11 January 2018

Nigeria: Stakeholders Raise Hope for a Viable Power Sector in 2018

The journey of the Nigerian Electricity Supply Industry (NESI) through year 2017 is one that witnessed huge challenges which almost plunged the nation into total darkness. Stakeholders are urging the government and relevant private sector players to synergise, ABAH ADAH, reports.

As stakeholders in government believe in a better and economically viable power sector in 2018, experts have expressed concern over non-implementation, absence of cost-effective tariff, and inefficient distribution, urging government to buckle up in terms of implementation of policies and getting the electricity distribution companies (DisCos) to retool in order to perform optimally in the new year.

Hon. Minister of Power, Works and Housing, Babatunde Fashola while addressing stakeholders as the Chairman at the 22nd Power Sector Stakeholders Meeting held recently.

Speaking at the event hosted by Geregu 1 power plant in Kogi State which closed the year 2017, Fashola stated that more electric power is expected to come on stream in the coming 2018 even as he noted that the N701 Payment assurance scheme initiated earlier in the year to help in the realisation of the incremental power policy of the federal government has started yielding positive results.

The minister noted that as at the time he visited the Geregu plants in 2016, only one of the tree turbines were working due to shortage of gas, saying the fact that all the tree turbines now have some gas and are working, leading to improved supply shows the payment assurance has helped significantly.

According to the minister, generating companies now feel safer as they can now invest and recover their money readily.

"Generation has reached an all-time high of 7, 000 mega watts (MW) which is far different from what it was in January, meaning there has been progress," Fashola said.

The Minister who acknowledged the effort of the Transmission Company of Nigeria (TCN) for increasing its wheeling capacity to 5, 155mw as at Friday, 8th December, 2017 said that is a milestone in the journey to incremental power, adding that though the distribution companies (DisCos) have not been left behind, the problem now is much more with under-capacity to distribute as much as what can be wheeled, leaving over 2000mw stranded at a time when the people are yearning for more power.

"One of the reasons why we cannot allow this power to continue being stranded is that Nigerians Need more power and more power is expected in the 2018 as Azura power plant and the several others will be ready to put more power on the grid even as mini-grids and other off-grid sources are expected to come on stream.

"To me, what people should be looking at now is not lack of power but where to locate those who will use the available power so that there will no more stranded power," the Minister said.

In an effort to ensure that more funds are made available to ease the sector's financial difficulties in 2018, President Muhammadu Buhari while presenting the 2018 budget to the National Assembly last November appropriated " a lion share" in the sum of N555.88 under capital spending to the Ministry of Power, Works and Housing.

"To consolidate on the momentum of the 2017 Budget's implementation, many ongoing capital projects have been provided for in the 2018 Budget. This is in line with our commitment to appropriately fund ongoing capital projects to completion," the President said.

He specifically mentioned some key projects on which attention will be focused by the ministry in implementing the 2018 budget to include the Manilla Hydro Power Project at N9.8 billion, including N8.5 billion as counterpart funding; earmarked transmission lines and substations at N12 billion counterpart funding; National Housing Programme at N35.41 billion; the second Niger Bridge at N10 billion; and construction and rehabilitation of strategic roads at about N300 billion.

"To consolidate on the momentum of the 2017 Budget's implementation, many ongoing capital projects have been provided for in the 2018 Budget. This is in line with our commitment to appropriately fund ongoing capital projects to completion," the President said.

At the same time time, the World Bank Group and the Federal Government of Nigeria concluded two days of high-level consultations on the Power Sector Recovery Programme (PSRP)-a comprehensive programme of policy, legal, regulatory, operational and financial interventions expected to restore service efficiency and long-term power sector viability. The measures that will be implemented through 2021 are aimed at improving transparency, service delivery and re-establishing investor confidence, and hence, investment in the sector. Accelerating electricity access including through off-grid public private partnerships is an important component of the programme.

Speaking to journalists also at the end of December about all the transmission projects, both completed and ongoing, that the Transmission Company of Nigeria (TCN) has spread across the country, The Interim Managing Director, MrUsmanGur Mohammed said the company is going to add 1, 100mw to the national grid as it prepares to commission 18 completed transmission projects (substations and high voltage transformers) across the country at different dates between then and end of January, 2018.

