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Original Post Date: 2011-01-17 Time: 08:00:03 Posted By: News Poster
By Adeola Yusuf
In this report, Correspondent, Adeola Yusuf examines the effects, which the $22 billion power investments, secured by the Federal Government, can have on the move to improve power supply in Nigeria
The excitement in the news that investors are injecting about $22 billion in power sector is enough to drag people into national jubilation elsewhere but not in Nigeria.
Not that Nigerians are ingrates, but they have had an overdose of such an exciting story on power sector over the years.
Like a proverbial cat’s special gift to mouse, the Federal Government has concluded plans to increase electricity tariffs by April 2011 as part of the measures to stimulate more investments in the power sector, in accordance with the roadmap launched last year.
As if this is not enough, about $22 billion is also spent annually by Nigerians to fuel generators for power generation annually.
Putting this in perspective, President Goodluck Jonathan has lamented that a whopping $13 billion (about N1.9 trillion) is being spent yearly by Nigerians to generate power from generators.
Despite the huge amount, less than half of Nigerians have access to electricity. Regrettably, the country only requires about $10 billion (about N1.5 trillion) yearly in investment over the next few years to develop power generation, distribution and transmission capacities.
On Thursday, January 4, it became clear that the Federal Government has secured a guarantee of $22 billion, a part of over $100 billion investments target in the power sector as the move to finalise the sale of the Power Holding Company of Nigeria (PHCN) in June got a boost.
A document obtained by Sunday Independent showed that new owner will take over management of the PHCN by end of the second quarter of 2011 despite the outcry by workers against the move.
Investors under the auspices of the Commonwealth Business Council, according to the document, have expressed an interest in investing $20 billion while Essar committed to invest $ 2 billion in Nigeria’s power sector.
Before this, the power sector received a shot in the arm with the recent issuance of a $100 million grant by the World Bank to guarantee private investment within the sector, under the Commercial Reorientation of the Electricity Sector Toolkit (CREST) initiative of the bank. Onno Ruhl, World Bank Country representative, who commented on financing challenges in the power sector said that the electricity supply industry is a capital intensive industry and so adequate cash flows are critical to recovering costs and returns on investment.
In line with this, the Presidential Task Force on Power (PTFP) noted that interested companies in PHCN take over are to submit Expressions of Interest latest by February 18.
The expressions of interest in taking up 51 per cent stake of the six generation and 11 distribution PHCN successor companies, according to PTFP, had been published.
Chairman of the Communications Committee of PTFP, Dr. Abimbola Agboluaje, who stated this, maintained that the roadmap on power sector reforms is explicit on the government’s stand on this.
Shortlisted companies will be invited to submit bids for the successor companies early in the second quarter of 2011 and winning bidders will take over management of the companies by the end of the second quarter of 2011, he said.
He maintained that the Nigerian Electricity Regulatory Commission (NERC) had initiated studies and consultations to determine a level of tariffs that would stimulate investment by making it possible for investors to recover their costs.
Agboluaje, who enumerated achievements of the PTFP to include the appointment of Transaction Adviser (TA), CPSC Transcom, in December 2010 stated that TA is to assist the Bureau of Public Enterprises (BPE).
The area of assistance to the BPE is, according to him, in undertaking “the divestiture transactions and the invitation of Power Grid of India, ESB International of Ireland and Manitoba Hydro of Canada, to submit technical and financial proposals for the management contract of the Transmission Company of Nigeria.”
On the corporatisation of PHCN Successor Companies, the PTFP spokesperson said, the companies are now de facto independent entities, thereby putting the PHCN in winding-up mode.
He said “All of the PHCN successor companies are set to enter the Transition Stage of the reform when they will buy and sell electricity based on contracts agreed with each other and stop operating as part of a government monopoly financed through a common budget and obliged to provide power or electricity evacuation services to each other without payment.
“This will create incentives for the power companies to provide service to as many Nigerians as possible and as frequently as possible so that they can earn money to pay for their inputs and operational costs.
He noted that the winding up of PHCN central head quarters was underway, adding that the headquarters staff have started moving out to the Ministry of Power or to successor companies.
However electricity workers have not hidden their disgust for the government’s plan to privatise the Power Holding Company of Nigeria (PHCN). For the umpteenth time, they have held national protest against the move and this can be perceived by investors to be a threat. But does the government see any threat in this?
The government, it appears, does not believe that the workers can stand on the way of its power sector reform, which it had severally described as a moving train.
Special Adviser to the President on Power, Professor Barth Nnaji, once told Sunday Independent that the arrears of monetisation benefits worth N57 billion had been paid to PHCN workers, while the government had secured an additional N143 billion from the National Assembly as part of the supplementary budget of 2010 to compensate current PHCN workers for the severance of their current employment contracts with the government.
The shortage of skilled manpower to operate sophisticated generation infrastructure will also pose a challenge for investors.
Most power generation plants in Nigeria were constructed in the 80s and very little upgrading has been carried out over the years. As such, most personnel in the sector lack the skills and knowledge of the new generation techniques.
Another hindrance staring the investment in the face is the spate of vandalism of PHCN facilities. The other day, the PHCN Somolu Business Unit said that its management spent over N20 million to replace vandalised items within its district areas in 2010.
Senior Manager, Public Affairs of the District, Akinola Ayeni, made this known in a statement issued in Lagos saying that over 12 transformer sub-stations vandalised in 2010 were replaced to ensure customers enjoy supply.
The spokesman said that the Business District of the PHCN raised the alarm over incessant vandalism of its equipment in the areas by unidentified persons as a result of what their activities have cost the company.
He said that PHCN transformers and cables in 12 of the company’s sub-stations at Somolu and its environs were vandalised within a year by unidentified persons.
He said that this money could be used to purchase other items to maintain the existing facilities. He added that in 2010, four vandals were arrested and one of them, Taye Adebuje, was convicted while others are still awaiting g trial and no PHCN staff was involved or mentioned.
“We implore the Community Development Associations, Government and Non- governmental Agencies to wage war against the criminals in their midst, arrest and report them to the nearest PHCN office or police stations for prosecution.
“Stop the vandals before they put your into period of darkness, as we are striving hard to serve you better, please endeavour to pay electricity bill promptly and regularly,” he said.
According to the roadmap, power generation would hit 5,379 megawatts by this December.
Under this action plan, 2278 megawatts and 1,230MW would come from Federal Government-owned gas-fired plants and hydro power stations, respectively; 351MW from the National Integrated Power Projects (NIPP) and 1,520MW from Independent Power Producers (IPPs).
But available statistics indicate that current generation hovers around 3,500MW, which is even below generating capacity at the period the roadmap was launched.
From the experience of other countries, transferring assets to private hands cannot by itself bring about investments in collections needed to make investments commercially viable. For private participation to succeed therefore, all stakeholders need to reach a consensus about the tariff regime that should be introduced and about the enforcement of collections, including disconnection for non-payment.
The labour union should be carried along by government in its bid to give a facelift to its power sector reform.
The government must formulate a clear environment policy guiding the utilisation of energy resources. Such a policy should have the input of the government, investors and the customers to ensure that roles and commitments of all stakeholders to the prevention of environmental degradation are clearly defined.
Lastly, there is no doubt that the $22 billion investment will better the lots of the sector, persistent efforts should, in this line, be made by the government to ensure a short-term improvement in power generation. This will make Nigerians to easily keep faith in government’s effort to achieve long-term improvement in the sector.
Original date published: 15 January 2011
Source: http://allafrica.com/stories/201101170456.html?viewall=1