When President Goodluck Jonathan unveiled the power sector reform roadmap on August 3, 2010, it was seen as a pathfinder to the country’s age-long power problems. Two years on, the roadmap is still a work in progress, writes EMEKA UGWUANYI Assistant Editor (Energy).
The availability of reliable electric power to the homes and businesses of our citizens has been one item in our national life that we have approached with so much hope and yet experienced so much frustration over the past decades. Various regimes, in the distant past, paid little attention to the sector but in the recent decades, subsequent regimes have put in billions of naira to reverse the neglect and mismanagement which has characterised the sector.
“I and my Vice President are conscious that what we do with the Nigerian electricity supply industry will go a long way in determining whether Nigeria remains in darkness or joins the rest of the world in the race for development. Our commitment is to bring an end to our nation’s stunted growth and usher in the fresh air of prosperity by pursuing a new era of sector-wide reform which is driven by improved service delivery to every class of customers in the Nigerian electricity sector.
“The full implementation of the electric power sector reform has been a key priority for this administration. We established the Presidential Action Committee on Power (PACP) with a view to eliminating red tape and the often over-bureaucratic and inefficient nature of decision-making in government.
“The Presidential Task Force on Power (PTFP) is the engine room that drives the vision of the PACP. The PTFP has the mandate to develop the roadmap and provide monitoring to ensure effective implementation of the plan. Their activities will introduce a greater degree of transparency to the way in which we implement the reforms and greater accountability on the part of those responsible.” These were the words of President Goodluck Jonathan while presentating the roadmap.
Going by the President’s comments, the roadmap was borne out of the seemingly intractable power problems. Despite funds sunk into the sector by successive administrations, no tangible results were achieved.
The roadmap is a well-intentioned statement of milestones to be achieved at specific periods, designed to prepare the sector for takeover by private operators because of government’s seeming failure to manage the utility. Until last year total power wheeled into the national grid didn’t exceed 3000 megawatts (MW).
Besides, if the government had the capacity to generate more megawatts and the will to wheel it into the grid, the grid appeared so fragile that it hardly took 3000MW hence the incessant system collapse, which threw the country into total blackout most times.
Although the roadmap failed to meet almost all its targets in generation, transmission and distribution of power and the privatisation timetable, it was able to give direction to the sector. The generation figures, improvement in transmission and distribution reports by the government have become more dependable and most of all, the transfer of ownership and management of the power sector asset to the private sector appear more realistic.
Power supply is becoming less erratic, and besides some security concerns, genuine investors’ confidence is increasing but unless the privatisation is done right, there may be a problem. There is need to ensure that the preferred bidders that would take over these assets are desirous to take Nigeria out of darkness on sustainable basis.
In order not to completely put the fate of over 160 million Nigerians, the economy and developmental aspirations into the hands of one person or a company, the government structured the privatisation terms differently for the various power assets, making the private investor the owner, with the federal and state governments owning equity shares.
Privatisation
The Bureau of Public Enterprises (BPE) is saddled with the responsibility of ensuring that the 18 successor companies unbundled from the Power Holding Company of Nigeria (PHCN) secure the right investors in terms of technical and financial competence.
The assets for privatisation include 11 distribution companies (Discos) and six generation companies (Gencos). The distribution companies include Abuja Electricity Distribution Company Plc, Benin Electricity Distribution Company Plc, Enugu Electricity Distribution Company Plc, Eko Electricity Distribution Company Plc, Ibadan Electricity Distribution Company Plc, Ikeja Electricity Distribution Company Plc, Jos Electricity Distribution Company Plc, Kaduna Electricity Distribution Company Plc, Kano Electricity Distribution Company Plc Port Harcourt Electricity Distribution Company Plc, and Yola Electricity Distribution Company Plc.
The Gencos include Ughelli Power Plc; and Sapele Power Plc in Delta State; Geregu Power Plc in Kogi State; and Afam Power Plc in Rivers State. These four power plants are thermal plants that run on gas while the remaining two – Shiroro Power Plc; and Kainji Power Plc both in Niger State are hydro power plants.
The 11 discos are part of the 18 successor companies unbundled from the PHCN but because none of the bidders met the requirement for the Kaduna Electricity Distribution Company, the 21 firms currently shortlisted would be jostling for 10 discos.
Shortlisted Discos
Oando Consortium; Vigeo Holdings, Gumco, African Corporation AFC &CESC, Honeywell, and 18 other firms were among the shortlisted by the BPE from the 54 firms that submitted bids to acquire the 11 electricity distribution companies.
Having passed the technical evaluation bid test, the BPE will on October 16, open the financial bids for the 21 companies.
