 |
|
Omotosho II Power
Plant (Image source: nipptransactions.com)
|
In
the past 16 years, the Federal Government tried unsuccessfully to make the
power sector play its role as the driver of industrialization. Despite the huge
funds pumped into the sector, power generation has not gone beyond 4,500
megawatts. EMEKA UGWUANYI and JOHN OFIKHENUA (The Nation newspaper) examine the
situation
With
over ₦5 trillion estimated to
have been spent on the power sector between 1999 and now, businesses should no
longer see public electricity source as alternative rather than the real deal.
The
Power Holding Company of Nigeria (PHCN), its successor companies – the
generation, transmission and distribution companies received a chunk of the
over ₦5 trillion. Funds
were also expended on the National Integrated Power Project (NIPP), which is
supervised by a Special Purpose Vehicle (SPV), the Niger Delta Power Holding
Company (NDPHC) Limited. The NDPHC was created to fast-track the attainment of
stable power supply in the country when past efforts failed.
Unfortunately,
the corruption the government wanted to avoid caught up with the NIPP
programme. The programme was conceived in 2004 and the NDPHC was created in
2005. In 2007, US$16 billion was allocated to the NIPP and used up within four
years. The project was engulfed in controversy and litigation because of the
alleged unexplained utilization of the fund. The immediate past administration
suspended the NIPP programme dismissing it as huge fraud and drainpipe but
after two years, the suspension was lifted and the government continued with
the project.
Power
Holding Company of Nigeria
Upon
return to democracy in 1999, Nigeria’s power sector was fully public-owned and
run through the National Electric Power Authority (NEPA). Its funding was
mostly from budgetary allocation. Power supply was then below 2,000 megawatts (MW)
because of neglect and lack of investment by the past military governments.
Between
1999 and 2000, crude oil sold for about US$9 per barrel so there was
paucity of fund to finance power projects. This informed the search for fund
for power supply, according to ex-President Olusegun Obasanjo. He said in the
bid to provide power for the country, the government resorted to the
development of the NIPPs. The ex-President expressed concern that after leaving
office, his successor could not continue with the project.
“When
we started having money, we started the NIPP. When we said the money we had
should be invested in power, my successor didn’t understand; he stopped it,” he
said.
He
lamented that after he handed over power to the late former President Umaru
Yar’Adua, no significant achievement was recorded in the power sector till he
died, adding that the situation deteriorated when Jonathan took over in
May, 2010.
After
his exit from office, the National Assembly initiated a probe into the US$16billion,
which the Obasanjo-led administration allegedly spent on power sector.
The
Director-General, Bureau of Public Enterprises (BPE), Mr. Benjamin Dikki,
explained that the government sold the 17 companies unbundled from PHCN for
over US$2.6billion. Dikki also said the Federal Government spent N373.17
billion on payment of workers’ entitlements.
Apart
from the Transmission Company of Nigeria (TCN), the Federal Government
privatized the successor generation and distribution companies in November
2013, making funding the responsibility of the private investors.
The
Federal Government also secured funds for the power sector from different
international development organizations and companies to tackle the challenges
in the generation, transmission and distribution value chain.
For
instance, the development of some projects, such as the Zungeru hydroelectric
power plant with installed capacity 700MW was funded by such funds. The Federal
Government, according to the former Minister of State for Power, Hajiya Zainab
Kuchi, in 2012 spent ₦162,990,364,379.30
to implement the project.
Seventy-five
percent of the funding is from the EXIM Bank of China. The counterpart funding
of US$309 million was from the Ministry of Power. The project was being
implemented by a Chinese consortium, CNEEC-Sino Hydro.
Besides
budgetary allocations, there were interventions from different development
organizations. For instance, the Permanent Secretary, Federal Ministry of
Power, Ambassador Godknows Boladei Igali, explained that the European Union, Japan
International Cooperation Agency (JICA) and Deutsche Gesellschaft für Internationale
Zusammenarbeit, GmbH (GIZ) bankrolled some projects.
