Latest on the Nigerian Power Sector Reforms

Going by government’s time schedule, the Nigeria Power Sector Reform Roadmap is set to enter the next crucial phase — the Transitional Electricity Market (TEM) stage — for the commencement of a fully contracted electricity market mode under an anticipated robust commercial and technical regime. As at Wednesday night, there has been substantial compliance in payments by Preferred Bidders for the sale of unbundled companies of the Power Holding Company of Nigeria PHCN, under the power privatization programme.  By the close of transactions Wednesday night, all Preferred Bidders had paid up, except the Enugu Distribution Company, while the preferred bidder for Sapele Power Station had made substantial part-payment. The completion of payment now entitles the preferred bidders to take full possession of the 15 PHCN unbundled entities (10 Distribution companies and 5 Generation companies).

In preparation for the TEM, the Nigerian Electricity Regulatory Commission (NERC) has commenced the process of constituting the Dispute Resolution Panel (DRP) for the Nigerian Electricity Supply Industry (NESI). The constitution of the DRP is a condition precedent for the new private sector led electricity sector. The Electric Power Sector Reform (ESPR) Act 2005 empowers the Nigerian Electricity Regulatory Commission (NERC) to issue licenses to persons who wish to participate in the electricity market. Pursuant to Section 71 (2c) of the Act, disputes arising from the market are to be referred to arbitration or determined by the Commission. The DRP is to resolve disputes that arise between Market Participants, namely the System Operator, Market Operator and the Transmission Services Provider and licensed distribution and generation companies, thereby providing regulatory, technical and commercial certainty in the fair and speedy resolution of disputes that may arise out of market rules.

However, emerging realities seem to put a lie to government’s ability to resolve all pending issues and herald a privatized power sector. Statistics from the Presidential Taskforce on Power indicate that, by government calculation, 2013 would witness the commencement and conclusion of payment of Labour severance packages to former PHCN staff. “There will be enhanced capacity of the Nigerian Bulk Electricity Trading Company (NBET) to sign and execute PPAs for existing FGN assets and the first wave of new IPPs. Bidders of privatised assets will complete full payment and handover of such assets will be completed.  The capacity of NELMCO will be enhanced to deal with liabilities pre and post privatisation.  The announcement of the commencement of the Transitional Electricity Market is expected in 2013.”

While government insists that it is on course to meeting its 2023 obligations, concerns have continued to mount over what the Minister of Power, Prof Chinedu Nebo has described as ‘ slippages’. For instance, despite repeated assurances for payment of severance package for workers to be disengaged from the system to enable new owners take over, payment only commenced less than three weeks ago, without evidence that the settlement would be completed before August 21, the Long Stop Date. Three condition precedents are still pending. These are metering of the grid interface points, testing of the Market Operators Settlement Systems and processes; and the constitution of a dispute resolution panel. Without completing the CPs, according to new plant owners, the Nigerian Electricity Regulatory Commission (NERC) cannot advice the Minister of Power to declare the Transition Electricity Market (TEM). According to the Chairman of the Roundtable of Distribution Companies, Dr. Ransom Owan, “the industry agreements (power purchase agreements, vesting contracts and the transmission network agreements) which underline industry revenue would be deemed illegal and a nullity until the declaration is made by the Minister of Power. This government policy risk makes it very challenging for the capital markets inside and outside of Nigeria to support our efforts financially.”

Speaking further on behalf of the new distribution company buyers, he said: “As at now, the Discos operate at a loss and buyers would quickly deploy their respective turn- business around plans. However, a cost reflective tariff, which guarantees a regulated return and covers all I dusty payments is not yet producing the desired results due to systematic and structural problems. If the Discos are unable to cover the cost of energy deliver them, the Bulk Tracer, Transmission Company and Generating Companies will be adversely affected.” With some of the new utilities owners sounding the alarm, there is little evidence to prove that the process is still on course. The process has previously met with delays and postponements. For instance, in 2001, the Bureau of Public Enterprises (BPE) drew up a tentative time table for the privatisation of the National Electric Power Authority (NEPA) slated for the next year, 2002. This followed former President Olusegun Obasanjo’s directive that NEPA and the Nigerian Ports Authority (NPA) be privatised by the end of 2002.