For the GenCos, the BPE had last Tuesday opened the financial bid for the preferred for eight investors that were shortlisted for five generation companies as the three firms that submitted bids for the sixth GenCo – Afam Power Plc, couldn’t meet the requirements. The eight companies offered a total of $1,119,363,150.05 for the five power plants.
Firms for Discos
The eight that qualified for the five companies are Amperion Power Distribution Company Limited (Geregu), Mainstream Energy Solutions Limited (Kainji), North-South Power Company Limited (Shiroro), Amperion Power Distribution Company Limited (Ughelli), Feniks Electricity Limited (Ughelli), Transcorp & Woodrock/ Symbion/ Medea/ PSL/ Thomassen (Ughelli), CMEC/Eurafric Energy JV (Sapele) and JBN-Nestoil Power Services Limited (Sapele).
The NCP reminded Amperion Power Distribution Limited to be aware that the rules allow them to win only one Genco. Accordingly, if they win both Ughelli Power Plc and Geregu Power Plc, they will have to give up one.
The Federal Government is selling majority stakes in power plants and letting private investors buy as much as 70 per cent of 11 distribution companies spun out of the former state-owned utility as it seeks private investment to curb power shortages.
The Chairman, Technical Committee of NCP, Mr Atedo Peterside said all the winning bids are “subject to the approval” of the National Council on Privatisation headed by Vice President Namadi Sambo. Bidders have 15 days after the final approval to post a bank guarantee for 15 per cent of the bid amount and pay 25 per cent of their bid within another 15 days after the deal has been signed, he said. The balance should be paid over six months or as agreed with the privatisation agency.
The transmission segment of the sector is wholly retained by the Federal Government but has been given out on management contract to a Canadian company – Manitoba Hydro International, for three years. On expiration of this term, the government may terminate the contract if it feels satisfied with the ability of Nigerians to manage it effectively but otherwise, the contract would be extended.
Initially, the completion of the privatisation programme was scheduled to end by February this year but had to be extended by eight months to accommodate the requests and desires of the investors who submitted bids for the generation and transmission and distribution assets.
But because the entire roadmap was anchored on a customer-driven sector-wide plan to achieve stable power supply, it was gathered that the extension of the privatisation timelines by the BPE became imperative. A BPE source explained that the bidders said they were not carried along on the initial privatisation package because they were not given the opportunity to carry out due diligence on the assets they submitted bids for and also measure the bankability of the projects, among others. It was in view of these requests that the BPE reviewed the timetable to October.
The roadmap expressed such fears when it said that investors would be reluctant to make large-scale investments in the upstream and downstream sectors of the electricity industry unless they are confident that commensurate investments in the midstream sector will also take place: This was the reason the management of transmission was contracted out to a private company, the government said has both the requisite project management and technical expertise.
The transaction timeline by BPE showed that the evaluation of the technical bids for the successor companies in generation and distribution companies would take place between August 14 and 28, 2012 after which the NCP would approve and announce the results of the technical evaluation by September 11, 2012. Although, there were slight shifts by few days in some of the schedules such as the announcement of the bidders that scaled the technical valuation of Discos’ bids, but the BPE stuck to its October deadline.
The timeline for the shortlisted bidders for generation companies to submit their letters of credit was September 18, 2012 while October 2, 2012 is the deadline for shortlisted bidders for distribution companies, which the NCP would approve to finally pave way for the opening of financial bids of the shortlisted investors.
The announcement of the preferred bidders for the generating companies, the BPE said, is October 9, 2012 while October 23, 2012 is the date for the announcement of the preferred bidders for the distribution companies.
The BPE said that alterations in the announcement dates of some results such that occurred when the successful companies that passed the technical bids evaluation for distribution companies, was to ensure transparency in the privatization process.
Gencos’ terms of
privatisation
The two privatised hydro power stations would be on concession for between 25-30 years while the four thermal plants would be 100 per cent sold but original plan in the roadmap was that thermal generating plants would be privatised via the sale of a minimum of 51 per cent equity to core investors that clearly demonstrate the technical and financial ability to operate and expand each plant.
The roadmap further noted that care would be taken, by working closely with the Nigerian Electricity Regulatory Commission (NERC) to ensure that a monopoly or oligopoly of market power in the generation sector is not acquired through these divestitures.
The BPE said that certainly the preferred private investor for any asset would have at least 51 per cent equity holding. It said the government deliberately structured it that way to ensure that all the concerns are private sector-run; adding that with 51 per cent or more equity shares, the preferred private sector bidder will have more directors on the board and exercise all the necessary powers.
