The Nation Newspaper

Tag: power sector

  • Power sector needs EFCC, not Senate probe

    Senate President, Dr, Bukola Saraki, is troubled. This has nothing to do with his ongoing crisis of legitimacy as Senate President. For now, the battle against his political party that has accused him of playing Brutus has been shifted to another day. His priority today is promoting solidarity with Nigerians that have been in darkness for 16 years. Bukola Saraki, an inheritor of Kwara fiefdom who often treats all as subjects, told Nigerians last week that he was troubled that they have not derived joy from both ‘the power Reform Act and the unbundling of the Power Holding Company of Nigeria.’

    Senator Godswill Akpabio, probably as part of the horse-trading that produced him Senate Minority Leader against Senate convention, was the first to echo the Senate President’s sentiments. He was followed by Senator Danjuma Goje who expressed his empathy for Nigerians because of ‘the untold suffering that lack of power supply had caused’ them. As for Senator Ndume, his righteous indignation stemmed not just from the fact that he spends  N10,000  daily to power his generator, but more from the failure of ‘government to show anything for the huge amount of money sunk into the power sector in the last 16 years.

    United by their passion for Nigeria, law makers that have for two months engaged in  competition over ‘materials and ideas’ which only ended with the sharing of about N13b for doing absolutely nothing, resolved to probe the power sector from Obasanjo to Jonathan. They have accordingly set up the Senator Abubakar Kyari‘s Ad Hoc Committee to ‘investigate the activities of the Discos and what is preventing Nigerians from benefitting from the unbundling of the PHCN’.

    However, for the exercise not to be seen as diversionary, many are saying the Senate should first solve its leadership crisis of legitimacy following the establishment by the police that the Senate rules used for the election of the Senate leadership were forged. But beyond this, many also believe Nigerians don’t really need a probe to identify those behind their continued darkness. All that is needed, in their view, since our leaders believe Nigerians suffer from collective amnesia, is a recall to memory.

    In 2008, Obasanjo in a long letter warned the Dimeji Bankole-led Lower House that probing his handling of the power sector will be noting but ‘a theatrical or circus show (which) will provide fun and maybe hurt some people’. He then went on to give an account of his stewardship to the Elumelu House Committee. He inherited in 1999 seven power stations in different states of disrepair, generating 1500MW; he added six with the seventh at finishing stage by 2007; introduced the pre-paid meter system and moved revenue generation from about N2b per month in year 2000 to about N7b per month in 2007 with$6.5b as capital expenditure and running costs between 1999 to 2007 including outstanding letters of credit as against the Dimeji Bankole’s $16b and Yar Adua’s $10b bandied figures. He capped all up with the inauguration of the Nigeria Integrated Power Project (NIPP), hoping ‘his successors would be driven with the same zeal and move the planned target up to 20,000 MW by 2015’.According to him, to kick-start, besides the Chinese loan facility, the National Council of State and the National Assembly also approved an initial $2.5b for NIPP from the “Excess Crude Oil Account” (ECOA) in August 2005.

    The late Dr. Agagu, his minister for power,  also revealed that ‘between June 2000 and December 2002, ‘our electricity generation capacity increased from 1425 to 4300 megawatts’; that the establishment of four power projects were completed within 24 months from contractors’ mobilisation, making them the fastest of deliveries in the history of Nigeria. ‘For all the four plants, a concessionary funding programme was negotiated with the Chinese Exim Bank through which the Nigerian government paid only 35 per cent of their cost for the plants to be delivered. The balance of 65 per cent, he explained, was to be paid over a seven-year period at six per cent interest rate and two years moratorium’. But Godwin Elumelu, as House of Representative chairman on power representing cash strapped lawmakers who claimed to have sold landed properties to fight the 2007 election, insisted there was indeed evidence of corruption in the process of awarding the contracts. On that account they delayed the Obasanjo scheme for two years.

    But all that was needed to prove our lawmakers were men with feet of clay was an opportunity to spend N7b of excess REA fund within two weeks to prevent the money from returning to government coffers. To beat the deadline,  Elumelu and his colleagues according to EFCC, ignored ‘due process’, nominated nine contractors by proxy, authorised the MD of REA to award them the contracts, and prevailed on the Permanent Secretary of the ministry who was also the acting minister to grant approval for the contracts and the payment of 15 per cent of the fee. The balance of 85 per cent was equally withdrawn from the REA account and lodged in the banks where those contractors had their accounts. On June 14 2010, EFCC further accused Godwin Elumelu, and Senator Nicholas Ugbane, his counterpart as Senate Committee Chairman on Power, of misappropriating over N10b public funds. EFCC therefore concluded that theexercise ”was used as conduit pipes with which funds of the Rural Electrification Agency were siphoned”.  EFCC added other offences – ‘misappropriation of N500million to buy houses; diversion of REA’s funds; flouting of government’s rules on award of contracts and award of fictitious and unnecessary contracts without following due process.’ But Justice M.G Umar of Abuja High Court on March 24, 2012, absolved them along with their fronts, claiming ‘he was unable to find a prima facie case or complaint disclosed in the proof of evidence against the respondent’. EFCC never appealed.

    Jonathan, after a two-year delay, went back to Obasanjo’s programme. His Roadmap for Power Sector Reform was a continuation of Obasanjo’s 2005 Electric Power Sector Reform Act (EPSR Act), which called for ‘unbundling the national power utility company into a series of 18 successor companies: six generation companies and 11 distribution companies. But the well-known forces behind our darkness once again overwhelmed a less self-assertive Jonathan. For instance, most of the 60 licensed Independent Power Producers (IPPs) were allegedly owned by some PDP leaders or their sympathisers. And as if to confirm this, Jerry Gana, a PDP leading light doubling as (IPPAN) chairman,  led the body to meet government over the demand of IPPS for waivers on ‘importation of gas-related machinery and equipment.’ The Jonathan government followed with a promise of more than half a billion bailout.

