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Privatisation of GENCOs, DISCOS was bound to fail — TCN

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Privatisation of GENCOs, DISCOS was bound to fail — TCN
VISIT: From left, Mr. Eze Anaba, Editor, Vanguard Newspaper, Mr. Gbenga Adefaye, GM/Editor-in-Chief, Vanguard Media Limited and U.G. Mohammed, Managing Director, CEO, Transmission Company of Nigeria when Mohammed visited Vanguard on Monday.

By Udeme Akpan & Prince Okafor

THE Transmission Company of Nigeria, TCN, has disclosed that the privatisation of Electricity Generation Companies, GENCOs and Electricity Distribution Companies, DISCOs, was bound to fail because the nation hurriedly adopted the ‘Single Buyer’ model which has never worked anywhere.

The Managing Director/CEO, TCN, Mr. Gur Mohammed, who disclosed this during a visit to Vanguard’s office in Lagos, said: “There were many problems, including high losses that needed to be addressed before privatisation of our power assets. We did not work toward addressing them and in spite of the advice of the Indian experts, we hurriedly privatised the power assets to mostly indigenous firms because many competent foreign companies knew about the problems and were not ready to invest.”

Lack of capacity

He stated: “The indigenous companies did not have the capacity to buy the assets. The only way they could buy them was to get loans from commercial banks and they have not been able to pay back.”

“The losses have continued to increase over the years, thus making it impossible for the investors to generate maximum revenue for reinvestment expected to build capacity and deliver adequate and stable power supply to consumers.”

“In November 2013, the privatisation of generation and distribution companies was completed with the Federal Government retaining the ownership of the transmission company in November 2014.

“I was part of the team that started the Power Sector Reform Programme in 2007. I was called to be the Secretary during President Umaru Musa Yar’Adua’s administration. I declined the offer, because I knew that the programme would never work. Our privatization process was not built to work, as we sold the 60 percent stake to unqualified investors that have no record of successful projects in the past.”

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He added: “The DISCOs accused TCN of being the weak part of the power chain. I admit we were. Our wheeling capacity used to be around 5, 000 megawatts before, but currently we can boast of a wheeling capacity of 8,000 megawatt.”

Energy crisis

He said the government and other stakeholders need to do more in order to tackle energy crisis in the nation, stressing, “If we don’t solve this problem, Nigeria will never move forward and we will continue to stay in one place.”

“If you look at all other sectors, they have close relationship with power because when there is no power all other sectors cannot function properly.”

“Also, there a direct relationship between electricity consumption and security. For this nation to move forward like the developed nations, we have to ensure that we solve the problem of energy crisis.”

Effect of wrong model

The TCN boss said it wrong for the nation to adopt the ‘Single Buyer’ model in privatising assets in the sector, pointing out that the model had failed in other nations that adopted it.

He pointed out that one weakness in the model was to hand over the entire assets at once, without doing enough work to verify the technical, managerial and other capacities of the buyers, despite his advice against it.

According to him, “The government went ahead to sell 11 distribution companies and six generation companies to the buyers, while TCN was retained, but operates like a private company. We sold our assets in 2013 and till now not much has been done to transform the sector.

“As a result of adopting this model, we have sunk N1.5 trillion in the power sector just to address critical problems. So, I believe that if we continue like this, the current government in three years time will have sank N3.3 trillion and I believe also the current capacity which is currently 4000mw, will soon be less because this money entering has not been used for any new investment.”

State of sector

However, investigation by Vanguard, yesterday showed that the sector has not changed much from its pre-privatisation days.

The latest report obtained from the office of Vice President Yemi Osinbajor, stated: “On February 02 2020, average energy sent out was 3,937 MWH/Hour (down by 93.68 MW from the previous day) while 2,959 MW was not generated due to unavailability of gas.

“195.6 MW was not generated due to unavailability of transmission infrastructure, while 135 MW was not generated due to high frequency resulting from unavailability of distribution infrastructure. 245 MW was recorded as losses due to water management

“The power sector lost an estimated N1, 697,000,000 (One Billion Six Hundred and Ninety Seven Million Naira) on February 02 2020 due to constraints from insufficient gas supply, distribution infrastructure and transmission infrastructure.”

Way forward

Speaking on the way forward, Mohammed said, the GENCOs and DISCOs need to invest as much as $4.3 billion in expanding their capacities to provide adequate and stable power to consumers, nationwide.

He said: “The investment must be sustainable to liberalise the power sector. We also need to imbibe the culture of adequate planning. As at today, if you look at the power sector reform, there are some planning issues that we did not do well. The buyers did not appear to understand clearly the assets they were buying, including available infrastructure to deliver power to consumers and the losses that could occur in the process.”

Vanguard Nigeria News

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