Last June, the Bureau of Public Enterprises (BPE) warned that investors, who fail to pay the balance of the 75 per cent of offer value of their bids for the successor companies carved out of the Power Holding Company of Nigeria (PHCN) within six months from the date the mandatory 25 per cent bid payment was made, would be penalised. BPE’s Director General, Mr. Benjamin Dikki, said investors were expected to fully take over the power assets after paying the balance of 75 per cent bid price since they had made the mandatory 25 per cent payment assured them that power supply would improve when the private investors take over. He, however, expressed the confidence that all the investors were serious businessmen who have the required financial muscle to pay the bid price. 

To boost confidence in the process and set the tone for the unfolding era, the Federal Government, early in the year, signed market making and largely private –sector led transactions across the power value chain. This, stakeholders say, showcase the increasing confidence in the reform agenda. The agreements and transactions completed at a Presidential Power Reform Transaction Summit held in Abuja included the handover of the payment certificates to the bidders that have successfully paid down the first 25 percent instalment of the purchase price for the PHCN successor companies.

A fact sheet from the Power Ministry listed the following as the success recorded in the reform so far.

   “The major achievements to date are as follows:

i. Bidding and selection of preferred bidders for the 10 Distribution Companies and the 5 Generation Companies was concluded in November 2012, contracts have been signed and bidders have already made initial payments of 25 percent of the bid price.

ii. Presidential Power Reform Transaction signing and presentation of certificates for payments of initial deposits to successful bidders of the DisCos and GenCos by Mr. President was performed on 22nd April, 2013.

iii. Handing over of TCN to Manitoba Hydro International for management contract concluded. Schedule of Delegated Authority (SODA) give to Manitoba

iv. The Nigerian Electricity Regulatory Commission (NERC) has been reconstituted, strengthened and now is fully operational.

v. NERC launched MYTO 2 cost-reflective tariff in June, 2012, which is now operational.

vi. Nigeria Bulk Electricity Trading (NBET) PLC was incorporated in July, 2010 and is now in operation as a credit-worthy off-taker.

vii. The Nigeria Electricity Liability Management Company (NELMCO) was established in 2010 to assume and manage the assets, liabilities and other obligations that could not be earlier transferred from PHCN to any successor company.

viii. Resolution of Labour issues is almost completed and payment of severance package to commence this week.

ix. Investor confidence evidenced by increased investment and signing of MoUs. Most recent being the MoU signed with Power China Corporation to develop 20,000 MW of Thermal Power Plants with associated substations and transmission lines up to 10,000 km

x. Sale of Ten (10) power plants built by the Niger Delta Power Holding Company Ltd commenced.

The document stressed: 

  “All power reform institutions are established and in operation 

• FGN/Labour signed agreement and its implementation is at advanced stage 

• Privatisation of 10 DisCos and 5 GenCos at advanced stage

•TCN management has been handed over to Management Contractors(Manitoba of Canada) and TCN Board Inaugurated.”

On why it is reviewing the Roadmap on power, the Ministry noted: “Let’s face it, with our population of over 160 million people living in over 25 million households, the current available peak power of 4500MW is just a tiny drop in the ocean. This is why we are having the blackouts. The load shedding, which is increasing lately, has its origin in the fact that once consumers witnessed increasing supply and reliability, previously suppressed or migrated demand started returning to the grid. People who used to only put one air-conditioning unit at their homes when using their small generators now put on all units at home.  Our grid operators and the National Control Centre are doing their best to reduce incidents of system collapses arising from unplanned sudden ramp up of grid load from returning suppressed or migrated demand.” Dagogo-Jack said government was not discarding the original Roadmap, noting, rather, that  all the benchmarks of the original one would be retained, while the ongoing review would capture the missed targets, review outstanding ones and re-evaluate scopes, while also addressing issues of fuel diversity, impact of technology on pricing of renewables, and developing long-term financing models for transmission investments. He said the new edition of the Roadmap would outline a workable strategy for closing the gap between the projected sector expansion and the required technical manpower capacity to operate this growth.

According to him, “we have been tasked by President Jonathan with the very tall order of giving Nigeria adequate electricity through the development of a sustainable and properly regulated power market in the life of this administration. This is the biggest power sector reform exercise in Africa by a very wide margin and ranks amongst the top five in the world in terms of the sheer size of the market and process complexity. Therefore every step is a learning curve for us. “He described the roadmap review exercise as a fundamental technical requirement any responsible reform driving agency must embark on, emphasizing that the 2010 version remains the anchor upon which everything so far achieved in the reform has rested.