Mohammed who was doing an overview of TCN's achievement in the outgoing year while giving an insight into the new 2018 in his office in Abuja just before tour of TCN's almost-ready three substations in Apo and Katampe in Abuja and Suleja in Niger state respectively with the newsmen, hinted that TCN will thereafter begin to re-conduct transmission lines sometime beyond the first quarter of next year to ensure that even as more power is wheeled, it is appropriately delivered for onward distribution.

He noted that the projects are being executed under the Transmission Rehabilitation and Expansion Programme (TREP) which seeks to expand the grid to 20,000MW in the next four years.

"In line with our strategy, we are completing across the country several projects which would cumulatively add over 1,000mw transformer capacity to the grid before January 31, 2018. The Nigerian Electricity Transmission Access Project (NETAP) which is one of the projects under REP was successfully negotiated and finalised with the World Bank on December 8," he explained, adding "We must work towards a national peak of 6,000mw in the early part of next year."

On his part, the Managing Director/CEO of the Niger Delta Power Holding Company, ChieduUgbo who was speaking on the impact of the National Integrated Power Projects (NIPP) on the power sector at an NDPHC-media parley held in Abuja to close up for the year 2017 said the N701 billion Payment Assurance scheme of the federal government has improved the revenue of the electricity generating companies (GenCos) and mitigated the impact of the liquidity that has been plaguing the power industry.

Ugbo said the Nigerian Bulk Electricity Trading Plc (NBET) currently pays about 50 per cent of the GenCos' invoice by off-setting the gas cost directly in addition to the about 30 per cent that the distribution companies (DisCos) have been able remit.

"At least we are able to get in the region of 80 per cent of our invoices paid now; that is why you can see that we are able to cope," he said.

Ugbo expressed hope that with government interventions such as the payment assurance that will span 2018 and the Power Sector Recovery Plan, more projects will be completed and energised to put more power on the grid in 2018.

The NDPHC boss who spoke of the many projects NDPHC has completed and those ongoing across the industry value chain said the focus now is on how to get the distribution end upgraded to be able to evacuate the available power, adding that much attention will be given to the distribution projects to ensure that they are completed in good time.

"Even if we manage to get all the gas required, we cannot generate at full capacity because it cannot be taken at the distribution level, and that is what we are trying to solve going forward," he said.

The Assistant General Manager (AGM) Transmission of TCN, Engr. Mahmud Suleiman during the tour said the new management of the company fast tracked the projects to completion from the slow pace they witnessedin the past and at the same time initiated new ones.

On how to go about achieving economic viability for the sector in the new year, the General Manager, Public Affairs of the Nigerian Bulk Electricity Trading company (NBET), Henrietta Ighomrore told LEADERSHIP that more efforts are being made at various levels to engage the DisCos with a view to stabilising the market amidst increased support for investors in getting their Public Private Partnership Agreement (PPPA) processed so that government intervention is minimised.

"We hope to achieve market stability in the sector in two major ways. Talking about the liquidity issue, what we are looking at this year is increased interaction with the distribution subsector. We are working with the DisCos to ensure that they increase payment and minimize losses so that gradually the market gets fully stabilised and government intervention is limited.

"And in line with the determination of this government to achieve incremental power for its citizens, we are looking at increasing support for investors to ensure that their PPPAs get signed for them to start executive projects without undue delay even as we intensify effort to complete and have ongoing projects commissioned in their turns. In this way we hope to attract more investors to the sector.

"I am sure you are aware we closed the year 2017 with the signing of a 550 mega watts (mw) power plant PPPA with Kingline Power Ltd, and in a no distant time the 459mw Azura project is expected to be commissioned. These are part of what we are doing to add more power to the grid and have an economically sound sector.

"Yes, we are very optimistic that 2018 will witness a more economically viable power sector considering the giant strides being taken by the government towards improving the situation," Ighomrore explained.

