As the implementation of the 2016 Appropriation Act, signed last week by President Muhammadu Buhari commences, the Federal Government is set to inject N99 billion to revamp the country’s power sector through the Federal Ministry of Power, Works and Housing. The sum of N433 billion was appropriated for the ministry.
Out of the appropriated amount, according to documents obtained yesterday from the ministry by The Guardian, the other two segments of the Ministry, Works and Housing, are to get N268 billion and N66 billion respectively to execute planned projects in the next one year.
It is not immediately clear how much difference the N99 billion budget can make, but the generation and distribution firms have expressed fear that the planned growth of the sector may be stunted by lack of required liquidity even as the ministry plans to introduce measures to tackle the problems inherent in the operations.
Although government plans to complete 47 transmission projects in the fiscal year, step up work on Zungeru Hydro Power Plants, among others, the concerns about the ability of operators to resolve the liquidity issue is growing.
The ministry, however, hopes to unveil an energy mix plan to boost electricity supply. It initiated moves to raise the Federal Government-secured bond using the Nigeria Bulk Electricity Trading Company (NBET).
An analysis from the Association of Nigerian Electricity Distributors (ANED) indicates that for Nigeria to achieve some level of stability in electricity supply in many parts of the country, the nation needs to generate, transmit and distribute 20, 000 megawatts in the medium time.
To achieve this, $40 billion would be required to boost investment and strengthen the networks across the three-level value chain. The operators are therefore, seeking a Federal Government sovereign guarantee to enable them to approach global lenders to secure the facility.
On the projects for the 2016 fiscal year, a fact sheet from the ministry quotes the Minister, Babatunde Fashola as saying: “We are at the point where we promised ourselves 6,000 MW by 2009 (in 2008); 15,000 MW by 2014 (in 2010); 20,000 MW by 2015 (in 2011); and 40,000 MW by 2020 (in 2013).
“Have we delivered on these targets as a nation? No disrespect. Should we sustain these kinds of practices?” Fashola explained some of the hydra-headed problems plaguing the sector.
His words: “In the power sector for example, there are problems along the entire value chain; from distribution, to transmission, generation and gas supply including a cross-cutting liquidity problem.
“I will, whilst being mindful of time, highlight some of the problems, and share with you some of our plans and in that way reveal some of the opportunities.”
For distribution, he noted: “In this part of the value chain, there is a gap of meter supply that needs to be met and I am hopeful that it will be met by local production or at least a significant local content participation that helps Small and Medium-Scale Enterprises (SMEs) to participate in supplying the meters and developing capacity and jobs. There are an estimated three million consumers who need to be metered.”
He went on: “Apart from metering, the distribution companies have aging assets: transformers, ring main units, poles, cables, breakers and so on, some of which are 20 to 30 years old. For them it must be a period of running repairs. It is a problem on one hand and enormous opportunity on the other hand.”
He drew attention to the liquidity challenge in the sector and urged the distribution companies to raise funds to fund their own component of the issue.
His words: “There is of course the financing challenge where distributors who own 60 percent of the undertaking need to raise capital; to buy and supply meters and replace aging assets.
“The opportunities that I see for investors are enormous. Why can DisCos, for example, not divest some of their shares in order to raise funds to finance the business?
“Better still, why can DisCos not have strategic shares arrangement in exchange for goods like meters, cables, etc. with companies who make those products which the DisCos need to service their customers? The Companies and Allied Matters Act clearly allows shares to be sold for cash and for kind.”
He attributed the major problem in the transmission subsector to low capacity, noting that the transmission capacity was not developed to cope with the generation capacity.
He said: “I liken the transmission part to a transport business; and every transporter must understand that there must be enough buses to move passengers, and he must bridge shortfalls by getting more buses. A situation where power generation installed capacity is in the region of 7000 MW and the transport system is in the region of a 5000 MW carrying capacity is not sustainable.
“We act through Transmission Company of Nigeria which is managed by government. They have shared a plan to grow the transmission grid over five years from 5,000 to 7,000 to 10,000 to 13,000 to 16,000 to 20,000 MW.
The minister spoke of a five-year 20,000 MW plan with an implementation programme stressing: “That is the roadmap to sustainable transmission. We have resolved to, and we have started working on actual numbers of how many transmission towers will take us to 7,000, 10,000, 13,000, 16,000 and 20,000 in each growth plan.
‘‘How many kilometres of cables and wires will each stage require? As we plan this, we are constantly receiving Expressions of Interests from people who want to invest in transmission grid expansion on a PPP basis. (Build Operate and Transfer.) We are open to it. But we recognise the need for assurances of recovery.’’
He spoke on plans for incremental power on a regular basis saying: “The road to incremental power is first to solve existing problems, and to plan the delivery of immediate and future additional power.
“Zungeru Power Plant in Niger State was conceived to deliver 700 MW of power around now. Work had stopped on the project for almost three years because of court cases, which we have now resolved. 800 workers are back on site with a new proposed delivery time of 2019.”
He also spoke of plans to work with the private sector to achieve an energy mix.
He said: “Since the vision 20 20 20 plan was launched, there have been statements of the need to use all the possible sources of energy available; gas, power, hydro, solar, wind, bio mass, nuclear, coal, etc
“But beyond those statements, no sustained steps have been taken, to the best of my knowledge, to organise how we will harness these energy sources.
“I am aware of gas to power initiatives in the Niger Delta and South-South area, but how did we come to build a gas power plant in Kaduna, several hundreds of kilometres away from our most prolific gas sources?
“Why are we investing extensive solar projects in the rain forest area of Nigeria instead of in Jigawa, Kano, Borno and other places where there is abundant sunlight as well as the required land space? This is what our energy mix will do. We will unveil it soon enough for investors guidance.”