    As the saying goes, ‘the pests that feed on leaf live on leaves’. The Senate needs not waste our resources to know that those who have continued to feed on the blood and sweat of Nigerian tax payers are those prolonging our darkness. Dagogo Jack, the chairman of Jonathan presidential task force on power now says “ since government  has no control over private firms, the best government can do is to ensure they ‘sustain the current 4500MW level, if they cannot increase it.” With power generation sometimes falling below 2000MW and   consumers debited for energy never supplied, government says it is helpless. Prof Bath Nnaji who as minister for power claimed that ‘apart from transmission, the  (power)sector, ”with regard to generation,  was moving ahead by ‘leaps and bounds’, now as an investor, probably smiles to the bank following the commissioning of his transmission firm in Aba by then President Jonathan.  The lot of consumers remains the same. His successor, Prof. Nebo, who told us that ”the situation where only 25 per cent of Nigerians have access to electricity is a nightmare caused by human beings used by evil forces” has failed to identify the parasites that have continued to prolong our darkness. Of course, as for the well-known PDP stalwarts with links to the power sector who donated billions towards ex-president Jonathan’s failed reelection bid, what is needed is not Senate probe but EFCC inquisition.

  • Nigeria’s power sector: Huge investment, little result

    Nigeria’s power sector: Huge investment, little result

    In the past 16 years, the Federal Government tried unsuccessfully to make the power sector play its role as the driver of industrialisation. Despite the huge funds pumped into the sector, power generation has not gone beyond 4,500 megawatts. EMEKA UGWUANYI and JOHN OFIKHENUA examine the situation

    With over N5 trillion estimated to have been spent on the power sector between 1999 and now, businesses should no longer see public electricity source as alternative rather than the real deal.

    The Power Holding Company of Nigeria (PHCN), its successor companies – the generation, transmission and distribution companies received a chunk of the over N5 trillion.  Funds were also expended on the National Integrated Power Project (NIPP), which is supervised by a special purpose vehicle, the Niger Delta Power Holding Company (NDPHC) Limited. The NDPHC was created to fast-track the attainment of stable power supply in the country when past efforts failed.

    Unfortunately, the corruption the government wanted to avoid caught up with the NIPP programme. The programme was conceived in 2004 and the NDPHC was created in 2005. In 2007, $16 billion was allocated to the NIPP and used up within four years. The project was engulfed in controversy and litigation because of the alleged unexplained utilisation of the fund. The immediate past administration suspended the NIPP programme dismissing it as huge fraud and drainpipe but after two years, the suspension was lifted and the government continued with the project.

     

    Power Holding Company

    of Nigeria

     

    Upon return to democracy in 1999, Nigeria’s power sector was fully public-owned and run through the National Electric Power Authority (NEPA). Its funding was mostly from budgetary allocation. Power supply was then below 2,000 megawatts (mw) because of neglect and lack of investment by the past military governments.

    Between 1999 and 2000,  crude oil sold for about $9 per barrel so there was paucity of fund to finance power projects. This informed the search for fund for power supply, according to ex-President Olusegun Obasanjo. He said in the bid to provide power for the country, the government resorted to the development of the NIPPs. The ex-President expressed concern that after leaving office, his successor could not continue with the project.

    “When we started having money, we started the NIPP. When we said the money we had should be invested in power, my successor didn’t understand; he stopped it,” he said.

    He lamented that after he handed over power to the late former President Umaru Yar’Adua, no significant achievement was recorded in the power sector till he died, adding that the situation  deteriorated when Jonathan took over in May, 2010.

    After his exit from office, the National Assembly initiated a probe into the $16billion, which the Obasanjo-led administration allegedly spent on power sector.

    The Director-General, Bureau of Public Enterprises (BPE), Mr. Benjamin Dikki, explained that the government sold the 17 companies unbundled from PHCN for over $2.6billion. Dikki also said the Federal Government spent N373.17 billion on payment of workers’ entitlements.

    Apart from the Transmission Company of Nigeria (TCN), the Federal Government privatised the successor generation and distribution companies in November 2013, making funding the responsibility of the private investors.

    The Federal Government also secured funds for the power sector from different international development organisations and companies to tackle the challenges in the generation, transmission and distribution value chain.

    For instance, the development of some projects, such as the Zungeru hydro electric power plant with installed capacity 700Mw was funded by such funds. The Federal Government, according to the former Minister of State for Power, Hajiya Zainab Kuchi, in 2012 spent N162,990,364,379.30 to implement the project.

    Seventy-five per cent of the funding is from the Exim Bank of China. The counterpart funding of $309 million was from the Ministry of Power. The project was being implemented by a Chinese consortium, CNEEC-Sino Hydro.

    Besides budgetary allocations, there were interventions from different development organisations. For instance, the Permanent Secretary, Federal Ministry of Power, Ambassador, Godknows Igali, explained that the European Union, JICA and GIZ bankrolled some projects.

    In November 2014, the former Minister of Power Prof Chinedu Nebo confirmed that there were several supports from bilateral partners in form of loans, such as $700million from the World Bank, $200million from JICA , $370million from  African Development Bank (AfDB), $500million from EXIM China and $1billion from Turkey Projects.

    In the transmission segment, the AfDB also released a loan of $100 million to the Transmission Company of Nigeria (TCN). Last year, it was estimated that the TCN required about $3.7billion to increase power transmission capacity, make the network more stable and reliable, and improve efficiency of electric power transfer by reducing transmission technical losses. However, while there was no budget for the PHCN in 2013, N5.2billion was distributed to generation and distribution companies as well as to TCN. The money was part of the N13billion intervention fund for critical projects implementation, which was for upgrades and major repairs to bridge the gap created by the zero budget for the companies.

     

    National Integrated Power

    Project (NIPP)

     

    The original plan was that NDPHC would also build hydropower dams in the North in the second phase of the NIPP. But currently, there are 10 midsized power plants built under the NIPP programme and they are all gas powered. Apart from increasing the power supply, the plants were meant to take substantial quantity of natural gas as part of government’s efforts to utilise the abundant gas resources and reduce flared gas.

