One of the major challenges that the nation has been grappling with and has defied solution is erratic power supply. Apart from the problem of corruption, putting square pegs in round holes has been a major bane of the power sub-sector. However, the appointment of Chiedu Ugbo as Managing Director of Niger-Delta Power Holding Company was seen as a welcome development because the Infrastructure Regulation specialist knows the nitty-gritty of Nigeria’s energy ecosystem and architecture like the back of his palms. In this interview with PAUL UKPABIO, Ugbo narrates his journey and how he has been able to brave the challenges to complete about 100 power projects across the country. Excerpts:
Prior to your appointment in the public service, not very much was known about you. Let’s have a glimpse into your background in the energy industry and what the experience has been, given your private sector background?
As you well know, I am a lawyer. I was called to the Nigerian Bar in 1991. I had my first degree in Law from the University of Lagos; the same university from which I also had my master’s degree, also in Law. I was in private practice since my call to the bar up until 2015. I worked in a few law firms for many years before I co-founded a law firm, Benchmac & Ince, with a colleague in 2003.
I started my first electric power work in 1999 with a review of the Lagos Enron Independent Power Project (IPP), which later moved to AES. We acted for NEPA then. After that, we negotiated several other PPAs (Power Purchase Agreement) for IPPs like Ibom Power, Agip (Okpai) and Shell Afam VI (Power Plant in Rivers State),among others.
There was a law review that eventually allows for the private generation of power. Prior to that time, NEPA (the defunct National Electric Power Authority) was a monopoly across the value chain – all the segments from generation to transmission and distribution were under NEPA.
By 1998/1999, there was an amendment to the law, which allows the private sector – the independent power producers to come and generate and send to utility – utility then being NEPA.
So, it was the first of its kind; although you could argue that the private sector had been there because the Nigeria Electricity Supply Company, Jos, has been around since 1929. So, this is the first of its kind where the IPPs will come and generate their own utility.
The IPP is a known transaction all over the world but they were just coming into Nigeria at the time through the Lagos Enron IPP. I was at George Ikoli & Okagbue at the time. So we acted as advisers to NEPA working with foreign lawyers as well. I was more like the associate doing the work.
In 2005, I was embedded at the Bureau of Public Enterprises to provide external counsel support under a DFID-funded Senior Legal Support project, which was at the heart of the electric power sector reform and several other reforms. Because I had a head start in the electric power sector, I was a little more involved in the reform.
As a lawyer, if you want to work in a specialised industry, the best thing to do is to study the industry to understand how things work there.
That is why they say lawyers are versatile. For instance, I have taken non-law related courses. In 2006, I went to study the basics of electricity in Canada; I was at the Canadian Energy Research Institute where I studied the fundamentals of electricity industry restructuring, which gave me sufficient insights and knowledge of the electricity supply industry.
That helped when I was embedded at BPE by the UK/DFID. I was there between 2005 and 2009. So, we were dealing with the issues coming out of the reform. Incidentally, the project manager of the power sector reform at the time, Mr. Chudi Ojukwu, is also a lawyer; he came all the way from law school as a lecturer with a strong interest in electric power sector reforms. He did a good job.
So, right now, one has historical, institutional and of course, professional experience, as well.
By 2010, there was a renewed interest in privatisation. Then, I had gone back to my practice. In fact, I had gone off to do the port concession of Sierra Leone in Freetown. So when I came back, the then new DG of the BPE, Ms Bolanle Onagoruwa, got me a DFID contract again when they wanted to start the full privatisation.
But before then, I had joined a consortium to bid for transaction advisory services for the privatisation. So when the consortium won and wanted to start the project, I had to move over to the consortium as part of the privatisation transaction advisory legal team.
In fact, I coordinated the legal workstream, which was a multi-discipline team consisting of financial and investment advisers, technical advisers and other relevant professionals; but I did this while interfacing with Herbert Smith Freehills (an international law firm in London and other parts of the world).
We did that all through the time the privatisation exercise lasted. I was also subsequently invited by Nexant of USA to work with them in providing technical support to the BPE under the USAID Fund in the privatisation of Omotosho 1 and Olorunsogo 1 PHCN power plants.
These two plants were built under a Chinese loan that they needed to convert to equity. So we had to advise on the privatisation with purchase consideration largely paid by debt-to-equity conversion; I worked with Nexant of USA on the transaction, which was very successful and those plants are now run by Pacific Energy.
The power plants are both in grid commercial operations.
That done, I was also invited to support the Nigeria Bulk Electricity Trading Plc, otherwise known as NBET still under the USAID Fund.
The NBET was set up by the Federal Government during the reforms as a credit enhancement measure because as at the time of privatisation, it was clear to everybody that distribution will not be creditworthy but there was also the need to quickly increase generation.
And if you want to mobilise capital for generation and you don’t have a creditworthy off-taker, lenders will not be able to put their money down. So, NBET was put in the middle so that lenders will see government-backed off-takers that will encourage them to put money into generation.
So NBET was set up to help mobilise investment in generation. Consequently, NBET signed the power purchase agreements (PPA) with the PHCN successor generation companies (now privatised), they signed PPA with the Omotosho I and Olorunsogo I power companies.