The proposed Roadmap 2.0 will retain all the benchmarks of the original one, will capture the missed targets, review outstanding ones and re-evaluate scopes while also addressing issues of fuel diversity, impact of technology on renewables pricing, developing long-term financing models for transmission investments, and a strategy for closing the gap between the projected sector expansion and the required technical manpower capacity to operate this growth.

Dagogo-Jack remarked that “for anyone to describe such a technically sound and judicious initiative as tantamount to policy reversal or somersault, is not only mischievous, but is a calculated attempt to denigrate the offices and persons of those of us working so tirelessly to overcome where several have failed in the past. Nigerians should please exercise restraint and resist the urge to cheaply politicise developments in a sector as basic and critical as electricity.”

Stakeholders say they are watching, hoping for the best as the privatisation process continues on thorny road to end of 2013.

NERC AND PHCN ARE USING THE MONTHLY ELECTRICITY FIXED CHARGES TO IMPOVERISH NIGERIANS AND RESIDENTS

A media release issued on 27^TH August, 2013, in Owerri, by Citizens Centre for Integrated Development and Social Rights – CCIDESOR, in response to the fixed charges on electricity consumers in Nigeria

Dear compatriots, it is time to get counted or get thrown into perpetual darkness and hardship by the ugly development in the electricity reform agenda currently being superintended by Nigeria Electricity Regulatory Commission - NERC. It seems that the reform agenda has been hijacked by those who don’t mean well for Nigerians. The latest antics to rip-off unsuspecting Nigerians, whose oil resources have been corruptly mismanaged,  is the 419 like fixed electricity charges endorsed by the NERC. Nigerians should recall that, so far, the only visible achievement of NERC and the entire electricity reform agenda is the regular increase of electricity tariffs. This exploitative increase has impacted negatively on over 150 million citizens since its introduction, with millions of families preferring to stay in darkness than pay for electricity they did not consume.

It will be recalled that the idea of fixed charges was introduced after the prepaid meters regime came into existence. Before, PHCN has been exploiting citizens through the monthly unmetered estimate billing system, until the prepaid metering regime, which insulated the citizens from the open and age long fraud against citizens came into existence. This confirms the position of CCIDESOR that Nigerians are being impoverished through all government monopolies like the power sector. It is something that did not start today.  In other to continue with the exploitation of Nigerians, the monthly fixed charge for metered customers was introduced through the back door, with the plausible reasons of trying to make the sector “attractive” when Nigeria already has a huge market that is more attractive than free “revenue” for new owners who appear incapable of satisfying the energy needs of Nigeria. This increment coming on the heels of selling the investment of many communities, philanthropists and individuals, who decided to fund the purchase of facilities to ensure that their communities get the epileptic power supply that government was unable to get to their communities, without offering them any stake to the tune of their investment, or asking them to withdraw their investment.    This is happening under the noose of an experienced and revered human rights activist who is the current chairman of the electricity reform agenda of Government.

It is important to note that since the commencement of the electricity reform agenda, the quality and quantity of electricity delivered to the helpless and hapless Nigerians remains perpetually and abysmally poor, while the level of hardship and impoverishment is on a steady increase. The latest increase of misery of Nigerians, in form of fixed monthly charges of N750, whether electricity is supplied or not, is regressive, ignominious, and an open day rip off of the already bleeding Nigerians. The introduction of this monthly fixed charge is an indication that the NERC has no new ideas to drive the electricity reform process. At this point, they need to pack their bags and go, than to remain in existence to inflict more pains on Nigerians and residents.  Now is the time for Nigerians to see the electricity reforms for what it is and what it has been – perpetuating the pain of Nigerians through high cost and exclusion. What is the rational to charge a consumer a fixed rate of N750 when NERC know that PHCN have not offered any service to the person? How would the electricity reform empower Nigerians when the philosophy behind it is total exploitation and enticing of investor with increased charges and not the potential population of electricity consumers? It is therefore time for EFCC and ICPC to probe the electricity regulatory agency because what they are indulging in is not different from economic crime against citizens. Making a consumer of PHCN electricity to pay for services that are not rendered or received is akin to economic crime against citizens.

An inquiry over the fixed charges increment alleges that it will be used to repay the cost of recently installed prepaid meters. This plausible explanation, which has not been confirmed by NERC or PHCN, clearly indicates that they may inflict more economic and social injuries on Nigerians if this trend of using electricity monopoly to impoverish Nigerians continues. The following issues should be considered if the electricity reforms means well for Nigerians and electricity consumers:

·         All consumers are not using the same capacity of prepaid meters. While some have “three face” meters, other have either two or one face meter. How can all of them be made to pay the same fixed monthly charge?