In
November 2014, the former Minister of Power Professor Chinedu Nebo confirmed
that there were several supports from bilateral partners in form of loans, such
as US$700million from the World Bank, US$200million from JICA , US$370million
from African Development Bank (AfDB), US$500million from EXIM China and US$1billion
from Turkey Projects.
In
the transmission segment, the AfDB also released a loan of US$100 million to
the Transmission Company of Nigeria (TCN). Last year, it was estimated that the
TCN required about US$3.7billion to increase power transmission capacity, make
the network more stable and reliable, and improve efficiency of electric power
transfer by reducing transmission technical losses. However, while there was no
budget for the PHCN in 2013, ₦5.2billion
was distributed to generation and distribution companies as well as to TCN. The
money was part of the N13billion intervention fund for critical projects
implementation, which was for upgrades and major repairs to bridge the gap
created by the zero budget for the companies.
National Integrated Power Project (NIPP)
The
original plan was that NDPHC would also build hydropower dams in the North in
the second phase of the NIPP. But currently, there are 10 midsized power plants
built under the NIPP programme and they are all gas powered. Apart from
increasing the power supply, the plants were meant to take substantial quantity
of natural gas as part of government’s efforts to utilize the abundant gas
resources and reduce flared gas.
As
at May this year, about US$11.1 billion had been committed to the project, The
Nation learnt. Of the US$11.1 billion, US$7.1 billion went into the building of
the 10 generation plants, US$0.5 billion into gas assets, transmission assets
got US$2 billion, and distribution assets received US$1.5 billion.
The
NIPP plants were designed to deliver combined installed capacity of 5,453
megawatts (MW). Eight of the 10 power plants are designed as Open Cycle Gas
Turbine (OCGT) power plants and the other two as Combined Cycle Gas Turbine
(CCGT) power plants. The CCGT power plants can generate power through gas and
steam turbines but because of lack of time considering deadline planned for
handover of the power plants to private sectors, the completion of the steam
turbines might not be realistic and perhaps may be completed by the private
sector owners.
For
instance, the Alaoji power plant was designed as a CCGT project with a plant
capacity of 1,131.4 MW. However, it was expected that by the handover date,
only one of the steam turbines would have been installed. Therefore, the plant
will be available for commercial operation as an 831.3 MW plant. As result of
some of these hitches, the NDPHC projected a combined generation of 5153.1MW as
against 5,453MW by the time the assets will be handed over to the new
investors. However, the projections have been disrupted following some factors
ranging from alleged lack of gas supply to the power plants to issues of
inability of some of the preferred bidders to make initial payment for the
assets they bought. The initial proposed period for the privatization of the
NIPP power plants was mid last year.
According
to the NDPHC chief, if not for lack of gas, the Alaoji Generation Company
located in Abia State, the biggest of the NIPP power plants would be generating
about 831.3MW as at mid-2014 while the Benin Generation Company in Ihovbor, Edo
State, would have 507MW output. The Egbema Generation Company, Imo State,
Gbarain Generation Company, Bayelsa State, Calabar Generation Company, Cross
River and Geregu Generation Company in Kogi State would have generation
capacities of 380.7MW, 253.8MW, 634.5MW and 506.1MW.
Also
Ogorode Generation Company in Sapale, Delta State was expected to be generating
507.6MW, while Olorunsogo Generation Company in Ogun State would have 754MW
output. Omoku Generation Company in Rivers State was expected to generate 264.7MW
with Omotosho Generation Company in Ondo State supplying 512.8MW.
Olotu
noted that seven of the eight OCGT power plants could be upgraded to CCGT
configuration, adding that five of the power plants are either fully or
partially operational. But these projections have been stalled by insufficient
gas supply and defeat of the Jonathan government.
Other
projects undertaken by the NDPHC include the 21.5 kilometre gas pipeline from
Creek Town to Ikot Nyong power plant projects, 18km Ikot Nyong-Adiabo 330kV DC
lines to evacuate power from Calabar power plant in Cross River State, 13km
132kv DC Adiabo-Calabar 132/33kV sub-station as well as reinforcement of the
Calabar 132/33kV substation with a 60MVA 132/33kV Transformer and bays to
accommodate new lines from Adiabo have all been completed.