    As at May this year, about $11.1 billion had been committed to the project, The Nation learnt. Of the $11.1 billion, $7.1 billion went into the building of the 10 generation plants, $0.5 billion into gas assets, transmission assets got $2 billion, and distribution assets received $1.5 billion.

    The NIPP plants were designed to deliver combined installed capacity of 5,453 megawatts (Mw). Eight of the 10 power plants are designed as Open Cycle Gas Turbine (OCGT) power plants and the other two as Combined Cycle Gas Turbine (CCGT) power plants. The CCGT power plants can generate power through gas and steam turbines but because of lack of time considering deadline planned for handover of the power plants to private sectors, the completion of the steam turbines might not be realistic and perhaps may be completed by the private sector owners.

    For instance, the Alaoji power plant was designed as a CCGT project with a plant capacity of 1,131.4 mw. However, it was expected that by the handover date, only one of the steam turbines would have been installed. Therefore, the plant will be available for commercial operation as an 831.3 mw plant. As result of some of these hitches, the NDPHC projected a combined generation of 5153.1mw as against 5,453mw by the time the assets will be handed over to the new investors. However, the projections have been disrupted following some factors ranging from alleged lack of gas supply to the power plants to issues of inability of some of the preferred bidders to make initial payment for the assets they bought. The initial proposed period for the privatisation of the NIPP power plants was mid last year.

    According to the NDPHC chief, if not for lack of gas, the Alaoji Generation Company located in Abia State, the biggest of the NIPP power plants would be generating about831.3mw as at mid 2014 while the Benin Generation Company in Ihovbor, Edo State, would have 507mw output. The Egbema Generation Company, Imo State, Gbarain Generation Company, Bayelsa State, Calabar Generation Company, Cross River and Geregu Generation Company in Kogi State would have generation capacities of 380.7mw, 253.8mw, 634.5mw and 506.1mw.

    Also Ogorode Generation Company in Sapale, Delta State was expected to be generating 507.6mw, while Olorunsogo Generation Company in Ogun State would have 754mw output. Omoku Generation Company in Rivers State was expected to generate 264.7mw with Omotosho Generation Company in Ondo State supplying 512.8mw.

    Olotu noted that seven of the eight OCGT power plants could be upgraded to CCGT configuration, adding that five of the power plants are either fully or partially operational. But these projections have been stalled by insufficient gas supply and defeat of the Jonathan government.

    Other projects undertaken by the NDPHC include the 21.5 kilometre gas pipeline from Creek Town to Ikot Nyong power plant projects, 18km Ikot Nyong-Adiabo 330kV DC lines to evacuate power from Calabar power plant in Cross River State, 13km 132kv DC Adiabo-Calabar 132/33kV sub-station as well as reinforcement of the Calabar 132/33kV substation with a 60MVA 132/33kV Transformer and bays to accommodate new lines from Adiabo have all been completed.

    Transmission and distribution works that were completed or upgraded by NDPHC include the Jos 330/132/33kV Substation, 286km 330kv DC Jos-Makurdi transmission line, new Makurdi 330/132/33kv substation, 222km 330kV DC transmission line from Geregu through Lokoja to Gwagwalada, a 2x150MVA 330/132/33kV transformer substation at Gwagwalada in the Federal Capital Territory (FCT) with a further 90km of both 330kV and 132kV lines to interface with Katampe and Apo 330/132/33kV substations, 2x300MVA 330/132/33kV transformer Substation at Oke-Aro in Lagos which is now the largest 330/132kV transformer substation in the grid and 150MVA 330/132/33kV substation at Asaba in Delta State among others.

    In distribution, Olotu said 72 injection substations had been inaugurated, adding that 3,517 completely self-protected 25kVA and 50kVA customer transformers had been installed and 650MVA out of 3,750MVA of 33/11kV Injection substation already in service.

    In the last quarter of 2013, seven of the 10 power plants were put up for sale. Government expects to realise $4.3 billion from the sale.

    The seven plants marked for sale were those that had no legal issues associated with them while the sale of the remaining three plants would be delayed until litigations against their bids were resolved, the Joint Transaction Board said.

    The Joint Transaction Board also confirmed the successful bidders for the seven plants and they include EMA Consortium as the preferred bidder for Benin Generation Company with a bid of $580 million, and the reserved bidder, Index Consortium with a price of $575 million. EMA Consortium was also the preferred bidder for Calabar Generation Company with a bid price of $625 million, as against Nebula Power Generation Consortium, the reserved bidder with an offer of $623.75 million.

    Dozzy Integrated Power Limited was confirmed the preferred bidder for Egbema Generation Company with a bid of $415.7 million, while AITEO Consortium was named the reserved bidder with an offer of $392 million. Seoul Electric Power Limited was the preferred bidder for Geregu Generation Company with a bid of $690.2 million, while YellowStone Electric Limited emerged reserved bidder with $613.1 million.

    Ogorode Generation Company had Daniel Poer Consortium as the preferred bidder with a bid of $532.78 million, followed by ESOP Power Limited as reserve bidder with an offer of $510 million. Olorunsogo Generation Company had ENL Consortium Limited as preferred bidder with an offer of $751.24 million while the reserved bidder, Index Consortium, offered $730 million. Also Omotosho Electric Power emerged the preferred bidder for Omotosho Generation Company with a bid of $659.9 million, while the reserved bidder was ENL Consortium Limited with $645.15 million offer. The board chaired by the former Vice President, Namadi Sambo, approved the sale of the plants to the preferred bidders following a successful financial bids opening exercise conducted on March 7, 2014.

    The sale of Alaoji Generation Company, Omoku Generation Company and Gbarain Generation Company was stepped down pending the resolution of the litigation instituted by Messrs Ethiope Energy Limited against their bids. Shayobe International emerged winner of Alaoji with an offer of $318.7 million and AITECO Consortium as the reserve bidder with $312.5 million offer.