·         What is the cost of the prepaid or regular meter and who fixed the rate? Why was Nigerian electricity consumers not consulted on the price of a meter?

·         After paying off the full value of a prepaid meter, who owns it, the consumer or the future private owner PHCN?

·         If a consumer leaves a particular house for another, is he/she entitled to leave with is meter, how will the transfer of ownership take place, particularly if the new apartment has no prepaid meter?

·         Can someone who is not producing any product entitled to any revenue other than a philanthropic gift?

·         Does it mean that Nigerians are not good enough to receive detailed explanation on this demonic fix charges or has electricity consumers been censored from negotiating a product that they want to purchase?

·         What is the rationale behind making the sector attractive only by exposing Nigerians to exploitation and rip-off by prospective investors instead of ensuring that they sale whatever energy they produce?

·         Why is the population of Nigeria not enough to make the price of electricity low and the sector more attractive?

There are so many questions begging for answers to clarify the longsuffering Nigerians, who have remained exploited since the establishment of NEPA now PHCN and NERC. The reform has just shown that it is not meant for 150 million poor Nigerians. This increase is an invitation of more poverty to unsuspecting Nigerians and should be totally rejected. It is more shocking that this anti-people electricity charges is being endorsed by a commission headed by a renowned and well respected “former” Human Rights activist. It is unfortunate that it is perhaps only in a country called Nigeria that a Human Rights Activist who knows the implication of this injustice by his commission takes undue pleasure in inflicting needless and huge economic pains on Nigerians.

To confirm our position, the history of power sector fixed charge increment since the power reform started shows the steady increment has been worse than what has happened in the petroleum sector, yet NLC has not gone on strike.  The economic burden of fixed monthly electricity charges is presented thus - N120 in 2008, N85 (the only reduction) in 2009, N245 in 2010, N300 in 2011, N500 in 2012 and now N750 in 2013. This is a clear testimony of lack of ideas to wake up the dead sector. With this new fixed charges of N750 per metered consumers per  month,  PHCN wrongly generates over N360 billion Naira annually for providing no light to about 40million estimated electricity consumers. This is millennium impunity by NERC that should be stopped without thinking twice. Sad enough, while the crazy fixed and its increment is going on, the national Assembly that is supposed to protect Nigerians against any form of exploitation are busy voting to award themselves life pension and the fattest salary any legislator can earn around the world.

The fixed charge and its increase is simply another way of sustaining the ripping off of citizens by the old electricity regime which Nigerians hoped that the prepaid meter system would have wiped out. Ever since the government announced that they are embarking on electricity reforms as a solution to the identified economic woes Nigerians suffer due to inadequate power supply, the commission and its agenda have been suspicious because of the negative history of that sector, which has been adjudged as the most corrupt sector in Nigeria. The myriad of corruption scandals that have trailed the power sector from inception of Chief Obasanjo led administration till today testifies to the fact that corruption in the electricity sector is beyond appreciation.

In line with the recent MYTO, the government is supposed to subsidize the cost of electricity; but what we have witnessed over a sad period of time is that the subsidy has been phased out and replaced with official exploitation. It was based on this reasoning or initial explanation that the initial amount of N110 billion provided by the government for onward disbursement to the eventual operators through the Central Bank of Nigeria before the Yar Adua regime halted the privatization process.   This did not correspondingly stop the exploitation of Nigerians through incessant electricity price increases which has risen to over 600% since four years now. With this effortless and fraudulent way of generating revenue as well as the new tactics of fixed charges, there is certainly no hope for improved electricity delivery to Nigerians. Rather, there is confirmed fear of increased poverty, unemployment, insecurity and lower standard of living of Nigerians. Prepaid metering, which could have cushioned the consumers against this unbridled rip-off, seems to have been completely abandoned, thus leaving electricity consumers in the lurch. This sad situation is against the intentions of government which motivated the injection of over $4.billion into the power sector in the last nine years.

 The new traffic regime and fixed charges have clearly shown that such huge expenditure of about $40billion in the sector is simply fraud, waste and abuse of public resources. While every public expenditure is meant to benefit citizens the expenditure in the power sector has caused more pains to Nigerians than can ever be imagined in any sane society.

