The Politics of the Power Sector

(By Favour B. Afolabi)

Although the country has been ill-famed for the wrong reasons, not many know that the NIPP is the single largest power project by any country in the world right now. It is a massive undertaking that is replacing the country worn radial infrastructure with a loop system that would ensure multiple sources of power supplies to consumers across the country.

I have noticed that those that love to use this issue as a convenient political excuse to always lampoon the current administration are actually largely ignorant of what is going on in the sector – and I have decided to discuss these developments under the following categories A-G as described below:

A. State of Current power delivery:

There is the group of those who would never believe that any progress is being made in the power sector irrespective of what you tell them; irrespective of them enjoying improved power supply in their homes; they are the folks that would suggest that the Power Minister, Prof Nebo lied when he mentioned that we would be losing about 1,112mws of power to some maintenance at a Chevron plant for a few days, they claimed rather that “the reason for the drop was because rainfall had subsided resulting in a fall of what we were getting from the hydro plants.” These folks of course do not know that Hydro sources only accounts for less than 30% of what the Nation currently uses to provide power to its population well!

Well, now that power has returned to what it was before the subject maintenance exercise and even possibly improved beyond what it was before the repairs, they have gone quiet about this their “Rain theory” and they of course will be too proud to tell those they misled that they were wrong neither will they admit that power has improved in their own homes since then even as the current installed available generation capacity within the sector has risen to 6,000mw while generation capability is currently at 5,228mw with peak generation above 4,500mw.

B. State of the privatization process & PHCN labour issues:

Then there is also the group that don’t know that the power companies have already practically been fully privatized and that government control in the sector would soon be reduced to that of transmission and regulation of the sector thereby ushering us into the sort of improved services that we currently enjoy within the Telecommunications industry; they would also tell you that these companies have been dashed to some cabals even though these companies fought through very competitive processes to win the bid for these companies in the full embrace of the international business community.

Well, here is a list of the preferred bidders for the Discos as approved by the National Council of Privatization:

1.             Kann Consortium for Abuja Successor Company at $164 million;

2.             Vigeo Power Consortium for Benin at $129 million;

3.             West Power &Gas for Eko at $135 million;

4.             Interstate Electrics Ltd for Enugu at $126 million;

5.             Integrated Energy for Ibadan at $169 million;

6.             NEDC/KEPCO for Ikeja at $131 million;

7.             Aura Energy Ltd for Jos at $82 million;

8.             Sahelian Piwer SPV Ltd for Kano at $137 million;

9.             4Power Consortium for Port Harcourt at $124 million;

10.           Integrated Energy Distribution & Marketing for Yola at $59 million.

 For the Gencos, the preferred bidders are:

11.           Amperion  for Geregu Plant at $132 million;

12.           Mainstream for Kainji Plant at $50.76 million plus commencement fee of $237,870,000;

13.           North-South for Shiroro Plant at $23.60 million plus commencement fee of $111 million;

14.           Transcorp/Woodrock for Ugheli Plant at $300 million;

15.           CMEC/Eurafric for Sapele Pant at $201 million.

And the success of this process has made even more firms to jostle for Afam Power Plc and Kaduna Electricity Distribution Plc; both processes which were earlier truncated because none of the bidders had scored the required minimum 75 per cent to progress to the financial bid stage which was later re-opened now having 20 companies being pre-qualified for this process while the Enugu Disco is being resolved under some other arrangements bringing the total of these companies to 18!

Well these our sensational analysts would tell you “until we see the power in our houses, we won’t believe” – no problems – Thomas said the same thing about Our Lord Jesus Christ until HE showed himself to him in person so these guys would undoubtedly see the power in their homes very soon as well yet this should call into question the intelligence level of these folks – why should even half-educated people choose to reason like this – how can they be suggesting that 18 privately managed companies with international partners and exposure who would have invested billions of dollars in acquiring and re-investing in these assets  would all fail in one single swoop? Why should anyone submit himself to such levels of unimaginable self-inflicted ignorance?

Aside from these, 70 per cent of Egbin Power Plc, Lagos has also been to KEPCO of South Korea for $407.3m.