Transmission
and distribution works that were completed or upgraded by NDPHC include the Jos
330/132/33kV Substation, 286km 330kv DC Jos-Makurdi transmission line, new
Makurdi 330/132/33kv substation, 222km 330kV DC transmission line from Geregu
through Lokoja to Gwagwalada, a 2x150MVA 330/132/33kV transformer substation at
Gwagwalada in the Federal Capital Territory (FCT) with a further 90km of both
330kV and 132kV lines to interface with Katampe and Apo 330/132/33kV
substations, 2x300MVA 330/132/33kV transformer Substation at Oke-Aro in Lagos
which is now the largest 330/132kV transformer substation in the grid and
150MVA 330/132/33kV substation at Asaba in Delta State among others.
In
distribution, Olotu said 72 injection substations had been inaugurated, adding
that 3,517 completely self-protected 25kVA and 50kVA customer transformers had
been installed and 650MVA out of 3,750MVA of 33/11kV Injection substation
already in service.
In
the last quarter of 2013, seven of the 10 power plants were put up for sale.
Government expects to realize US$4.3 billion from the sale.
The
seven plants marked for sale were those that had no legal issues associated
with them while the sale of the remaining three plants would be delayed until
litigations against their bids were resolved, the Joint Transaction Board said.
The
Joint Transaction Board also confirmed the successful bidders for the seven
plants and they include EMA Consortium as the preferred bidder for Benin
Generation Company with a bid of US$580 million, and the reserved bidder, Index
Consortium with a price of US$575 million. EMA Consortium was also the preferred
bidder for Calabar Generation Company with a bid price of US$625 million, as
against Nebula Power Generation Consortium, the reserved bidder with an offer
of US$623.75 million.
Dozzy
Integrated Power Limited was confirmed the preferred bidder for Egbema Generation
Company with a bid of US$415.7 million, while AITEO Consortium was named the
reserved bidder with an offer of US$392 million. Seoul Electric Power Limited
was the preferred bidder for Geregu Generation Company with a bid of US$690.2
million, while YellowStone Electric Limited emerged reserved bidder with US$613.1
million.
Ogorode
Generation Company had Daniel Poer Consortium as the preferred bidder with a
bid of US$532.78 million, followed by ESOP Power Limited as reserve bidder with
an offer of US$510 million. Olorunsogo Generation Company had ENL Consortium
Limited as preferred bidder with an offer of US$751.24 million while the
reserved bidder, Index Consortium, offered US$730 million. Also Omotosho
Electric Power emerged the preferred bidder for Omotosho Generation Company
with a bid of US$659.9 million, while the reserved bidder was ENL Consortium
Limited with US$645.15 million offer. The board chaired by the former Vice
President, Namadi Sambo, approved the sale of the plants to the preferred
bidders following a successful financial bids opening exercise conducted on
March 7, 2014.
The
sale of Alaoji Generation Company, Omoku Generation Company and Gbarain
Generation Company was stepped down pending the resolution of the litigation
instituted by Messrs Ethiope Energy Limited against their bids. Shayobe
International emerged winner of Alaoji with an offer of US$318.7 million and
AITECO Consortium as the reserve bidder with US$312.5 million offer.
KDI
Energy Resources emerged preferred bidder for Gbarain Power with an offer of US$340
million while the reserve bidder Azikel Power Limited offered US$305.09
million.
Rural
Electrification Agency of Nigeria
The
Rural Electrification Agency of Nigeria (REAN) was established by Section 88 of
the Electric Power Sector Reform Act (EPSRA) 2005. On March 16, 2006, the board
and management of the agency were inaugurated and mandated to by the Federal
Government to pursue aggressive rural electrification. The board and management
were directed to facilitate the provision of steady and reliable power
supply at economic rates for residential, commercial, industrial and social
activities in the rural and peri-urban areas of the country.