    KDI Energy Resources emerged preferred bidder for Gbarain Power with an offer of $340 million while the reserve bidder Azikel Power Limited offered $305.09 million.

     

    Rural Electrification Agency

    of Nigeria

     

    The Rural Electrification Agency of Nigeria was established by Section 88 of the Electric Power Sector Reform Act 2005. On March 16, 2006, the board and management of the agency were inaugurated and mandated to by the Federal Government to pursue aggressive rural electrification. The board and management were directed to facilitate the provision of steady  and reliable power supply at economic rates for residential, commercial, industrial and social activities in the rural and peri-urban areas of the country.

    But hardly had the agency taken off than it was enmeshed in corruption, and it was suspended before it was resurrected after few years. In 2009, the Federal Government through the Economic and Financial Crimes Commission (EFCC) initiated a 156-count corruption charge at a Federal Capital Territory High Court in Abuja, accusing the then Chairman of the House of Representatives Committee on Power, Ndudi Elumelu, the deputy Chairman, Jibo Mohammed, Senator Nicholas Yahaya Ugbane and seven senior management officials of the agency of corruptly appropriating rural electrification project funds of the agency. The EFCC accused the suspects of stealing over N5.2 billion and accused the committee of illegal contract award through which the funds were stolen.

    The EFCC also accused the former speaker of the House, Dimeji Bankole, and some of his relations of benefitting to the tune of N900 million from the diverted rural electrification funds. They were never charged by the EFCC as the government scrapped the agency.

    Annoyed by the misappropriation, Yar’Adua, on June 10, 2009, sent a bill to the National Assembly for amendment of the Electric Power Sector Reform Act (EPSRA) 2005 repealing the rural electrification agency. The bill was withdrawn after the death of Yar’Adua, and the agency reactivated in toward the end of 2011 by the former Minister of Power, Prof. Barth Nnaji.

    Substantial amount of money had gone into the agency before and after its suspension. The former Minister of State for Power, Hajia Zainab Kuchi, had at the inauguration of the board of the agency said that as much as N16 billion was approved by government for the agency to undertake projects and continue work on the abandoned projects.

    Nothing much has happened till date.

     

    Impact of the huge investment

     

    A budget analysis called statisense, carried out by an organisation called Slideshare, which covered nine years (2006-2014), showed that the power ministry’s budgetary allocation within the period was N872 billion. The analysis was undertaken to know if the budgets were able to meet the United Nations Development Programme (UNDP) recommendation, which stipulates that budgetary allocation should be structured 70 per cent for capital expenditure and 30 per cent for recurrent expenditure. Their research showed that the Power ministry had consistently allocated more funds to capital expenditure even surpassing the UNDP recommendation, but noted that Nigerians have not enjoyed commensurate benefit of these allocations.

    “Therefore, it goes beyond budgeting to actually make the people enjoy the dividend of democracy,” the report said.

    The report showed that the Ministry of power got N78 billion, N105 billion, N140 billion and N93 billion as budgetary allocations between 2006 and 2009 while the percentage recurrent and capital expenditures were 4.33 per cent and 95.67 per cent; 3.70 per cent and 96.30 per cent; 18.18 per cent and 81.82 per cent; and 5.31 per cent and 94.69 per cent r.

    Also between 2010 and 2014, allocations were N157 billion, N86 billion, N73 billion, N77 billion and N63 billion respectively while the percentages of allocation to recurrent and capital expenditures were 2.28 per cent and 97.72 per cent; 9.45 per cent and 90.55 per cent; 4.25 per cent and 95.75 per cent; 5.43 per cent and 94.57 per cent; and 5.44 per cent and 94.56 per cent respectively. The report showed that the least percentage allocation to capital expenditure within the period was 81.82 per cent indicating 11.82 per cent above the UNDP recommendation. Why was there no improvement in power supply over those years?  A source said the lack of improvement in output was due to large scale corruption and sabotage.

    Also the dramatic improvement being witnessed in the level of power supply in the last two months confirmed there has been high level sabotage. Output has risen from about 3,000Mw to 4662Mw. The Managing Director of the Transmission Company of Nigeria (TCN), Dr. Abubakar Rasheed Tambuwal, told The Nation that the company can comfortably wheel 4,662mw, adding that it has capacity to wheel to the national grid about 5300mw with assured system stability.

    Will the dramatic improvement continue or will things slide? Time will tell.

     

  • Senate to probe power sector funding since 1999

    Senate to probe power sector funding since 1999

    The Senate on Thursday commissioned a panel to conduct a holistic investigation into management of funds allocated to the power sector since 1999.

    The ad-hoc committee is also mandated to look into the unbundling of Power Holding Company of Nigeria (PHCN).

    The 13-man committee that will look at irregularities in the power sector is headed by Senator Abubakar Kyari (Borno North).

    It is expected to conclude its investigation and report back to the Senate within four weeks.

    This followed the adoption of a motion on “The disconnection of Maiduguri from the National Grid and General Power Degeneration in Nigeria,” sponsored by the Leader of the Senate, Senator Mohammed Ali Ndume.

    Other members of the committee are – Senators Godswill Akpabio, Babajide Omoworare, Mohammed Hassan, Ali Wakili, Mao Ohuabunwa, Aliyu Magatakarda  Wamakko , Olusola Adeyeye and Mohammed Shaaba Lafiagi.

    The Senate urged President Muhammadu  Buhari  to mandate  the Transmission Company of Nigeria (TCN) to immediately reconnect Maiduguri  back to the national grid.

    The lawmakers also urged the Federal Government to complete the Mambilla Power Project to improve electricity supply in the country.

    They condemned the inability of TCN to provide regular and uninterrupted power supply to all parts of the country.

    Ndume expressed worry that Nigeria with a population of over 150 million produces only 4, 600Mega watts of electricity, while South Africa with population of about 40 million people produces 40,000Mega watts.

     

  • Tackling Nigeria’s power sector challenges

    Tackling Nigeria’s power sector challenges

    Analysts observe that the privatisation of the power sector in Nigeria notwithstanding, the country has yet to provide steady power supply.

