Extant incentives foreclose operational failures by new power assets owners

power transmission station08 October 2013, Abuja – The federal government has said extant incentives already created by it to aid the operations of the new private owners and investors in the unbundled Power Holding Company of Nigeria (PHCN) has foreclosed any excuse of operational failure by any of the companies.

This is just as the Nigerian National Petroleum Corporation (NNPC) has said it was excited with the opportunities of going into a profitable commercial gas sales regime with the new owners of the thermal generation companies.

President Goodluck Jonathan and Vice President Namadi Sambo, who is the Chairman of the National Council on Privatisation (NCP), which presided over the sale of government owned assets, stated at the formal handover of share certificates and licences to core owners of PHCN successor generation and distribution companies in Abuja that the government has bequeathed to the new investors, sustainable operational atmosphere that should propel them to good commercial success.
Both Jonathan and Sambo assured the government was committed to providing to the new private owners, all the support required by them to provide Nigerians with uninterrupted power supply.

Specifically, Jonathan said: “The new genco owners are inheriting signed gas supply and transportation agreements, a new phenomenon in the gas-to-power industry, thereby moving the industry away from the prior status of best endeavour supply and transportation basis.

Accordingly, we will maintain the agreed gas pricing policy in order to encourage new investments in gas supply and infrastructure development. The implementation of the gas policy will culminate in a willing buyer-willing seller structure to establish a fully market-driven environment.”

On his part, Sambo stated that while the government had done so much to facilitate transfer of operations of the successor companies to private investors, it equally expected the new investors to reciprocate the good gestures with commensurate growth in the country’s power supply portfolio.

“Given that we have ensured and assured the public of the independence of the industry regulator, our expectations is that the electricity market would be regulated in a manner that promotes growth. Electricity consumers are assured that their interest will be protected from over-pricing and poor service.

“It is pertinent to state that the introductory phase of the private sector led electricity market was structured to remove known impediments to success. The Nigeria Electricity Liabilities Management Company (NELMCO) was set up to assume all legacy liabilities so that the new owners will take off with clean balance sheets,” Sambo said.

The vice president again added: “Additionally, the Nigerian Bulk Electricity Trader was put in place to provide guarantees for any shortfalls of payment in the value chain. There is therefore no room for failure.

“There are myriads of investment incentives available for investors in the privatisation of the electricity utility. They include duty exemptions for equipment for gas-fired generating companies, five-year tax holiday, resolution of labour liabilities, NELMCO and a World Bank securitisation to protect investors.”

Meanwhile, the Group Managing Director of the NNPC, Andrew Yakubu, said at the event that the corporation was looking forward to growing its domestic gas supply obligation to the Nigerian power sector with the entry of new private owners of PHCN successor generation companies.

Yakubu stated the prospects of selling its gas at commercial price and with the assurance of prompt payment to it by the new investors would spur the corporation to continue its drive for development of new gas field considering the expected demand for same.

“We are excited at this because we have new customers that will buy and pay for our gas from now. The NNPC looks forward to selling more gas to these power plants,” he said.

The corporation recently announced its domestic gas supply has grown to 1500 million metric cubic feet per day (mmcf/d) from 900mmcf/d in 2010 out of which 1065mmcf/d was accorded to the power sector. It said the growth would continue to 1630mmcf/d by the end of 2013 with the power sector taking up 1195mmcf/d.

– This Day

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