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PHCN: No going back on reforms-FG

By Yemie Adeoye
IF the power sector is to attract the necessary investments to bring about the needed growth required for Nigerians to realise their dreams of uninterrupted power supply, a total overhaul and reformation of the sector may be unavoidable afterall.

It is in view of this that the federal government decided that the reformation of the power utility company, PHCN, and the sector in general has become inevitable.

Aside from this, the federal government also seems to be uncomfortable with the current situation in the power utility company which boasts of a staff strength of about 50,000, a situation which is responsible for the stagnancy of the sector as about 90 percent of the company’s income goes into staff salaries.

Immediate past Minister of Power, Dr. Lanre Babalola dropped this hint during a breakfast meeting with energy correspondent in Lagos recently. According to him the focus of the federal government this year is to drive the reforms of the power sector amongst other things as this is the only panacea to the much needed private sector investment in the sector. “A situation where the about 90 percent of PHCN’s monthly revenue is claimed by staff salaries and overhead costs makes it clear that no investor would be ready to come in”.

The Minister stated that the over 50,000 staff of the company is highly unnecessary as this is another avenue for wastage, especially as the company parades about 50,000 staff, most of whom may not be technical staff.
Dr. Babalola also used the opportunity to elaborate further on the N500 billion grant from the Central bank to revamp the ailing sector.

He siad that the establishment of a technical team was necessary because investment in power must take cognisance of the transmission, distribution and fuel supply if we are to avoid building white elephants or plants that will only work part of the time. “We need to adopt a holistic approach on this issue by addressing all variables in a technical manner and the viability of such projects in the identified area”.

He said the visit was to commend the effort of the CBN and also present issues on power project development in practical perspective and more importantly; the Ministry of power’s readiness to play a pivotal role based on the series of studies and feasibilities on projects where the private sector players can be effectively engaged.  According to him not only is significant funding required in generation but also in transmission, distribution and fuel supply to effectively produce and deliver power to Nigerians for domestic and economic use.

The Minister who was accompanied on the visit by the Minister of State Arc. Nuhu Wya and top officials of the Ministry and Power Holding Company of Nigeria(PHCN) told the CBN team that there was the need to avoid the mistake of the past in citing and executing power projects where all the variables required for a functional and viable projects are not properly considered before rushing into their development.

The CBN team was led by two Deputy Governors, Dr Sarah Alade who is in charge of Economic Policy and Dr. Tunde Lemo who oversees operations at the bank. The former acted for the Governor who was out of the country at the time of the visit.  The Minister specifically stated that in addition to providing debt finance, CBN could further facilitate private sector investment and participation by playing a prominent role in the provision of guarantees and securitization, which are critical for ensuring long-term sustainability of power plants. He further stressed that this is the type of structure used worldwide to promote private sector in the development of power projects. Even in Africa, Ghana, Cote d’Ivoire and Algeria have used this structure to good effect.

The Minister listed other conditions that CBN should consider for effective utilisation of the facility and development of the power sector including,  Establishment of a fund for the sector that provides credit support for IPPs.*A more central role to be played by CBN in the provision of guarantees and securitization arrangement

* Assistance with hedging of foreign exchange rates,  Other alternative suggested by the Minister include, the need for wider consultation with the Ministry of Power, NERC, PHCN, TCN playing critical role in the development of the power system. There should be awareness that solutions require a holistic approach which is not just generation focused but include not just transmission and distribution also the reform and deregulation of the sector.

Minister of state in his contribution commended the CBN for this step adding that this is the type of cooperation the Ministry has long be waiting for as collaborative effort to boost power supply to Nigerians. “This is the type of collaboration we have been looking for and I must commend CBN for this bold initiative” Wya said. In welcoming the delegation, Dr.Alade noted that the said fund would be channeled through the Africa Finance Corporation(AFC) since the institution has the expertise and global network to grow the fund and attract other facilities for investors in the power sector. According to her it is expected that this fund will act as catalyst for the sector and through the participating banks more facilities could be attracted pointing out that the apex bank was worried over the low performance of the real sector of the economy which gave rise to many investors rushing to the capital markets few years ago.

“We felt that we need to push this fund into a sector that will encourage development and growth of the real sector and that was why we are looking at Power and industrial cluster areas but now that we know from your presentation what other requirements are, CBN will look at this fund will have to do a thorough job by incorporating all of this” Also speaking Lemo cautioned on the need to avoid debt overhang and added that CBN statement was meant to provoke discussion so that the very best will come out of this scheme and for the benefit of all. According to him, based on the financing needs of the power sector, the N500bn is a small amount but that it has a signal effects because the AFC that will be adviser on the fund would be able to attract more fund from abroad for this cause. He said AFC has qualified competent to manage the fund and any local bank that will participate in the scheme will have to meet AFC conditions for such business.