    They note that steady electricity supply is crucial to industrial development of any country, especially Nigeria that is planning to become one of the best economies in the world by 2020.

    In their opinions, steady power supply will also reduce cost of manufacturing and other domestic services.

    According to them, uninterrupted power supply will guarantee investments, employments for teeming unemployed graduates and reduce poverty level, among other developments.

    Stressing the importance of steady power supply to development, most Nigerians believe that the provision of stable power supply is the most important dividends of democracy any administrations can accomplish.

    Perceptive observers also recall that past administrations, since independence, have spent a lot of money on power projects without much result.

    They note that the Federal Government spent more than three billion dollars between 1999 and 2007 on National Integrated Power Project.

    According to them, the recent full privatisation and unbundling of the Power Holding Company of Nigeria by the immediate-past administration have also not guaranteed steady power supply.

    In an effort to make power sector effective, the Federal Government insists that it has signed a Memorandum of Understanding with
    Firstgate Business Intermediaries Ltd. and its South Korean technical partners, to construct 1,000 megawatts solar plant in the country.

    Former Minister of Power Chinedu Nebo, who signed on behalf of the Federal Government at that time, said about two billion dollars would be needed to have an operational 1,000 megawatts thermal power plant.

    He gave an assurance that the company promised that it would build the plant in line with the agreement.

    Nebo said that the government would work towards assisting the investors on facilitating the project, especially to acquire the Power Purchase Agreement and other documents.

    Mr Kelvin Asogwa, the chairman of the company, said that the company was also collaborating with local banks for the projects.

    He noted that the company had reputable technical partners from Turkey that had handled similar projects.

    He recalled that the company had an agreement with the government of Kogi to build a solar farm on 2,700 hectares of land.

    In the same vein, the Federal Government says it has also signed another agreement with Solius NGPC, Peoples Home Association and Solar Force Nigeria Ltd. to ensure steady power supply.

    Mrs Patricia Deworitshe, Assistant Director in the Ministry of Power in a statement recently, noted that the agreement was to inject another 1,000 megawatts into the national grid.

    She, nonetheless, explained that the company would start with 100 megawatts in any location as recommended by the ministry.

    Mr Rasaki Porbeni, the Chief Operating Officer, Peoples Home Association, said that the company planned to establish Solar Research Centres in some universities across the country to generate 10,000 jobs for Nigerians.

    “Under the agreement, Solar Force Company will also produce one megawatt each of solar energy to 200 different villages in six different states of the federation,’’ he said.

    These initiatives notwithstanding, observers note that Nigeria’s total electricity generation has dropped from 4,500 megawatts to 2,800 megawatts within a year.

    Giving further details, Godknows Igali, the Permanent Secretary in the Federal Ministry of Power, said that the power output dropped from 4,500 megawatts on April 3, to 2,800 megawatts on March 30.

    He blamed the drop on the vandalisation of gas pipelines and called for increased protection of Nigeria’s power infrastructure.

    He also said that the ministry of power was working more closely with appropriate security agencies to adequately protect power infrastructure across the country.

    Besides tackling the vandalisation of gas pipelines, observers express concern about the decision of some of the electricity distributions companies to pull out from the privatisation programme of the power sector.

    For instance, the Integrated Energy Distribution and Marketing Company (IEDM) gave security challenge in some parts of the country as excuse for its decision to withdraw from the exercise.

    In the same vein, eight other distribution companies have also threatened to withdraw on the grounds that the electricity tariff id low.

    Further to this, the Bureau for Public Enterprises has approved the payment of N29.2 billion to the IEDM in a share buy-back deal.

    Stakeholders in the sector, however, insist that the challenges facing the country’s power sector can only be overcome with proper pricing of electricity.

    Mr Kola Adesina, the Chairman, Egbin Power Plc, Lagos, expressed similar opinion, insisting that the power supply would be more stable in the country if the price of the product is right.

    He made the observation recently in Lagos during the launch of a book entitled: “The Development of the Nigerian Electric Power System (1973-1990)’’

    “The electricity sector is fundamentally flawed and it needs to be dealt with squarely.
    “The price has to be right for any investor to make it in the sector; it can only be profitable if the customers are satisfied with the supply.

    “Consumers’ satisfaction could be possible if only the product is readily available; and the product can also be readily available if the price is right,’’ he said.

    However, President Muhammadu Buhari has assured Nigerians that his administration would improve on electricity generation.

    He said in his inaugural speech that there was no other better ways to explain Nigerian’s poor economic performance over the years than the power situation.

    “It is a national shame that an economy of 180 million generates only 4,000 megawatts and distributes even less.

    “We will not allow this to go on. Careful studies are under way during this transition to identify the quickest, safest and most cost-effective way to bring light and relief to Nigerians,’’ Buhari said.

    Observers, nonetheless, urge the present administration to also take a critical and objective overview of the power sector privatisation to analyse its economic viability and sustainability.

    They advise the Federal Government to invest in the development of alternative sources of energy, including wind and solar to boost the capacity of the country, to meet its energy requirements.

  • Power Sector Reform: What went wrong?

    As the nation continues to groan under chronic power supply shortage which has regressed from epileptic to comatose and defied all projections for improvement despite massive injection of public and private funds, it is appropriate to examine the power sector reform in order to identify the problems militating against attainment of the desired goals.

    The major drivers for reform and privatization of the power sector were inadequacy of funding and non-judicious management of the resources available which is better known as corruption. The sector suffered unprecedented neglect under successive military administrations. Attempts to revamp it under the fourth civilian administration were bungled by over-bearing political influence. Political administrators muzzled the technocrats and usurped their roles in the conception and award of contracts leading to shoddy execution of projects and protracted delays. We are witnesses to power projects being uncompleted more than 10 years after contract award! The doctrine of urgency with which they were conceived without detailed planning and awarded did not translate into expedition in execution. Project completion costs bear no comparison with prices on award!