But the Executive Director, Research and Advocacy, Association of the Nigerian Electricity Distributors (ANED), Sunday Oduntun who was hosted on a TVC News programme in the new year to speak on the face of the power industry in the outgoing year and the prospect for 2018, said the sector may not enjoy the compliment of economic viability until appropriate pricing is introduced, and the Nigerian Electricity Regulatory Commission (NERC) becomes independent in the real sense of the word to manage the sector without government interference.

Oduntan who commended the federal government's partnership with the World Bank in a move to complete ongoing projects and embark on more said implementation has been the bane with successive governments over the years, urging a closer and sincere look at that.

Oduntan who remarked that this government has done better than the previous ones in terms of funding the power sector wants the transmission and distribution part of the value chain taken serious and carried along with generation to have a better performing sector going forward.

"Government needs to do a lot more in terms of investment in the transmission and distribution subsectors to enable meet up with generation, because if you generate and it doesn't get to the consumers, it is an effort in futility," he said.

Oduntan also agreed with the school of thought that the national grid be decentralised so that different geopolitical components manage their own grid, saying, "that will help move the sector forward".

Energy expert and CEO of ZKJ Energy Partners Ltd, RumundakaWonodi, who is also of the view that the economy of the power sector is likely to witness improvement in the new year however advised that to achieve that the government has to do more in terms of implementation and ensure that a cost reflective tariff is in place while the DisCos must step up action in the area of revenue collection.

"There is hope for a more economically viable power sector in Nigeria in 2018 going by the seriousness being orchestrated by the government and other stakeholders but everything boils down to implementation to give effect to the efforts.

"To make that happen, government has to sit up and put a lot of things in place. For instance, it has to come up with a cost reflective tariff plan that will enable DisCos generate more revenue to pay NBET for onward payment to the GenCos and the gas suppliers. This is yet to be seen.

"The N701 billion is just good money thrown at something that one has no means of measuring the impact. My fear is that they are just going to exhaust that money and begin to look for another one because we do not have a cost reflective tariff that will improve payment from the distribution companies, and I don't think we have an effective plan to invest in the distribution companies," Wonodi said.

Wonodi who was speaking to LEADERSHIP via telephone said government needs to do something about the capital structure so that the DisCos can find money to invest or government invest on their behalf and take over some of the shares.

"But we need to get the distribution sector working by injecting equity money into it and not borrowing as that which is being done currently cannot solve the liquidity problem. What we need is investor money; either government raises its stake from 40% in the interim and then later sell it to the public or the players raise the money as equity to invest. That is only way the sector can make headway economically," he added.

Contrary to the impression people get from Mr President's New Year speech that the GenCos now generate about 7, 000 mega watts of power, Wonodi said "the truth is that they "can" generate; they have not yet generated that much because of the distribution bottlenecks."

Also speaking to LEADERSHIP, another energy stakeholder, OdionOmonsoman said he sees a financially stabilised power sector in 2018 on two conditions of sustained gas supply and government's financial support.

"I see the power sector stabilising, but on two conditions: First, if there is sustained supply of gas; in other words, if supply of gas is not artificially disrupted again, because 85% of our generation is based on gas-fired plants. The other condition is if the financial intervention by the government is sustained. For instance, the N701 billion payment assurance introduced has helped in improving the financial viability of the sector significantly even though it does not facilitate 100% payment, but just enough to keep the operators in business.

He however said loan-based intervention is not the way forward from the liquidity crisis, but just a gap-bridging measure with unfavourable consequence.

"What the government is actually doing is building up a huge dept that the public must pay. The money is a loan to NBET, and where the bulk trader cannot pay, the government that guarantees it is liable; that is where we all become involved

"The Central Bank did not give NBET free money; it charges interest on it. It is also not a bailout. So for me, 2018 should be when there a sustainable plan towards tackling the liquidity challenges and make the sector financially sound. And it is a combination of NBET being able to raise its additional capital beyond the CBN funding, and most importantly, the distribution companies putting more effort to become more effective in their collection and reduction oflosses, distribution as well as metering, while the regulation by NERC to democratise meter procurement comes into play.

"This will attract more investors and address the problem of estimated billing being faced now. But on the whole 2018 is a very positive year for the power sector, building upon the successes of 2017," he said.

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