The states where the assets situate were mandated to own shares not more 20 per cent in such assets but apart from equities due to them in that regard, they (states) would further be considered for extra equity ownership, which would be based on the quantum of investment they made in such states. Most of the state governments had immensely invested in some the assets located in their areas. Therefore, the extra equity holding they will be considered for would be more of compensation and that extra equity should come from the Federal Government’s owned equity.
The states that made investments in the power facilities would submit their claims (investments made in the facilities) to the government. Such claims would be evaluated and ratified by the NERC. On the basis of the feedback from NERC, the Federal Government will determine the level of extra equity to be allocated the states from its shares.
Discos’ terms of
privatisation
As stipulated in Gencos, the preferred private sector bidder would have the highest equity holding of 51 per cent or more in each of the 11 distribution companies to be able to be in charge and take decisions. But the difference here is that none of the Discos would be sold 100 per cent. The federal and state governments where the distribution companies are located, would own statutory or recommended equities of not more than 20 per cent and extra equities, which would be measured by level of the state government’s investment in the asset.
Targets, misses,
achievements
The Federal Government in the roadmap expressed commitment to achieve 14,000 MW of power generation capacity, which would be available by December 2013. Out of this, 4,500 MW would come from PHCN generation assets, 4,775 MW from the NIPP plants and 3,300 MW from independent power producers such as Shell and Agip, among others. Shell’s Afam VI in Rivers State, is a combined cycle plant with installed capacity of 650MW while Agip’s Okpai plant in Delta State has installed capacity of 460MW. In the short term, the government’s generation target achievable by April 2011 was put at 7000MW.
To meet Vision 20:2020 target of 40,000MW, the government said it would require investments in power generating capacity alone of at least US$ 3.5 billion per annum for the next 10 years. None of the targets was met as the PHCN assets currently generates about 3000MW and the NIPP 1150MW. The Managing Director, Niger Delta Power Holding Company (NDPHC), which supervises the 10 medium sized power plants being constructed under the National Integrated Power Project (NIPP), Mr. James Olotu, said the Federal Government has so far spent about $8 billion on the projects.
Olotu said out of the NIPP’s 10 plants, four are operational, which include Olorunsogo in Ogun State, Omotosho in Ondo State, Sapele in Delta State and Alaoji in Abia State. Alaoji according to him, came on board this month.
He also noted that the total supply capacity from the four plants, which currently is wheeled into the national grid stands at 1150 megawatts (MW), which is expected to jump to about 1500mw by December.
The other six plants, he added, are under construction and are at between 80 per cent and 90 per cent completion stage.
He said: “By the end of this year, from all the stations, we will be looking at about 2500mw, which would be dependent on gas delivery. We are also building hundreds of thousands of kilometres of transmission line across the country as substations to support those transmission lines.
“The company commissioned 150MVA transmission facility at the Ikeja West Transmission Station and another 150MVA would be commissioned this month at Akangba. Several sizes of this transmission facilities and smaller one have been commissioned and more would be commissioned before the end of this year.
“We are also building several thousands of kilometres of lines for distribution and also the infrastructure and substations to support it. We are also building gas pipelines within the same fund to ensure that wherever you have a power plant there is gas that is flowing there and there is a line pipe that will be feeding the plant.”
New projects
The Federal Government revealed in the roadmap that it had plans that would lead to the commencement of construction of the Mambilla Power plant, which would have an installed capacity of 2,600MW and Zungeru Power with a capacity of 700MW as well as expand the Gurara Hydro power plant, which currently has installed 30MW to a capacity of 300 MW, 200 MW dual-fired power plant in Kaduna, which are expected to be completed within the next six years to complete.
The Minister of State for Power Arc Darius Dickson Ishaku told the NCP last month that the Kaduna power plant is in progress, noting that eight gas turbine generators for the plant are at Onne port while the Mambilla installed capacity of 2600MW as contained in the roadmap has been revised to 3050MW. Update on the project, according to him, is still at bankable feasibility studies. The feasibility studies’ completion is last quarter of this year, adding that the entire Mambilla project would be financed through equity debt structure of 80:20 per cent ration by Exim Bank of China. The engineering, procurement and construction (EPC) would be completed by first quarter of 2013, he added. For the Zungeru plant, the minister said the project’s contract renegotiation is ongoing; the procurement of project management consultancy at BPP certification level while the environmental impact assessment has been completed.
He also stated that the Federal Ministry of Power is in discussion with EximmBank of China for the funding of loan component, adding that the government is constructing a 10.75MW wind power plant in Katsin a, which consists of 37 wind turbines. The project, he said, was 98 per cent completion as at August 30, 2012.