Some have also expressed concerns about labour issues within the industry, well – under a deal with PHCN workers, the Federal Government has accepted to pay a total of N384 billion to the staff of PHCN, and this is in addition to the N57 billion which was paid out in 2011 as monetisation arrears. The demand of the workers meant a payout of over 97.5 percent of the power privatization proceeds. The workers will receive payment for redundancy, gratuity and arrears of payment into the retirement or pension accounts of the about 45,000 workers.

It is expected that all workers of PHCN will be fully evaluated by the new owners of the privatized assets and those found to be incompetent will not be retained in their posts. They will collect their compensation and then go on to restart their lives elsewhere. The competent ones will be retained and they will get only part of the compensation, the one to be linked to their pension account.

C. State of the NIPPs & related projects:

The National Integrated Power Project (NIPP) was conceived in 2004 as a fast-track government funded initiative to stabilize Nigeria’s electricity supply system while the private-sector led structure of the Electric Power Sector Reform Act (EPSRA) of 2005 took effect; NIPP was originally designed around seven medium sized gas fired power stations in the gas producing states, and the critical transmission infrastructure needed to evacuate the added power into the national grid. A commitment to electrify host communities in the vicinity of the power stations and major substations gave rise to the distribution component of the project; these assets are listed thus:

1.Calabar – 561mw

1. Egbema – 338mw

2. Ihovbor – 450mw

3. Gbarain – 225mw

4. Sapele – 450mw

5. Omoku – 250mw

6. Alaoji – 1,074mw

7. Olorunsogo II – 750mw

8. Omotosho II – 500mw

9. Geregu II – 434mw

10. Ibom Power – 190mw

Total: 5,222mw.

These projects would of course come online at different times in the course of the next couple of months leading to 2014 and would naturally be able to help the sector achieve the target of 10,000mw  as promised by the Power minister even as some of them would eventually be privatized as well just as the federal government has just recently sold the Omotosho Power Plant I to China National Machinery and Equipment Import and Export Corporation [CMEC] under a debt-equity swap arrangement in a transaction worth USD$217.5m. 80% stake in each of these companies have already been advertised for sale by the Niger Delta Power Holding Company of Nigeria (NDPHC) for which 44 companies have already expressed interests in acquiring same.

Also, the NDPHC has added 274 kilometres (km) of transmission lines to the national carrying capacity through the completion of six transmission projects namely, the 330KV DC Ajaokuta-Lokoja-Gwagwalada lines, 222Km; 330KV DC Ihovbor-Benin Main-Oshogbo Line A, 17km; 330KV DC Papalanto-IkejaWest-Ayede line, 16KM; 330KV DC Ganmo-Jebba-Oshogbo SC-Turn In/Turn Out Line, 12KM; 330KV DC Omotosho-Ikeja West Line, 5Km; and the two-kilometre, 132KV DC Ganmo-Ilorin-Oshogbo Turn In/Turn Out line.

Furthermore, the NDPHC has strengthened the transmission capacity of 12 substations, built three new ones from the scratch and rehabilitated two across the country, with a cumulative capacity of 2,370MVA. In the distribution end of the NIPP project, the NDPHC also has a haul of 30 completed zonal projects as follows: Abuja zone, 2; Benin zone,2; Eko zone, 9; Ibadan zone, 6; Ikeja zone 6; Kaduna zone, 3; and Jos/Yola zone, 2.

And, as part of the NIPP, the NDPHC is overhauling the country’s transformer system by putting the huge 3000KVA-50000KVA low voltage range of transformers out of service and replacing them with hundreds of thousands complete, self-protective (CSP) high voltage transformers in the 25-50KVA range.

Attached to two or three homes at the maximum, the CSPs are being deployed nationwide to end the phenomenon of plunging whole neighbourhood into darkness whenever the sole transformer serving several streets pack up, among other problems associated with the central transformer system.

Although the country has been ill-famed for the wrong reasons, not many know that the NIPP is the single largest power project by any country in the world right now. It is a massive undertaking that is replacing the country worn radial infrastructure with a loop system that would ensure multiple sources of power supplies to consumers across the country.

D. State of gas supply to these plants:

The World Bank has began to provide Partial Risk Guarantees [PRGs] to support Nigeria’s gas sector to bring more electricity to consumers and one of such Gas Supply and Aggregation Agreement [GSAA] has just been executed for Egbin Power Plc/plant between the bank, Power Holding Company of Nigeria, Chevron Nigeria Limited and Deutsche Bank. Under the 10-year GSAA, which is based on the industry template developed by the Nigerian National Petroleum Corporation, Chevron will provide gas to Egbin power plant for power generation. This will be the first time that Egbin power plant will be able to procure gas under long-term arrangements.

