Nigeria: 2013 - a year of privatised power sector

Dec 31, 2013 12:00 AM

The biggest event that changed the course of the power sector in 2013 was the power assets privatisation culminating in the colourful handover of 10 distribution companies and four generation companies on November 1, 2013.

The power utilities acquired by various investors with foreign and local partners were part of the 18 core electricity assets grouped into Distribution companies (Discos) and Generation companies (Gencos) of the Power Holding Company of Nigeria (PHCN). Experts have considered the exercise as the significant event of the privatization ever done by any African government.

In 2012, privatisation efforts in Nigeria was heightened with the arrival of Prof. Chinedu Nebo as the Minister of Power in 2013

The major turnaround came in the first quarter, on March 21, when preferred bidders who were earlier declared winners of the bids made a 25percent advanced payment of about N73billion ($469.032million) to the Bureau of Public Enterprise (BPE). Following the success recorded in payment earlier, President Jonathan in May handed over the 25percent share certificates to the preferred bidders for Geregu, Sapele, Ughelli, Shiroro, Kainji Gencos. The Discos, including Benin, Enugu, Kano, Ibadan, Yola and Abuja, Ikeja, Jos, Eko, Port Harcourt also received the certificates having paid the 25percent.

Equally, Manitoba Hydro International (MHI) of Canada was formally was handed a Delegated Authority schedule which transferred managerial control of the Transmission Company of Nigeria (TCN) with the objective of repositioning the transmission system, the only asset to be left in government's possession.

While the privatisation process was ongoing, the Federal Government in May began the 735megawatts Zungeru Hydro project which is expected to be completed in four years from time. At the ceremony in Zungeru, Niger State, President Jonathan noted that work on the largest hydro dam, the Mambilla Hydro in Taraba State that was abandoned for many years, would be commenced shortly.

Meanwhile, Nigerian Electricity Regulatory Commission (NERC) , has implemented the Multi Year Tariff Order (MYTO 2) in June which came under pressure from the consumers as it increased electricity bills even in the face of serious system collapses recorded across many states like Bayelsa, Kebbi, Gombe among others. The committee set up by the Minister of Power, Prof. Chinedu Nebo attributed the collapse to weakened systems, inadequate and aged personnel, and environmental factors such as trees falling on transmission lines and towers.

The preferred bidders received heavy pressure in August, following a deadline issued by the Bureau of Public Enterprise (BPE), handling the privatization exercise to pay up the 75percent balance of about $3 billion (N480 billion) before they could take over the plants. While many struggled to complete the payment before the August 21st deadline, one of the bidders, Interstate Electrics, had a major challenges that lasted for a month before it was finally cleared.

Meanwhile, the handover of the power utilities was officially done early in October by President Goodluck Jonathan amidst strikes and kicks from the National Union of Electricity Employees (NUEE) over unpaid severance benefits to the workers. This was, however, tackled with the signing of an agreement in late October to pay all such benefits and other claims of the workers before the end of November.

Finally, on November 1st, the privatized assets consisting of 10 Distribution companies (Discos) and four Generation companies (Gencos) were handed over to the new owners in a coordinated exercise. The Abuja Disco was handed over to KANN Consortium by the Minister of Power, Prof. Chinedu Nebo on behalf of the Chairman, National Council on Privatisation (NCP), Vice President Namadi Sambo. Sambo noted during the event that in post privatization, the ministry will move to policy planning and monitoring of the private-led power sector.

The Ministry of Power also refocused its goals to rural electrification through alternative energy sources. The pilot project of solar kiosk and residential solar energy under the Operation Light Up Rural Nigeria is 95percent completed in Durumi, a suburb in the Federal Capital Territory, Abuja.

The National Power Training Institute of Nigeria (NAPTIN) also graduated its first set of 243 power sector engineers which it trained and deployed to the generation, transmission and distribution sections of the power sector just as the institute has admitted another set of students for the one year course.

NIPPs role

While the PHCN privatization was going on, the Niger Delta Power Holding Company (NDPHC) which is owned by the three tiers of government with a plan to build 10 additional generation plants and ubiquitous substations was seriously at work. As the privatisation of the PHCN assets reached its peak, NDPHC significantly began its coordinated commissioning of its National Integrated Power Projects (NIPP) plants. The first of such was the 435megawatts Geregu Power Plant II in Kogi State, followed by the 500mw Omotosho Power Plant in Ondo State, in October. It has also commissioned several injection substations and power facilities in Lagos, Ibadan and Abuja which it handed over to Distribution companies (Discos) to optimize their electricity supply services. Seven of the NIPPs alongside the various injection substations and transmission lines are expected to be completed and commissioned in the first quarter of 2014.

Reviewing the energy policy

The Energy Commission of Nigeria (ECN) commenced the review of the current National Energy Policy (NEP) in September, eight years after its approval. The Director General, Prof. Eli Jidere Bala, said the review was borne out of its many clauses being obsolete and the need to meet up with realities in the energy sector. The draft of the Revised National Energy Policy (RNEP) was prepared in November and it is now awaiting finishing presidential approval.

More so, the 2050 Energy Calculator which energy experts said it would help refocus the energy sector is being developed. ECN which adopted the model from the United Kingdom Energy Department also partnered with the UK experts to train some staff and help them develop the Nigerian version of the calculator. On invention, it would help government to calculate energy resource deposits, demand levels and supply capability of the nation between 2015 and 2050.

Market capitalization

Federal Government in early December placed N50billion in the escrow accounts of three selected Nigerian banks to support power generation companies. This was part of the deal it had with the investors through the Nigerian Bulk Electricity Trading Company (NBET) and the Bureau of Public Enterprise (BPE) to provide a cushion for likely risk occurrences in the electricity market.

The money was part of the proceeds from the privatisation exercise and would insure the companies from any revenue loss in their effort to boost generation. The participating banks include First City Monument Bank (FCMB) Plc which is the lead escrow agent, United Bank for Africa (UBA) and First Bank Plc.

The infant market challenges

The handover was greeted with instant disengagement of electricity staff by the new owners in most of the privatized power plants. This alongside a sporadic vandalism of gas pipelines and system collapse which were heavier earlier in the year, resulted in nationwide power cuts and power rationing. The alarming nature of the challenge swept off most of the new companies with speculations that the power system will collapse.

Surveys conducted after the initial physical handover revealed utter dissatisfaction of Nigerians with the power supply service. However, in recent days, consumers are expressing optimism with the supply. The implementation of the Interim Rule by NERC has also helped the new owners to delineate their duties for service efficiency.

But in December, Prof. Nebo said the transition to a private sector driven electricity market has been seamless though he acknowledged the 'teething problems' experienced by the investors and even consumers. He noted that huge metering gap remains a challenge in the new power sector.

He said: "We are trying to find ways to mitigate the consequences of this huge metering gap that was estimated to be up to 2.7 million. It's not easy to fill that gap within a short time. It will take time to procure and install and commission the meters."

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