PHCN Ikeja commences installation of new
distribution transformers

By Yemie Adeoye

THE federal govern
ments multibillion naira intervention fund for revitalising the power sector seems to have yielded fruits as the Management of Power Holding Company of Nigeria Plc. (PHCN), Ikeja Electricity Distribution Company takes delivery of 95 distribution transformers as part of the 607 it ordered under Federal Government 2009 Capital Budget and Intervention Fund in the Power Sector.
The remaining consignments of the transformers are expected to be delivered before the end of April 2010.
This was disclosed by the Chief Executive Officer of the Company, Engr. Chris Akamnonu in Lagos at the weekend.  The Chief Executive Officer said that the transformers will be used to replace failed units, upgrade overloaded ones as well as provide additional reinforcement within the distribution networks in the Zone.  He however said that the deployment of the transformers has commenced, starting with the failed units.  Already, 72No. have been installed and commissioned.  Under this programme, Ikeja Distribution Management is assuring electricity customers in the Zone comprising of Abule_Egba, Akowonjo, Ikeja, Ikorodu, Ikotun, Odogunyan, Ogba, Ojodu, Oshodi and Shomolu Business Units that by the end of April 2010, no customer will be without electricity due to failed transformers.
The Chief Executive Officer further disclosed that 78km of undersized distribution lines have been upgraded while eleven (11No.) 11kV feeders are under construction to reduce overload and power interruptions at peak load periods.
Other projects already completed according to Engr. Akamnonu include the commissioning of 15MVA Transformers at Igando, Oworonshoki and Bolorunpelu Injection Substations while 10No. Injection Substation Switchyards and Switch_rooms have been fully rehabilitated.  Also, rehabilitation of others is on_going and will be completed soon.  Management has also procured and distributed 69No. new operational vehicles for prompt faults clearing and improved customers’ service delivery.  Computerization of faults recording and customers account verification and management is ongoing in the Business Units and Undertaking Offices in Ikeja Distribution Company.
The Management of the Zone, the Chief Executive Officer said, is confident that the new equipment and materials already procured under the 2009 Federal Government Capital Budget and Intervention will substantially impact on network expansion, maintenance and operations in the Zone.  He further commended the efforts of electricity customers and law enforcement agencies, who responded to his earlier appeal for vigilance in stemming the tide of vandalism of equipment in Ikeja Distribution Zone.
Meanwhile three suspected vandals were arrested in Ajegunle area of Ikorodu over the weekend for vandalizing PHCN cables. The suspects who have been paraded by the Lagos State Police command are being remanded in police custody. The Management appeals to the police to ensure prosecution of the suspected vandals under the miscellaneous offences decree to serve as deterrent. The Ajegunle community was also commended by the Management for their efforts in arresting the vandals.