They also signed a PPA for a new IPP – Azura in Benin. Several solar PPAs were also negotiated presently awaiting completion. I assisted in the processes under the USAID Africa Infrastructure Program and subsequently under the USAID Power Africa Transaction and Reform Program.
‘Revenue shortfall is the biggest challenge in the power sector’
I was there till 2015 when the administration of His Excellency, President Mohammadu Buhari, came in. By October 2015, I was invited to join the Advisory Power Team in the Office of the Vice-President which was set up by Mrs. Damilola Ogunbiyi.
I was subsequently made a Senior Special Assistant to the President on Power Privatisation. I also doubled as Acting Head of the Advisory Power Team, which I did till June 2016 when I was appointed the Acting Managing Director of the Niger-Delta Power Holding Company Limited. By August 25, 2016, I was appointed the substantive Managing Director. And since then, God has been helping us.
To the second part of your question, the difference in the environment is just the bureaucracy associated with the public sector.
The NDPHC was set up as a fast-track company to do electric power projects. It is a private limited liability company to be governed by the rules of company law but it must also bear in mind that it is owned 100% by the governments of the federation: the Federal Government holds 47% of the shares, states holding for themselves and the local governments in their territories hold 53%. So, the money belongs to Nigeria and the shares are held by Nigerian governments.
What that tells you is that you must balance speed with the process. You are supposed to run very fast but again, you must not ignore the bureaucracy that comes with public service, which is meant for accountability.
You must go through the processes. You must go through the Bureau of Public Procurement in your procurements; you must get all the necessary approvals for your activities.
I have to state that the BPP has been supportive and helpful. They understand our processes. They too have to work as Public Service.
So, we are answerable to the board, made up of bureaucrats and political leaders: six governors, each representing the geo-political zones, and four ministers, including the Attorney-General of the Federation, Minister of Finance, Minister of Power and Minister of Petroleum Resources; and we have His Excellency, the Vice President, that chairs the board.
The company literally belongs to the National Economic Council – they are the shareholders. The board structure reflects that shareholding with the Vice President as the Chairman.
The board has been very responsive. In fact, the board sits every month because I have to bring my procurement activities requiring board approvals for their approval in accordance with the procurement rules – the CEO does not have the sole authority to approve every procurement.
He has a limited threshold beyond which Tenders’ Board approval is required up to a particular limit and, thereafter, the approval of the Company’s Board.
Remember, our activities involve operation and maintenance of electric power stations, and construction of transmission and distribution stations often involving procurement of expensive equipment which must necessarily go to BPP for “no objection” and the necessary authorities for approvals. With that illustration, you can see that you must always bear in mind that you are in the public sector, even though you want to get things done as fast as a private company would, so, creating that balance is key.
As a lawyer and someone appointed to effect speedy growth in the company, don’t you think there is a need to relax the law a bit to provide for more freedom in the operations of the company?
I have no problems with the law as it is. It only makes us more accountable.
But it slows down the process, having to wait on the board to get certain stuff done…
Yes, it may look like it slows down the process but we have to be accountable. Don’t forget that enterprise managers are human beings. I won’t support the review of a process that could ultimately be liable to abuse. I can only talk about myself.
What happens when somebody else with ulterior motives comes on board after my time here? So, let’s flow through the process. Note, however, that our board is not a problem because the board meets frequently.
Another area that sometimes throws up a challenge is employment. You have to follow federal character. Don’t get me wrong; in every part of the country you can get brilliant minds, but you will need the approval of the Federal Character Commission or waiver, which can take time. It could slow the process sometimes, but you just have to ensure that you carry everybody along, especially in the NDPHC that’s owned by everybody.
The challenge might come where, for instance, you need a finance person and the qualified person might not come from the state that has the quota.
State A may have the qualified person but it has used up its quota, while the person who applied from that state with quota may not have the qualification in the vacant field; so, you have to restart the search.
But then, I always tell my colleagues that the federal character is meant to give everybody a sense of belonging, and it is good to forge that sense of unity too.
I believe and I have indeed seen that at this stage of our national development, every state in Nigeria has professionals in every field.
Prior to your appointment, the National Independent Power Project (NIPP) was enmeshed in corruption and it was said to be a conduit through which a huge sum of money was siphoned.
]How far has the company gone about recovering the said funds from the contractors that took money without executing the jobs?
The NDPHC was set up in 2005 as a vehicle to implement the NIPP, a government project. Just like every other organisation where you hear about things that happened in the past but we were not there then.
I believe the law enforcement agencies are well-equipped to determine if indeed there was a fraud. However, the fact on the ground is that the company has 10 power plants, eight of them already generating power to the grid; two not completed at all. Out of the eight, two are partially complete.
The company has also implemented the construction of several transmission and distribution projects. So, one cannot rule out the fact that in implementing these projects back then, certain things might have happened that called for the on-going investigations to truly know what happened then.
I wasn’t there during the period under investigation and until the investigation is concluded, one cannot say in specific terms what led to what, even though a recent newspaper headline linked N1.5 billion to a former NDPHC chief.
