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Despite attracting $3.5bn, power sector bemoans viability

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By Sebastine Obasi

…sector not bankable, NDPHC

NIGERIANs’ hope of having stable power supply in short or medium term may be a mirage going by the insidious challenges in the sector which have not yet been tackled head on.

Vanguard gathered that despite attracting about $3.5 billion, the sector is still haunted by many deeply-rooted problems.

Explaining the current state of electricity generation, distribution and transmission, situation, the Managing Director, Niger Delta Power Holding Company, Mr. Chiedu Ugbo, said that NDPHC has spent about $3.5 billion on distribution and transmission projects in the country.

“As soon as the new owners of old PHCN assets took over, market issues came up, coupled with micro economic challenges of between 2015 and 2016. We have been negotiating with the preferred bidders, the companies are still much interested, but unfortunately, the power sector market has not been able to attract lending now. The sector is not bankable at this time.

What the preferred bidders are saying is that the privatisation was structured in such a way that they would fund 30 per cent equity and 70 per cent debt.

“They said since the market is not good enough for them to borrow, they are ready to put down their 30 per cent equity and bring the 70 per cent when the market improves.’’

He however said the proposal from the investors has not yet been presented to the presidency as negotiation was still on-going.

Ugbo, who stated that the privatisation of the 10 NIPP power plants resulted in the sale of 80 per cent equity at $5.73 billion, said that other intricate challenges had impacted on the nation’s power supply.

According to him, “The privatisation challenges such as insufficient gas supply, liquidity problems, as well as micro economic issues, had significant impact on the privatisation process since the emergence of the bidders on March 7, 2014, but we are negotiating with them.”

“Even though there are available generation capacity close to 7,000 megawatts, MW, transmission could only absorb about 68 per cent of what is generated. Currently we have between 2,900MW and 3,000MW generation capacity that is stranded while the installed capacity of the nation’s power plants is 13,000MW.”

Power shortages remain a primary challenge for businesses as well as households across Nigeria.

The cost of self-generation continues to erode households and weighs heavily on operational costs for businesses.

The Transmission Company of Nigeria (TCN) recently estimated generation capability as high as 7,000 megawatts (MW).

However, industry sources said that the national energy wheeling capacity through the transmission grid is limited to a maximum of 6,000MW.

Speaking on the situation in the sector, Minister of Power, Works and Housing, Mr. Babatunde Fashola, said that despite the challenges, steady power supply is still achievable.

According to him, “It is a journey – incremental power. Every one megawatt is defined. We cannot have 12,000MW installed and be concentrating on new ones without optimising the existing ones. Egbema and Gbarain power plants are not finished, Olorunsogo, Omotosho, and Geregu are not optimising because there is not enough gas. In some places, there are transmission problems.

“This is what the Ministry is now talking. Let’s be focused, which transmission project will we award?  Is it the one that goes to a power plant that is ready to deliver power? Some have gas and the power is there but they cannot evacuate, so, let’s build the transmission line. Some have the transmission but don’t have gas, so, let’s build the gas pipeline.

“That is what is happening in places like Omoku plant in Rivers State. We will complete Omoku by March next year and it will give us about 270MW. We will finish Gabarain this year and it will give us over 115MW, Alaoji by June next year.”

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