But
hardly had the agency taken off than it was enmeshed in corruption and it was
suspended before it was resurrected after few years. In 2009, the Federal
Government through the Economic and Financial Crimes Commission (EFCC)
initiated a 156-count corruption charge at a Federal Capital Territory High
Court in Abuja, accusing the then Chairman of the House of Representatives
Committee on Power, Ndudi Elumelu, the deputy Chairman, Jibo Mohammed, Senator
Nicholas Yahaya Ugbane and seven senior management officials of the agency of
corruptly appropriating rural electrification project funds of the agency. The
EFCC accused the suspects of stealing over ₦5.2 billion and accused the committee of illegal contract award
through which the funds were stolen.
The
EFCC also accused the former speaker of the House, Dimeji Bankole, and some of
his relations of benefitting to the tune of ₦900 million from the diverted rural electrification funds. They
were never charged by the EFCC as the government scrapped the agency.
Annoyed
by the misappropriation, Yar’Adua, on June 10, 2009, sent a bill to the
National Assembly for amendment of the Electric Power Sector Reform Act 2005
repealing the rural electrification agency. The bill was withdrawn after the
death of Yar’Adua, and the agency reactivated in toward the end of 2011 by the
former Minister of Power, Professor Barth Nnaji.
Substantial
amount of money had gone into the agency before and after its suspension. The
former Minister of State for Power, Hajia Zainab Kuchi, had at the inauguration
of the board of the agency said that as much as ₦16 billion was approved by government for the agency to undertake
projects and continue work on the abandoned projects.
Nothing
much has happened till date.
Impact of the huge investment
A
budget analysis called statisense, carried out by an organization called
Slideshare, which covered nine years (2006-2014), showed that the Federal
Ministry of Power’s budgetary allocation within the period was ₦872 billion. The analysis was
undertaken to know if the budgets were able to meet the United Nations
Development Programme (UNDP) recommendation, which stipulates that budgetary
allocation should be structured 70 per cent for capital expenditure and 30 per
cent for recurrent expenditure. Their research showed that the Power ministry
had consistently allocated more funds to capital expenditure even surpassing
the UNDP recommendation, but noted that Nigerians have not enjoyed commensurate
benefit of these allocations.
“Therefore,
it goes beyond budgeting to actually make the people enjoy the dividend of
democracy,” the report said.
The
report showed that the Federal Ministry of Power got ₦78 billion, ₦105
billion, ₦140 billion and ₦93 billion as budgetary allocations
between 2006 and 2009 while the percentage recurrent and capital expenditures
were 4.33 per cent and 95.67 per cent; 3.70 per cent and 96.30 per cent; 18.18
per cent and 81.82 per cent; and 5.31 per cent and 94.69 percent.
Also
between 2010 and 2014, allocations were ₦157
billion, ₦86 billion, ₦73 billion, ₦77 billion and N63 billion respectively while the percentages of
allocation to recurrent and capital expenditures were 2.28 per cent and 97.72
per cent; 9.45 per cent and 90.55 per cent; 4.25 per cent and 95.75 per cent;
5.43 per cent and 94.57 per cent; and 5.44 per cent and 94.56 per cent
respectively. The report showed that the least percentage allocation to capital
expenditure within the period was 81.82 per cent indicating 11.82 per cent
above the UNDP recommendation. Why was there no improvement in power supply
over those years? A source said the lack of improvement in output was due
to large scale corruption and sabotage.
Also
the dramatic improvement being witnessed in the level of power supply in the
last two months confirmed there has been high level sabotage. Output has risen
from about 3,000MW to 4662MW. The Managing Director of the Transmission Company
of Nigeria (TCN), Dr. Abubakar Rasheed Tambuwal, told The Nation that
the company can comfortably wheel 4,662MW, adding that it has capacity to wheel
to the national grid about 5300MW with assured system stability.
Will
the dramatic improvement continue or will things slide? Time will tell.
No comments :
Post a Comment