In fact, the report says about N8.3 billion must have been mismanaged or stolen…. 
I don’t know. As I said, I was not there at the time. However, I know judging from what I met on the gro und that we have uncompleted projects.
There was a contractor who had four power plants to construct for the NIPP, none of which was ever completed.
Ordinarily, it should not have taken more than 36 months to complete. Granted there was a delay during the power probe between 2007 and 2009; if they started in 2010, they were expected to have commissioned the projects by 2013, or at most, 2015.
What about 2016? But here we are in 2019 and the contractor has not completed anyone of them. They only did two partially.
You stated that you have 10 power plants, how many of these are in operation?
We have 10 power generation projects. I mentioned to you that eight are already connected to the grid. Those eight will give you somewhere around 4,000 MW installed capacity.
Associated with the generation projects are gas transportation infrastructure projects ensuring that gas flows to the station; those ones have also been completed. As at today, we do an average of 700MW out of 4,000MW because of transmission limitations.
This is how it works with power generation – transmission is what determines the generation. Unlike other products, electricity generated is not what you can store and keep somewhere. You have to generate at about the same time the distribution companies are ready for them.
If not, the transmission system will collapse. Transmission determines whether we should generate or not. When a certain amount of megawatt is generated, it has to be transmitted. The constraint has to basically do with the transmission lines based on off-take from distribution companies.
Transmission controls us to generate or not; it will not call you up in the morning to generate or call every one hour to either come down or go up, it is a whole process. The argument is that there is no demand and by that, I mean bulk demand at the distribution end.
And the argument is impacting on generation companies. So, you can see why I said about the average of 700MW compared to 4,000MW installed capacity
There is also a gas constraint. We have about 2,000 MW in the western axis from Olorunsogo in Ogun State to Omotosho in Ondo State to Benin to Sapele to Geregu.
I need about 400mmscf (abbreviation for million standard cubic feet, a common measure for volume of gas) of gas to run them but only have been able to mobilise 100mmscf, which is barely enough to run 400MW out of 2,000MW in the West. But in our power plant in the East, we have excess gas.
We have full gas for Calabar and Alaoji Power Plants. We have full gas for Gbarain Power Plant. These are the three operational ones in the East. So our transmission constraint is well over our gas constraint; but there is a gas constraint, no doubt.
So how do you mitigate all these constraints?
We just signed a 60 mmscf gas agreement with Chevron Nigeria for Olorunshogo Power Plant.
To mitigate evacuation, we are working directly with distribution companies in our areas to see if we can supply directly to distribution companies and end-users. We have signed a few contracts in that regard.
But there’s the gas challenge and the evacuation challenge, while the biggest challenge in the industry is the revenue shortfall.
Picture it this way: we have 4,000MW, we don’t get dispatched; we don’t get more than 700MW daily because there’s no enough evacuation capability due to distribution constraints. Even that 700MW we do, when we put in our invoice, we get paid an average of 25% on a monthly basis because NBET remits exactly the percentage they get from the distribution companies who claim that what NBET charges is way above what they approve for them to collect from customers. That is the tariff shortfall.
But in addition to that, there is also what they call the market shortfall, which is what distribution companies on their own are not able to meet, so these are the challenges.
To get around these challenges again, the former Minister of Power, Babatunde Fashola, did what is called ‘Eligible Customer Declaration’ under the Electric Power Sector Reform Act, which allows us to seek high net-worth consumers and supply directly so that we do bilateral contract with them and collect our money. They are not so many but we are doing that to improve our revenue.
We are also working with distribution companies to mitigate that and to also do end-to-end…like from our power plant to the end-users. We are looking at the arrangement with our power plant in Ogun State.
We hope to work with the Lagos State government to start with certain areas on how to supply 24/7 electricity end to end where all the issues are cleared; and supply directly, get the payment directly. But we must carry the distribution companies along.
How do you intend to get to the rural communities?
One of the ways we have tried to overcome this is through massive investment in transmission. We just commissioned the 2x60MVA transmission sub-station in Ogun State. It is a major transmission sub-station.
We expanded the Ota transmission station, and we did a new line from Ota to old Abeokuta sub-station. These transmission interventions are done to improve transmission.
Once Ibadan Disco starts taking, what that means is that there is more energy and more access for Ibadan Distribution Company to serve.
We are doing similar things all over the country. We are doing Lafia transmission project in Nassarawa – it is a major transmission project.
We are also working on Ihiala now, also a major transmission project in Anambra State that would have electricity supplied to Nnewi industrial areas, so that all these will ease evacuation bottlenecks, and then we are able to generate more.
For instance, nothing stops us from generating from Alaoji Power Plant directly to serve Nnewi consumers but the transmission corridor is constrained. However, with Ihiala, that will open up.
We did a massive one in Ikot Ekpene. So we have transmissions all over the country.
To answer how to get to the rural area, in a nutshell, we are making investments in the transmission that the distribution companies won’t make, and connecting them to the grid to give room for more people to be served and be able to generate more.
We are also building several distribution projects and deploying solar home systems. So far, we have deployed 20,000 units to homes.