A Review of the Nigerian Energy Industry

Poor power generation threatens $1.8bn investments in Discos

power transmission station03 February 2014, Lagos – The current inability of the electricity generation companies (Gencos) to supply adequate power to the distribution companies (Discos) due to shortage of gas is threatening the $1.8 billion investments expected from the new owners of the Discos in line with the terms of the recent privatisation programme in the power sector.

Investigations revealed that since the new owners took over the distribution assets on November 1, 2013, electricity generation has continued to worsen, thereby making the immediate investments in the areas of proper metering of all customers, procurement of new transformers, upgrade of other distribution infrastructure, reduction in the number of customer interruptions, rolling out of new customer connections and other network expansion programmes, uneconomic.

By the terms of the agreement with the federal government, through the Bureau of Public Enterprises (BPE), the new owners of the 11 Discos would commit $1.8 billion for the upgrade and replacement of aging infrastructure over a five-year period from 2013 to 2017, at an average of $357.663 million yearly.

Under this arrangement, the new owners ought to have invested $357.663 million in 2013 to improve distribution infrastructure but the protracted privatisation process delayed the handover of the assets until just two months to the end of the year.

It was however gathered that apart from the owners of large Discos such as Ibadan, Ikeja, Eko and a few others, most of the new investors are yet to commence massive upgrade or replacement of the physical infrastructure to improve power supply because there is no electricity to distribute.

Sources close to some of the new owners, who spoke to THISDAY at the weekend, said the dwindling supply of electricity from the power plants was not encouraging immediate investments in the distribution facilities.

However, a source close to Enugu Electricity Distribution Company (EEDC) said the efforts of the new owners of the 11 Discos would not improve supply without an increase in generation, no matter the amount invested.

“Enugu has no distribution problem but when you replace all the transformers, what about the transmission lines, which are key? What are you going to do with only distribution transformers when there is no supply from the generation companies? The current problem is beyond distribution,” he said.

THISDAY gathered at the weekend that the commercial city of Onitsha, which is under Enugu Disco, was in darkness for three weeks, apparently due to the nationwide shortfall in electricity generation.
Electricity supply, it was learnt, has also worsened in Enugu metropolis and Abakaliki in Ebonyi State, since January 1, due to inadequate supply from the national grid.

A source close to the new owners of the Ikeja Electricity Distribution Company (IKEDC), which was acquired by a joint venture between Korea Electric Power Corporation (KEPCO) and the New Electricity Distribution Company (NEDC), told THISDAY that the new investors had commenced massive investments, especially in new technology.

According to him, the Koreans are currently delivering the initial report of the inventory they carried out at Ikeja Disco.

“Inventory of all existing distribution infrastructure is ongoing, with the aim of identifying the best options of overhauling and outright replacement of defective facilities. We are bringing new technology that requires new thinking and a new approach to solving the challenge of power technology,” he said.

“So the plan is to first revamp the distribution infrastructure, including transformers and metering system. The Koreans have started giving their initial report of the inventory they took of all the 11 business units. They are delivering their reports and the next steps to be taken. What we are doing now is investment. That is why we brought the Koreans. They have come with a new technology,” he added.

The Managing Director of Korean Electric Power Nigeria Limited, Mr. Yeom Gyoo Chull, also told THISDAY that with the company’s discipline and technology, their partnership in Nigeria would produce records that would be notable globally.

“Already, we have begun a review of the infrastructure and processes at the Egbin power plant and Ikeja Electricity Distribution Company. This is an ongoing process aimed at setting the foundations for world-class services to our customers,” he said.
THISDAY however gathered that the Ikeja Disco, which used to receive about 600MW of electricity from the national grid, got only 380MW at the weekend.

Spokesman of Ibadan Electricity Distribution Company (IEDC), the largest distribution network in the country, which covers Oyo, Ogun, Osun and Kwara States, as well as some parts of Kogi, Ekiti and Niger States, Mr. Tokunbo Peters, told THISDAY that the new owners had also embarked on new investments.

According to him, the new management has completed a new 33KV feeder station that radiates from the Ayede Transmission Station to the company’s injection sub-station at bypass, also in Ibadan, to decongest an existing overloaded feeder.

He said the new management was also carrying out studies and analysis of the existing infrastructure to identify the critical areas of needs.

Peters however said the current power allocation to Ibadan Disco was less than half of the total energy requirements of the company.

“The new management believes that customer is king and is changing the orientation of the workers and re-training them on how to deliver efficient services under the private sector. However, what we are getting is less than our total energy requirements. But as soon as the current problem of gas is overcome and generation improves, we will ensure that generated power gets to the end users,” he said.

The new owners of the Discos and their commitments in the next five years, according to statistics from the BPE, include Kann Consortium Utility Company Limited, which plans to invest $183.03 million in Abuja Disco from 2013 to 2017; Vigeo Holdings’ $121 million in Benin Disco; and Interstate Electrics’ $136 million in Enugu Disco.

Integrated Energy Distribution and Marketing Limited also plans to invest $219 million in Ibadan Disco and $65 million in Yola Disco; Aura Energy Limited, $113 million in Jos Disco and Sahelian Power SPV Limited, $151 million in Kano Disco.

Others include West Power & Gas Limited’s $225 million in Eko Disco; KEPCO/NEDC Consortium’s $293 million in Ikeja Disco; and 4Power Consortium’s $127 million in Port Harcourt Disco.

An investment of $149 million will also be made in Kaduna Disco, which has Northwest Power Consortium as the preferred bidder in the yet-to-be concluded transaction.
The federal government and the BPE are expected to monitor these investments continuously.

– Ejiofor Alike, This Day

In this article

Join the Conversation