    Although President Obasanjo initiated the reform process as far back as year 2000, he could not get the much needed support of the legislature to push through the power sector reform bill during his first term in office. The Electric Power Sector Reform Act was eventually passed in April 2005 when the much needed legal backing took effect. Rather than continue where his predecessor left off, President Yar’Adua back-pedalled on the reform process and re-appointed two sacked directors of PHCN who turned the hands of the clock backwards by re-integrating unbundled PHCN entities.

    Nudged on by the doggedness of his minister of power – Prof. Bart Nnaji, President Jonathan, in a rare display of courage, demonstrated the political will to get it running again. Thus a clear road map was launched in August 2010 in anticipation of completion of privatization by mid-2011. However, external and internal entrenched interests determined to frustrate the process manifested their opposition through the various workers unions and caused untold delays to the privatization exercise which was finally concluded two and half years later in November 2013.

    The privatization of the power sector has therefore come a long way having met the key internationally recognized success factors. Why, then, have we not enjoyed the benefits?

    The ownership of power assets changed hands on the premise that the private sector is able to mobilise funds and use them more efficiently that the public sector.

    Two different models were employed in the privation process. The overriding objective for the DISCOs was system upgrade and improvement. The prices were pre-determined, bidders were required to showcase their experience, understanding of the assets on sale and business plan for improved service delivery. For the GENCOs, pricing was an added competition criterion.

    The attempts by the bidders to go beyond the data room to verify the state of the assets was frustrated by the electricity workers unions. They depended largely on information packaged by evaluators appointed by the seller – BPE. Even if the evaluators’ assessments were of acceptable quality, degradation of the assets as a result of continued use during the protracted interlude between the time of assessment and asset transfer was obviously not captured in the transactions. It was therefore not surprising to hear complaints from the buyers of the appalling condition of most of the assets. The implication is that the business plans needed to be revised ab initio. More funds are needed than projected. Payback period is jeopardized. Additional loans are required etc. The capacities of local lenders, on the other hand, are known to be stretched. Power is not the only sector sourcing for financing, the oil & gas sector is witnessing massive divestments!

    To further compound the situation, the GENCOs are paralysed by shortage of gas. This is a national self-inflicted perennial problem which has its roots in lack of appropriate pricing of the commodity. For decades, policy makers failed to appreciate that gas gathering and processing is capital intensive. Seeing that gas was being flared in the oil fields, they expected it to be delivered to government owned GENCOs at give-away prices. The creation of a Gas &Power Division in NNPC and the formulation of a national gas policy have now tilted the balance towards more realistic pricing which of course has not motivated the IOCs sufficiently to invest in gas field development projects, the situation is further compounded by their systematic disengagement from onshore activities. Even when they are reluctantly willing to do so, JV funding is an ever present clog in the wheel.

    The solution of this age-old problem demands flexibility on the part of the government with respect to pricing policy and JV funding.

    Rather than holding on tenaciously to the present price regime of US$2.50 per 1,000 scft of gas, policy makers will do well to harmonise the price with the going supply price to the Bonny LNG which may just not be substantially higher than US$2.50. The variability of that price vis-à-vis crude oil price is believed to be favoured by the IOCs against a regulated fixed price.

    Public ownership of generation and distribution assets has failed us. The government reluctantly yielded to the option of reform and privatization when it became clear that it could no longer meet the financial requirements needed to maintain existing facilities not to talk of further investments towards meeting the ever growing demand. The per capita power consumption of Nigeria ranks among the world’s lowest.

    The capacity of the private sector to raise funds and out-perform the public sector has been demonstrated in the telecom sector and also in the acquisition of the power assets.

    The buyers have only recently mounted the saddle. Time was needed to appraise the acquired assets and revise whatever business plans they bidded with. Unlike what happened in the telecom sector, the power companies cannot start on a clean slate and the acquired assets have suffered from many years of neglect.

    The government should by no means yield to calls for reversal of the privatization exercise under any guise or pressure to do so. Firstly, such a major policy somersault will generate ripples beyond our borders and the loss of credibility will be difficult to recover from. There is nothing wrong in reviewing the performance of GENCOs  and DISCOs especially within the context of the covenants in the sale agreements and where there are defaults,  sanctions  should be applied.  Such an exercise falls within the purview of the regulator and should not be politically engineered.

    The government should concern itself with policies that will ensure success of the privatization and promotion of investments especially relating to hydro development and harnessing of coal for power generation.

    Consumer protection is non-existent; such needs to be institutionalized. Many consumers both small and large complain bitterly about crazy/arbitrary bills imposed on them by the distribution companies. This is a fall-out of the estimated billing approach practised by PHCN; this option was flagrantly abused when the distribution companies were given high revenue targets and the only way they could meet such was imposition of punitive charges on the consumers. The new DISCOs have an obligation to install pre-paid meters under the terms and conditions of the asset sales agreement; in the meantime, they continue to take advantage of the inherited estimated billing system to the disadvantage of the electricity-starved consumers. NERC has to wield the big axe and put a stop to this unwholesome practice. Such a measure will force the DISCOs to i) ensure installed meters are read and reflected in billings and ii) fast-track installation of pre-paid meters rather than bloat their recurrent budget on account of engagement of meter readers.

    ‘Rather than holding on tenaciously to the present price regime of US$2.50 per 1,000 scft of gas, policy makers will do well to harmonise the price with the going supply price to the Bonny LNG which may just not be substantially higher than US$2.50. The variability of that price vis-à-vis crude oil price is believed to be favoured by the IOCs against a regulated fixed price’

    • Eribake writes from Lagos.
  • Ex-NIBRRI boss calls for power sector privatization review

    Ex-NIBRRI boss calls for power sector privatization review

    The former Director General, Nigerian Building and Road Research Institute (NIBRRI) Prof. Charles Ofoegbu Thursday called on the Gen. Muhammadu Buhari -led incoming administration to review the privatization of power sector assets.

    He noted that worsening power supply in Nigeria has cast doubt on the competence of some of the private investors, stressing that some of the firms lack the technical expertise to operate power plants.

