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Power debacle: Reversal of privatisation not solution – GENCOs tell Senate

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Power debacle: Reversal of privatisation not solution - GENCOs tell Senate…Call for mechanism to strengthen grid capacity, DISCOs

…Claim to spend N360 billion to ramp up capacity in five years

..Double available capacities from 4,214MW to 8,145MW in five years

…Lament 3,214MW of stranded power

By Chris Ochayi

The power Generation Companies, GENCOs, Sunday, rejected the calls for outright reversal of the entire power privatisation exercise, while suggesting that instead, frantic efforts must be made to strengthening the weak links in the power value chains in order to remedy the abysmal state of the sector.

The GENCOs, which made the clarification, while reacting to the recent remarks by the Senate President, Senator Ahmed Lawal, where he called for total reversal of the privatisation exercise, noted total reversal of the privatised power assets was not solution to the escort’s debacle.

Operating under the aegis of Association of Power Generation Companies, APCO, the GENCOs, however, agreed with the position of the Senate President that all is not well with the Nigeria Electricity Supply Industry, NESI.

According to a statement signed by the Executive secretary of APCO, Dr. Joy Ogaji, said, As GENCOs, we empathise with Nigerians on the current abysmal situation of electricity supply to individuals and the industrial community as well as the attendant effects, this has on the costs of goods and services.

“We also understand that this may have led to the frustration expressed by the Senate in calling for an outright cancellation of the privatization of the Power Sector. “

Dr. Ogaji noted that, “It is very pertinent to state that the reversal of the privatisation exercise of 2013 is not the solution to resolving the current abysmal state of the sector.

“As responsible corporate citizens we are going to use this medium to provide additional insight into the challenges plaguing the sector and proffer a pragmatic approach towards increasing and sustaining electricity supply to Nigerians.

“It is also important to mention that the current situation in the sector is adversely affecting our operations, jeopardising our investments and has a very high potential to negatively impact the inflow of Foreign Direct Investments to the country.

She recalled “The privatization of the Nigerian power sector, which began in year 2004, was embarked upon majorly to ensure stable electricity supply to Nigerians, repeal monopolistic laws which restricted entry into the Nigerian Electricity Supply Industry (NESI), liberalize the sector and create an enabling environment for private sector investment and participation with a view to driving efficiency in the power sector.”

Ogaji however, regretted that soon after the privatization, some guidelines stipulated in the governing contract were not and have still not being activated.

She lamented that the inactivation of these resulted in the “Non-payment for power generated and supplied to the national grid, as there was no effective PPA. This has led to a huge outstanding debt of approximately One Trillion Naira (N1TRN) owed to GENCOs from the inception of privatization till date.”

Revealing the current factor plaguing the sector,  Dr. Ogaji said, “Worthy of note is that the weak transmission (Grid) and distribution network inherited from the PHCN days are still very much in existence and are not complementing our efforts in maximizing our respective available capacities to the benefit of the Nigerian populace.

“The maximum capacity attained by the national grid ever is 5,375 MW as opposed to the current overall average available capacity 8,589 MW and installed capacity of 13,427 MW with an expansion capacity of 20,000MW in an enabling environment.

“Average stranded capacity that could have been made available to Nigerians in the light of maximum attained grid capacity is an average of 3,214MW.

“This implies that if we had a grid capacity that matches our average available capacity, 3,214 MW can be immediately made available to Nigerians with the current state of operations of the GENCOS and at no additional cost.”

While awarding the GENCOs pass mark, Executive Secretary noted that, “The subject of GENCOs performance constitutes part of the guidelines and conditions stated above.

“Part of the obligations imposed on the owners of the GENCOs at the point of privatization, was meeting of a minimum performance target (MPT) of 5,000MW set by the Federal Government of Nigeria (through BPE) for the GENCOs.

“Each GENCOs was mandated to increase the generation capacity of its plant to a threshold set by the FGN within 5 years. The penalty for not meeting the MPT was a possible takeover of any defaulting GENCO by the Federal government of Nigeria.

READ ALSO: GENCOs raise alarm over delay in releasing CBN’s N213bn fund

“Notwithstanding the non-payment of GENCOs’ invoices for power supplied to the national grid, the GENCOs took loans and other credit facilities to fund the capital expenditure required to meet the MPT by ramping up capacity.

“It is very important to stress that The GENCOs have doubled their available capacities from 4,214MW at takeover in 2013 to 8,145MW in 2020. Out of the 8,145MW available capacity, only 3,987MW is generated for Nigerians. The balance 4,159MW is stranded as a result of constraints in the national grid capacity.

“GENCOs in addition to acquiring the assets for over $1bn dollars, have invested heavily in ramping up nameplate capacity through frequent maintenance, minor and major inspections and also major overhauls.

“GENCOs since November 2013 have spent circa USD 1 billion to ramp up capacity not only to meet the performance target set by the Federal Government of to act responsibly in the provision of power to Nigerians and also to maximize their return on investments in order to fulfill their obligations to the financial service providers for their respective acquisitions.”

The GENCOs, which viewed the call by the Senate to cancel the privatisation exercise as premature, urged that National assembly to focus some  structural issues raised and as well calling for Conduct a viable and independent stress test on the Generation, Distribution and Transmission capacities to enable us plan proactively and build the sector.

“Urgent review of the Electric Power Sector Reforms Act (EPSRA), the Multi-Year Tariff Order, Orders made by NERC so far, Policies, Market Rule and other governance document in the NESI;

“Immediate separation and unbundling of the Independent System Operator (ISO) and Transmission Service Provider (TSP) from the existing Transmission Company of Nigeria (TCN) to drive efficiency in the wheeling and allocation of power.

“Provide local/foreign guarantees (backed by World Bank/AFDB) to enhance guaranteed payment plan for GENCOs to enable them improve generation and implement expansion plans (for power growth).

“Ensure that there is transparency in the billing, collection and remittance as well as develop a viable metering framework to improve collection efficiencies.”

Vanguard

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