A Review of the Nigerian Energy Industry

Govt owes us N39bn — Egbin Power

03 October 2015 Lagos — Egbin Power, yesterday, declared that the Federal Government owes the generation company, Genco, between N38 billion and N39 billion for electricity generated but not paid for.

*Egbin power station.

The power company also blamed the huge debts for its inability to pay for gas supply, as about a quarter of the amount, if paid, will be deployed to servicing gas debts.

Chairman, Egbin Power, Mr. Kola Adesina, told journalists in Lagos, yesterday, that the Genco was highly constrained by the debt burden, as it is frustrating its power development plans.

He said: “We are highly constrained by the lack of payment for services rendered. No matter how much broad-minded you are and no matter the desire to serve your nation, if services are not paid for, the momentum to continue to serve will not be sustained.”

He disclosed that industry operators are in dire need of funds, as most of the monies used in acquiring the power assets and other post-privatisation investments came from the banks.

He said: “But banks don’t want to hear about any delays or the reasons for such delays. When the amount of the debt payment is due, they simply call for their money.”

Regulatory issues

Besides, Adesina further noted that policy inconsistency, especially as regards regulatory issues, is also frustrating investment planning in the sector, saying that till date, the power purchase agreements, PPAs, and Gas Supply Agreement, GSAs, have not been implemented.

Such a declaration comes as a surprise given that government had set up the Nigerian Bulk Electricity Trading Company, NBET, while also declaring the Transition Electricity Market, TEM, to deal with such issues.

Besides, Adesina insisted that operators are also faced with regulatory challenges, saying: “A lot of institutional issues were not fully resolved and these pose serious constraints in planning and affects our business operations. Regulations are of strategic importance for our business, as strategy has very serious implication for our business.”


Impact of policy inconsistency

Citing the impact of policy inconsistency on its operations, he said a change in tariff model by the industry regulator, Nigerian Electricity Regulatory Commission, NERC, is frustrating the ability of the Genco to access the Central Bank of Nigeria, CBN, N230 billion lifeline to the power sector.

According to him, “we have only drawn 25 percent of the CBN fund. We couldn’t draw the balance of 75 per cent because the regulator (NERC) suddenly changed the tariff model. The economic implication is that with the change in the tariff model, it became obvious that there won’t be any flow backs. So, when the regulator changed the tariff model, the CBN said, ‘No, this is no longer feasible.’

“This because the CBN intervention fund to power is not a gratis, because it is a loan meant to be paid back at a particular period, with interest. So the new model cannot support the mechanics for the fund.”

But NERC is yet to react to these issues, as its Chairman, Dr. Sam Amadi, promised to call back once he is done with writing an official report for the Presidency.

He, however, noted that Vice President Yemi Osibajo and his economic team have been meeting with stakeholders with a view to resolving all the outstanding issues.


Renewable power

Meanwhile, Adesina also disclosed that Egbin is considering delving into renewable energy, specifically solar, and is using its housing estate as the pilot for the project.

This is even as the management plans to expand existing capacity at Egbin with additional 1,350 megawatts to ramp up capacity at the thermal plant to 2,670MW by 2019.

To this end, he said the management is in the process of doing the feasibility and viability study for the expansion programme, which will also include the environmental impact assessment, EIA; the front end engineering design, FEDD; and the award for the engineering, procurement and construction, EPC, contract.

With regard to the solar project, Adesina explained that the move is meant to create a cocktail for availability of electricity such that “if there is a defect in one, you can rely on another source, pending when you are able to rectify the problem.”

Besides, he said  using the Egbin Estate for the pilot is not only to test the efficiency and effectiveness of solar power and eventual commercialisation, but also to free up more power available for consumers on the grid.


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