    He maintained that following the epileptic power supply in the country, it has become expedient for the Federal Government to examine whether the private owners of the firms have met the vision, aims and objectives of the privatization exercise.

    Ofoegbu, who is also a Geo-Physicist and a former head of exploration with the Nigerian National Petroleum Corporation (NNPC), spoke with reporters in Abuja.

    He raised the alarm that some of the companies that bought over the power entities may have stripped the assets and sold them alongside the spare parts.

    He added that some of the investors have not even unlocked the gates of the companies since the entities where handed over to them.

    Ofoegbu submitted that the entire privatization of Nigeria’s public corporations has turned out to be a failure owing to some genuine and intentional mistakes of the government, which need urgent corrections for the citizenry to have the benefits of the privatization exercise.

    He said: “We need to make sure that it was properly done. If there are areas where there are genuine mistakes, those genuine mistakes should be corrected so that Nigerians will have the full benefits of privatization.”

    The former NIBRRI boss expressed surprise at the shortage of power supply even in the face of newly commissioned power plants.

    The reason, he said, “is that we are placing the cart before the horse.”

    He stressed that government did not finish implementing gas master plan prior to the building of the power plants.

    According to him, there are some of the power plants that have no pipes conveying gas to them.

    His words:  “We did not implement adequate gas master plan. It has not been fully implemented are you are putting in place generating points on a master plan that is not implemented then you commissioned these elephants. Many people in their domains do not even realize that there is no raw material to power them.”

    Ofoegbu insisted that: “The gas supply is not there. There are some power stations we have in this country that there are not pipes taking gas to them. Why should we not do the first thing first?”

    The expert faulted the claim that vandalization of gas pipeline has been responsible for lack of gas supply to the power plants, stressing that the government has been very economical with the truth.

    “Every time they blame it on vandalization. Gas pipelines cannot just be vandalised by just anybody. It is not everybody that can temper with these pipelines. How many times did you hear of explosion of gas?”

    According to him, it is outdated to even fault vandalism since the sector should have made provision for remote monitoring of gas pipelines and power infrastructure.

    He recalled that some of the mistakes in the power sector was the abandonment of coal power plants in Afam and Oji River soon after the end of the civil war.

  • Jonathan explains commitment to power sector devt

    President Goodluck Jonathan yesterday gave some reasons for his administration’s commitment to the development of the power sector in the country over the past six years.

    According to him, the administration has been committed because it is the only thing that could ensure the survival of small businesses in the country.

    Aside creating jobs, he said  the sector will also create wealth in the country.

    He spoke in Abia State during the official commissioning of the Alaoji Power Station (Phase I 504megawatts (Mw) simple cycle gas). Its one of the projects under the Niger Delta Power Holding Company (NDPHC).

    “Today is a moment we will forever remember. For small businesses to survive, they need power and that is why we are totally committed(rejuvenating the power sector),” Jonathan said.

    Thanking the people of Abia State for their support towards the execution of the project, the president also promised that the government would continue to work towards transforming the country.

    Speaking on the occasion, Abia State Governor, Theodore Orji said the project will remain indelible in the minds of the people of the state.

    He said the president has given everything to ensure the success of the project right from the time he was the Vice President.

    Governor Orji said the state has already given plots of land to the company to build housing estate for the workers  that will work at the station.

    He said the people of Abia State will show their gratitude to the president during Saturday’s presidential election.

    The Minister of Power, Prof. Chinedu Nebo said efforts of the President has resulted in the revival of the 10 National Integrated Power Projects (NIPPs).

    According to him, the remaining six NIPPs yet to be commissioned will be commissioned before the end of this year.

  • No end in sight?

    •President Jonathan should not play politics with phony power project commissioning

    Expecting that flicker of light in the dark tunnel that the current administration has thrown the power sector is increasingly akin to waiting for Godot. Having spun so many fables about performance and delivered far more alibis than electricity, the Jonathan administration seems to have been inextricably caught in the maze of its contradictory spins.

    Being an electioneering season, it is not unexpected that the administration would seek to showcase its achievement – if any. That perhaps explains why the president has ramped up  his campaigns in the South-west for the most part of the past fortnight. With pretty little to show after nearly six years in the saddle despite repeated pledges to make darkness history, power-starved citizens ought to find it amusing that the under-achieving Jonathan administration has embarked on an orgy of commissioning make-believe power projects in the twilight of its first term.

    One such is the 750MW Olorunsogo Phase II Power station, in Olorunsogo, Ogun State, commissioned by the president on February 20. The other is the ‘new’ turbine unit at the Egbin Power Station, near Lagos, inaugurated the next day – February 21 during which the Minister of Power Chinedu Nebo gleefully announced that the nation’s generation/transmission capacity currently hovers around 5,000MW – which he touts as achievement – using the 2011 output of 2,800MW as baseline.

    Clearly, if we are any confounded at the fraud now in-built into the computation of the power sector arithmetic and the perennial celebration of under-achievement that has become its companion, more confounding must be the administration’s amnesia coming after serial promises to cross the 10,000MW by December 2013. Jonathan’s Minister of State for Power, Zainab Kuchi, had in the course of a presentation to the Presidential Action Committee on Power in January 2013 claimed that the nation’s power generation capacity as at the end of 2012 stood at 6,442MW with peak quantity generation of 4,517.6MW recorded on December 23, 2012. Her projection at the time was that the nation would have achieved the 10,000 Megawatts of electricity generation by December 2013. That was after President Jonathan had stated times without number that the power sector conundrum would be cracked long before the end of his first term.

    Two years after that projection, the situation is hardly better. In major respects, it may have gotten worse. One proof is the claim attributed to the Federal Ministry of Power that the actual energy sent out to electricity consumers average 3,424.11MW – an output far less than the 5,000MW claimed by the minister in charge.