The World Bank’s PRGs being provided under the IDA-financed Nigeria Electricity and Gas Improvement Project [NEGIP], is key to enabling long-term gas supply; the PRGs will be used to cover private lenders against the risk of a public entity failing to perform its payment or contractual obligations. The NEGIP PRGs will be instrumental to achieving financial closure of the Egbin GSAA transaction by providing payment security for Chevron for the supply of gas to the plant.

These long-term contracts enabled by the PRG would also help to encourage investments in upstream gas production by international and domestic oil and gas companies; this will help to catalyse long-term private investments in Nigeria’s gas sector and underpin future investments in the power sector. Subsequent PRGs would support other gas supply agreements to these power plants even as the World Bank has already committed to a series of PRGs totaling $400m, of which the one for Egbin is the first to be signed. This template of course would be eventually replicated across all these power plants.

E. State of the hydro power sources:

The Federal Government is also investing heavily to boost generation through the large, medium and small Hydro plants with the total capacity of over 4,234mw being:

1. Zungeru – 700mw

2. Mambilla – 3050mw

3. Gurara second phase -360mw

4. Itsi – 40mw

5. Small Hydro plant – 84mw.

F. State of the other sources of power:

Another 1,896mw is being expected from Independent Power Producers (IPPs) like Aba IPP, etc, while another 806mw is being expected from the Federal Government legal assets before the end of 2013.

There are also at least 50 other Nigerian private IPPs as registered by Nigerian Electricity Regulatory Commission [NERC] of different capacities that have either been connected to the national grid already or are being connected to it.

G. State of the sector before Goodluck Jonathan and his legacy:

Then there is this group that would tell you that “President Jonathan should stop making excuses for his failures in this sector because PDP has been in office for 14 years and that he should not talk about the wasted years of the military when it comes to development of these infrastructure” – well no one can change HISTORICAL FACTS – yes, Jonathan is a member of the PDP but he can only answer for his own time in office; and yes, if the Military had invested in power as Jerry Rawlings, also a military man did in Ghana, or Hosni Mubarak, a maximum dictator did in Egypt, the incoming governments won’t be struggling with power as they are doing now and they would have been able to invest such funds elsewhere like the Education and Health sectors.

So these commentators should blame the likes of Buhari, IBB, Abacha, and AbdulSalam and their cronies that ran the nation for so many years for stashing away several billions of the Nation’s dollars in foreign accounts rather than using such in building critical infrastructure like power and others; these are the same guys that would begin to quote crazy figures that they believe the PDP has spent on the power sector for 14 years without telling you that some of these 18 power companies being privatized; 11 NIPPs; 5 hydro plants; and other transmission grid improvements were built with these same funds.

Well there is nowhere in the world where a current leader is blamed for the failures of his predecessors even though some of them belong to his political party as and that logic cannot be hold water in Nigeria – every President and his administration would always have specific successes and failures attached to it by history irrespective of how some individuals try to distort such facts – Obasanjo’s government would always be remembered for the telecommunications privatization exercise that produced the MTN/Econet/Globacom/Etisalat, etc revolution in Nigeria that now has now produced more 100 million subscribers in more than 10 years; the late Umar Yar’Adua government would always be remembered for the Niger Delta Amnesty programme that went on to provide an atmosphere of peace in the region that has allowed the nation to be able to produce 1.5m barrel of oil per day.

In the same way that Jonathan cannot lay claim to those successes, he can also not be blamed for the failures of those administrations as well so he would have to be judged by what he is able to achieve while in office and it now very apparent that Jonathan would be claiming this trophy as regards the power sector – I just hope that when that happens, these same folks won’t come and say “ehn, he is not the one that did it, na Obasanjo and Yar’ Adua do the real work wey hin come enjoy” or “ehn, shebi it is the normal duty of government to provide services to its people, there is no big deal there, South Africa has had 48,000mw for more than 20 years already, wetin we dey celebrate.”

Author: Favour B. Afolabi is President at Viva Real Estates Company; he is a consultant to several infrastructural development projects in Lagos, Abuja and Port-Harcourt.

“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”

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