U.S collaborates with Nigeria, IPPAN to generate 10,000MW by 2010

By Daniel Alfred

THE American
Ambassador to Nigeria, Robin R. Sanders has disclosed that the U.S. Government is collaborating with the government and with the Independent Power Providers Association of Nigeria (IPPAN) to implement one of its top priorities, increasing electricity generation to 10.000 megawatts by 2011.
Besides this, their help in the energy sector also includes providing capacity building assistance to the Nigerian Electricity Regulatory Commission (NERC), and a grant by the U.S. Government Agency, USTDA, of $162.000 to assist IHS Nigeria, a local company that manufactures towers for cellular, microwave, and radio uses to improve its efforts to evaluate energy alternatives, for renewable energy solutions, and in the ICT sector.
Robins said this through an agreement he signed last week and through the Nigerian Energy and Climate Change project, a U.S. Government effort to help Nigeria generate clean power, generate power from flared gas, and assist independent wind and solar firms to develop bankable investments.
He further affirmed that they are working with the Central Bank of Nigeria’s (CBN) Information Technology department to help on cyber_security solutions and security best practices in the banking sector and Nigeria being the largest agribusiness market in Sub_Saharan Africa for the United States. They are working to deepen U.S. Nigeria agribusiness tie through trade and development programs. Each year, hundreds of Nigerian agribusinesses participate in industry_specific events in the United States to source products, services, and technical know_how for their operations.
According to him, “We support and sponsor various agricultural technical exchanges between U.S. and Nigerian institutions through programs including USDA’s fellowship and faculty exchange programs. These offer short_term agricultural training opportunities for mid_level managers from the government and NGOs.   As part of the U.S. $25 million Global Food Security Program for Nigeria, we are working with federal, state, and private sector institutions to build capacity in agricultural productivity, markets, linkages, and building agricultural yields in cassava, rice, and cow peas. Nigeria’s agricultural future is vital to this country’s well_being, and I am pleased that I have had an opportunity to meet with Nigerian farmers all over Nigeria to see how our technical assistance has helped farmers to produce protein enriched cassava and cow pea flour, and better rice.   Recently in Ogun State, I visited an innovative public_private partnership between Ekha Agro and the U.S. Government through USAID which is helping over 1,000 Nigerian cassava farmers produce glucose from cassava, the first agro_business of its kind in Nigeria and the first in all of West Africa. Small scale farmers will double their productivity and increase their net incomes by over 150 percent thanks to better yields and higher prices. In Benue’s Olam farm, we have also helped a 200_member farmers’ cooperative improve rice yields and increase exports. In Ondo State, an agro_business is making cassava flakes for export. All of these projects are using, and are advancing with U.S._funded technical assistance and capacity building. I know this audience is primarily filled with business persons active in the dynamic commercial sector of Lagos. But it doesn’t mean that your voices should not be heard at this crucial political time for Nigeria. You know as well as I do that investment and economic growth don’t like uncertainty, so what is going on now politically in either the short term or the long term does affect your interests so your voices need to be heard. That being said, the U.S. Government wants to assure you that we support the democratic efforts to find a way out of these uncharted waters. We are still your friend and I speak today as a friend of the nation.  So I want to tell you some of the things we are still doing to be helpful and supportive during this critical time, in the areas of energy, banking. ICT and agriculture. I know these are uncertain political times for Nigeria, as your Acting President needs your support in ensuring Nigeria’s democracy not only continues to mature but also so that the country remains stable. The U.S. Government cares deeply about Nigeria, Not only how it is doing as a nation, but where it is going, and how it is planning to get there. We wish you success as you continue to chart a way forward during these uncertain political times as you decide as a nation how to address the issues at hand, from the dignity for an ailing President to reports that a small group is being less than transparent about his status. Your Acting President needs the support of the entire nation at this time to ensure that the way forward for Nigeria is not only democratic and maintains unity of purpose, but also inspires the right actions on election reform and addressing the fundamental areas of development particularly in the Niger Delta, and including encouraging more transparency in the Petroleum Industry and Local Content Bills for the energy sector.” He said.

Gas producers may hold up output – Algeria Energy Minister

NATURAL gas produc
ers may restrict their output to correct oversupply and boost prices, the president of the Gas Exporting Countries Forum said Tuesday, countering skepticism that gas countries can’t influence prices the same way as oil producers.
Speaking to reporters ahead of an OPEC meeting here Chakib Khelil, who is also Algeria’s oil minister, said if there is a market imbalance “all you need to do is to take back some of your production.”
“It isn’t a problem to shut-in fields,” he said.
The statements are the clearest indication to date of the policies the GECF could discuss when it meets April 19 in Oran, Algeria. Restricting output would be similar to the actions of the Organization of Petroleum Exporting Countries, which has cut or increased production to stabilize markets.
Some gas producers and experts have said cutting output to boost prices would be harder for gas producers than for oil as the majority of the deals are tied to long-term prices.
Arriving in Vienna later, Abdullah bin Hamad Al Attiyah, oil minister for GECF member Qatar, said it is too early to say whether it will cut gas supplies, but agreed prices are currently below their optimum range.
“We feel [the low gas price] is unfair,” he said. “We aren’t asking for a premium, but price parity for gas with oil.”
Members of the GECF have blamed depressed global prices on new gas supplies from U.S non-conventional gas fields.
Last year, the Henry Hub U.S. gas contract was on average 44% lower than in 2008 at $3.99 per million British thermal units. By contrast, Khelil said Tuesday a fair price for natural gas is $13 to $14 per million British thermal units, but didn’t specify which particular benchmark contract he had in mind.
The prices have already led some producers to warn they could reign in production. Statoil ASA (STO) said recently it may delay some natural gas output in Norway, the world’s third-largest gas exporter.
But Russia, which holds the Forum’s secretariat general and is the world’s largest gas exporter, has said the GECF has no immediate plans to co-ordinate output volumes and regulate prices.
The 11-member GECF — which also comprises Bolivia, Venezuela, Egypt, Iran, Libya, Nigeria, Trinidad & Tobago, and Equatorial Guinea — controls 73% of global gas reserves and 42% of production.


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