    Beyond the arithmetic, what must be of particular interest is that the challenges facing the sector, and which have long been diagnosed, have hardly changed in any substantial sense from what they were five years ago. Then, we were told that a gas-endowed nation cannot find gas to power its thermal plants; that investors would not bring their money into the gas sector because fiscal terms were unfavourable. The Federal Government has since procured another headache: pipeline vandalism – a problem which the Jonathan administration has framed as an alibi, to buy time even as the nation continues to languish in darkness.

    It ought to be obvious by now that the administration has neither the capacity nor the will to tackle the power problem. This in itself is tragic considering the over $20 billion sunk into the sector by the different Peoples Democratic Party (PDP) administrations. And while the darkness lingers, the ill-served power consumer is still forced to bear the brunt via the avenue of the crazy, inequitable bills. It is a classic case of double jeopardy, which we might remain in, unfortunately, at least until the government begins to think out of the box.

  • Schneider chief calls for more investment in power sector

    The Country President of Schneider Electric, Walid Sheta, has said Nigeria needs massive investment in the power, especially in transmission and generation value chain despite the sector’s privatisation.

    Sheta, who spoke to reporters at the company’s headquarters in Lagos, hailed the sector’s privatisation, but added that it is inadequate considering the population and the level of power generation. The power generation, he said, is only enough for a city and not the country.

    “Therefore, if the expected stable power generation that will drive the economy will be attained, the transmission needs to be reinforced strongly because it is a backbone of the country,” he said.

    He added: “With a lot of investments, it took 10 years for some countries to achieve this. There is also need for massive investment in generation, three gigawatts (3000MW) should be for a city, therefore, Nigeria’s generation ordinarily should be for a city. Nigeria should build 10 power plants of 2000 megawatts (MW) each for the distribution companies to see what to distribute. The grid and generation should be upgraded, this will bring Nigeria to where it is supposed to be just like China and Brazil.”

    Sheta said Schneider, with its expertise, is committed to helping Nigeria achieve its power aspirations. He said: “Energy issue in Nigeria is important and Schneider has the solution. We want to bring Schneider to another level of awareness, and making Africans leaders of the company in Africa.

    “We have re-injected capital in Schneider Electric Nigeria. We have increased our asset base in the country in December and our presence in Nigeria is also being increased. We are committed to this biggest economy in Africa without any doubt. My main focus is to take Schneider Electric Nigeria to greater heights. We are proud to have 96 per cent of our team including the management team as Nigerians.

    “We are very proud to ensure that part of the leadership of Africa is Africans. It is a key element of our strategy. We are making our African colleagues rotate in and outside the zone, before they return to assume leadership positions in their home countries, which is an important part of our strategy. It is important to mention that people are key in our organisation. I believe that the difference between organisations is the quality of service and the quality of the people who are interacting with the customers.

    “We are known in the world as an excellent provider of energy systems, especially from the utility angle, including the distribution and generation companies. Our access to renewable energy programmes, such as the one Durumi in Bayelsa and 10 villages in Ogun State, and Edo State, among others.”

     

  • Power sector sinkhole

    Power sector sinkhole

    •Why would the Fed Govt think merely throwing money at the problem will give us light?

    For a sector that has gulped more than N5 trillion ($31.45 billion) from 1999 till date with pretty little to show for it, the report that the Federal Government is set to take another $7 billion to support the on-going Power Sector Reform should stoke alarm. If anything, it has merely validated our earlier warnings about the increasing appetite of the Jonathan administration for foreign loans.

    World Bank’s Country Energy Task Team Leader for Nigeria, Eric Fernstrom, reportedly told participants at a two-day capacity building workshop on post-privatisation monitoring for the power sector jointly organised by the World Bank and the Bureau of Public Enterprises (BPE) that “arrangements have been concluded to release about $1.75 billion, which is 25 per cent of the total $7 billion pledged for Nigeria over the four years”.

    The offer, as one would expect, did not come without a rather gratuitous statement that “the bank was greatly encouraged to offer the additional assistance to ensure that the reform objectives were realised following the high level of transparency exhibited in the transaction process and the robust post-reform measures put in place by the NCP/BPE”.

    To start with, where is the transparency being touted by the World Bank about the process? The same process currently stuck in judicial tango? Is the World Bank not aware of the controversies surrounding the sale of the Kaduna Electricity Distribution Company, (Kaduna Disco)? Or is the bank feigning ignorance of the court order restraining BPE from transferring the controversial Kaduna Disco to the preferred bidder following its alleged failure to execute the deed of sale and the refusal of the BPE to invite the reserved bidder to complete the Share Purchase Agreement? Did the sale of Afam Power Generating Company (Afam Genco) not suffer the same fate? So which transparency is the World Bank talking about?

    Of greater concern to us however is the $7 billion loan. We understand that the power sector needs all the help that it can get to bail it out of the current morass. The problem here is that neither the World Bank nor the National Council on Privatisation/Bureau for Public Enterprises deems it fit to avail Nigerians of information about the specific projects the package was meant for and what the terms of the loans were.

    In May this year, the same World Bank at the sidelines of the World Economic Forum Africa (WEFA) summit announced that it had mobilised about US$1.7 billion to boost the reforms of Nigeria’s power sector.  At least the nation was told about the US$245 million for the 459-megawatt (MW) Azura Edo Power Plant near Benin City, Edo State; and the US$150 million for the 533-MW Qua Iboe plant in Ibeno, Akwa Ibom State. If only for reasons of transparency, we at least expect that BPE/NCP to avail Nigerians of the details of the latest loan.

    But then, the more fundamental question is – how many more loans would the Federal Government require before Nigerians begin to see some light at the end of the dark tunnel? And where is the guarantee that this latest loan will make a difference given past experiences? Moreover, isn’t the whole idea of the Power Sector Reform essentially about divesting the Federal Government of some of the burdens it currently bears? How does one reconcile a sector being primed to become the toast of the so-called investors remaining essentially a sinkhole in which taxpayers and foreign monies continue to be poured? As it appears, Nigerians may not have been told the whole truth about the loan.  We believe that something is wrong somewhere. It is something the National Assembly should help find out.