is N120 million; how are you going to do that?

"Again that was part of the handicap, why they have a lot of projects; at the last count over a hundred in different shapes and sizes of incompletion. We want to go beyond that and get people that have the capacity, who believe in the integrity of this country and our balance sheet and who will say I will do this project for you and you will pay me over 20 years at a fixed sum."

He stated: "We believe that the market will grow, they know that this is where to spend money and get their money back. People are showing interest, we are talking with them, we are shaping all the different options and I can assure you that sooner than later some kind of momentum will be seen where people are bringing money from somewhere to dump into the transmission network so that we can close the gaps.

"The different projects are running at different momentums but I get the sense that it won't be before the end of the second quarter before a few of those options kick in as projects."

Copyright © 2013 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.