Poor transmission, gas constraint may hamper steady power supply – Peterside

Atedo-Peterside-108 October 2013, Lagos – The Chairman of the Technical Committee of the National Council on Privatisation (NCP), Mr. Atedo Peterside, has warned that if the twin problem of weak transmission and gas constraint are not addressed with dispatch, they could  hamper Nigeria’s aspiration to achieve steady power supply after the power sector privatisation.

Peterside, who spoke at a recent forum on Financing the Power Sector Reforms for Economic Development, organised by The Bankers’ Committee, noted that transmission, which is the ‘life-blood’ of the entire electricity eco-system is potentially the weakest link at present.

He said currently, the power generation due to weak transmission evacuation was in the region of 100mw, adding that if the transmission problem was not addressed by 2014, there would be a very big crisis  when the  ten  National Integrated Power Plants (NIPP) would come  on stream.
Peterside said aside from the transmission issue, another major problem that could hamper regular power supply was inadequate gas to fire the gas thermal stations.

He said: “Transmission is the “life-blood” of  this entire electricity “eco-system” and it is also potentially the “weakest link” at present. I am reliably informed that, currently, stranded capacity due to transmission evacuation constraints is in the region of 100 MW. The other ‘weak link’ is gas supply and gas transportation, as Nigeria is predominantly reliant on gas-fired power plants. While gas supply  constraints  arising from capacity shortfalls/lags can  be foreseen, the impact induce damaging shocks to the health of the entire electricity value  chain.”

He expressed concern over the slow pace at which the board of the Transmission Company of Nigeria (TCN) was handling federal government’s mandate to it owing to squabbling and in fighting within the board.

“Unfortunately, the Board of TCN is yet to get its act together. Since the appointment of a Chairman and some initial board members was first announced some months ago, so much time appears to have been lost in squabbling over who does what, when and how. If the TCN does not deliver the goods in 2014, there will be a ‘crisis of sorts’ when the  ten  NIPP power plants come  on stream. The same can be said for the Gas Supply and Gas Transportation arrangements. From the foregoing, it is obvious that we can only have a Healthy and Self-Sustaining Electricity Value Chain if we are financing the expansion of all components of this intricately interwoven sector and if the various  parties are competent, proactive and behaving responsibly,” he said.

He said the ability of the TCN to catch up with generation availability and also keep pace with future expansion would depend on its continued access to financing for its huge capex needs and its ability to execute and rigorously monitor project implementation to high professional standards.

Peterside said the architecture of the federal government’s Power Sector Roadmap rests on seven critical pillars – empowering the regulator (NERC); establishing a bulk trader; introducing cost reflective tariffs; engaging a management contractor for TCN; privatisation of Gencos; privatisation of Discos and strengthening of the Fuel-to-Power Arrangements.

The technical committee chairman noted that the successful sale of the power assets and their subsequent hand over to the new investor was just the beginning of the power privatization journey.

He added: “It is pertinent to remember that this is really the “beginning of a journey” and not the “end of a journey” as some have  mistaken it to be. As we all know, the purpose of privatising the Discos and Gencos was not just to transfer ownership of the assets. The  primary purpose was  to bring into play new owners with “deep pockets” who could finance and/or access financing for the rapid restoration of lost capacity and/or add significant new  capacity to make up  for decades of government neglect and mismanagement.”

He explained that the nine PHCN Gencos (including Omotosho and Olorunsogo) only  had available capacity of 2,692mw as at September 10, 2013, as against a total installed capacity of 6,976.40mw.
He stated that financing the necessary capex to  fund this incremental  4,284.4mw   that was   required to achieve full capacity (crudely estimated at  $1m per megawatt approximately) will cost an additional $4.28billion.

“For the  Discos, some very significant investments  will also be  required to improve efficiencies and reduce Aggregate, Technical Commercial and  Collection  Losses. Based on the proposals submitted by  the core investors, new meters will be  installed over the course of the next five years.

Furthermore, he said:  “At an estimated weighted average cost (purchase and installation) of N25,000 per meter, this amounts to over N150bn.The bulk of this should be recoverable from the consumer, but then  the  distribution infrastructure also   needs to  be  modernised and expanded to achieve greater coverage. The 11 Discos are projecting  annual capital  expenditures  in  the region of N60  billion per  annum for  each  of the next five years.”

– Chika Amanze-Nwachuku, This Day

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