Govt, power investors miss post-privatisation targets

07 May 2014, Abuja – Exactly six months after private investors took over the assets of the defunct Power Holding Company of Nigeria (PHCN), the federal government and the new owners have failed to meet the post-privatisation targets, resulting in revenue shortfalls occasioned by the shortage of gas to generate electricity, THISDAY has learnt.

Prof Chinedu Nebo

Prof. Chined Nebo, Minister of Power

THISDAY gathered that with the federal government, through the Nigerian Gas Company (NGC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), failing to meet its gas supply obligations to the power generating plants, the electricity supplied to the national grid within the past six months had fallen far below the projected targets during the privatisation exercise.

Under the Share Sale Agreement between the investors and the Bureau of Public Enterprises (BPE), the investors were expected to commit a specific amount of money to upgrade power facilities over a five–year period, subject to the federal government meeting certain conditions, especially in the area of gas supply to the generating plants by the NNPC.

But with the shortage of gas to power the plants, THISDAY gathered that there has been inadequate electricity to sell, thus effectively undermining the capacity of the new investors to generate revenue to meet their investment commitments.

THISDAY’s investigation revealed that the 1,320MW-capacity Egbin Power Station in Lagos State, for instance, the biggest power plant in Nigeria, generated as much as N25 billion of electricity between November 1, 2013 and March 31, 2014.

This figure, it was learnt, was based on the fact that the new electricity market rules provide that the generating companies are entitled to get paid by the Market Operator, once their turbines are ready to generate electricity, even if there is no gas to run the machines.

It was however learnt that since the power sector is still operating under interim rules, pending the declaration of the Transition Electricity Market (TEM), the Market Operator had agreed to pay the power plants only N18.269 billion, which represents the actual invoice.

But of the N18.269 billion, the Market Operator was said to have discounted the invoice by N5.3 billion, so that only N13 billion would be paid in the interim.

The balance of N5.3 billion, however, is expected to be paid when the electricity market matures.
Investigations further revealed that of the N13.16 billion the Market Operator agreed to pay, only N6.5 billion has been paid since the private sector took over the assets.

The implication is that Egbin power station is owed about N18.5 billion, representing 72 per cent of their invoice since the new owners took over.

The uncertainty in the revenue profile of Egbin Plant, which was caused by imperfect market conditions and the inability of the government to meet its commitments, is applicable to all other power generation stations across the country.

This development has affected the capacity of the hydro stations to effectively invest in massive upgrades of infrastructure, in line with the privatisation agreement.

Speaking during a recent oversight visit of the House of Representatives’ Committee on Privatisation and Commercialisation to some of the power assets to access their post-privatisation status, a member of the committee, Hon. Fort Ifeanyi Dike, who represents Ihiala Federal Constituency in Anambra State, observed that all the ongoing investments in the hydro stations might have been initiated by the federal government before the sale of the assets to private investors.

“We would like to have your exact investments in financial terms, since you took over. And if what we saw at the hydro plants is what is happening here, it may be that even the renovations that have taken place since you took over may have been arrangements entered into by the federal government, not even you.
“So it is important to furnish us with your investments so that you not only justify the takeover but we are also assured that you are meeting the terms of the agreement,” he had said.


– This Day

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