We are aware that most of the unbundled components of the electricity sector, particularly at the distribution level, have been finally sold by outright confiscation of the investment of many communities (particularly in the southeast) in the purchase of transformers, poles, wires, etc., the electricity commission do not think that such sacrifice is enough to attract investors and make the sector viable. It is also only in Nigeria that  with the pretense of electricity reform,  community efforts and properties can be easily and safely handed over to a private investor with the additional penalty of crazy fixed charges, yet it has been difficult for the private buyers to take off. For example, a recent rapid response survey of communities in the southeast conducted by Citizens Centre for Integrated Development and Social Rights – CCIDESOR, reveals that over 80% of distribution facilities that most communities use to supply of electricity are purchased or funded by either the communities or a philanthropist.  It is therefore unfair to punish the communities further with fixed charges.

It is on the above premise that we state as follows:

1. That the fixed charges per meter per month should be stopped immediately and victims of such rip-off refunded whatever they have paid to PHCN.

2. What is required to truly reform the power sector is to remove electricity monopoly from the exclusive list and put it in the concurrent list so that states that want to move faster can provide their people with twenty four hours electricity.

3. That NERC and PHCN should explain to Nigerians why over $40 billion expenditure in the power sector can only lead to increase in power tariff and fixed meter charged instead of lower tariff and improved power supply.

4. That the EFCC should intervene to protect Nigerians from this economic exploitation being perpetrated through the instrumentation of government commission. PHCN and NERC should immediately be charged of economic crime against Nigerians.

5. The National Assembly should also direct the discontinuation of that fraudulent practice to save Nigeria from impoverishment and other economic woes

6. NERC and PHCN should only generate money from power that the produce and not to make money out of nothing.

7. That NERC should be disbanded since their idea of improved power sector does not go  beyond increase in power tariff and monopolistic exploitations of citizens without delivering any improved service for the  years they have been in existence.

8. Unless this monthly fixed meter charge rip off is stopped and victim refunded, we shall commence the mobilization of Nigerians to reject the current exploitation embedded in the energy reform process.

The true economic reform of Nigeria can be achieved when those federal government monopolies that directly impact on the lives and livelihood of Nigerians are distributed among federal, states and Local Governments. 

Influx of Imported Prepaid Meters Threatens Local Manufacturing

Moman Meter Manufacturing Company Limited (MEMCOL) has warned the federal government about the influx of imported prepaid and postpaid meters, noting that the move is threatening investment in local manufacturing of all meters in the country. The Chairman of the company, Mr. Kola Balogun, explained that the despite the huge N8 billion invested in the manufacturing of quality and world class standard prepaid and postpaid meters to meet the local consumption in the country, the federal government still threw its borders open to foreign prepaid and postpaid meters discouraging investments in local production of meters. Speaking during the launching of MEMCOL ultra-modern electricity meters manufacturing company by the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, Balogun stressed that the company has the capacity to provide prepaid and postpaid electricity meters and other metering solutions and applications.

He also decried the lack of patronage by the federal government, saying that the company is yet to receive the desired patronage from the federal government. “We have not been able to meet our dream to be less dependent on importation of prepaid and postpaid meters. Nigeria is currently occupying the fourth position in meter manufacturing, but if this unfavourable importation of meters continues, we would be misplaced in the global market,” he said. He therefore called on the federal government to implement policies to protect the local industries, saying that this is the only way Nigeria can achieve industrial revolution and ensure economic growth. “I want to appeal to the federal government through the ministry of industry trade and investment to ensure that whoever has invested in Nigeria must not have any cause to regret. We have good product that we can showcase to the rest of Africa,” he said.

Aganga, in his remarks, said the launching is coming at an auspicious time when the current administration has made industrialisation top priority and is making concerted efforts to ensure that the power sector is totally revitalised to lift the industrial sector to the desired height. “This is a very high technology company that has keyed into the value chain in the power sector to produce all the meters we need. They have the capacity to produce smart prepaid and postpaid meters and I am very impressed with the quality of the meters I have seen here today. I am also excited about the future of this company and the federal government will make sure that we create the enabling environment for them to do extremely very well,” he said. In his words, “You will agree with me that Nigeria is an endowed nation with abundant human and natural resources. However, to place Nigeria among the top 20 economies in very good time, in line with the goals of this administration, all hands must be on deck to ensure that this country has a vibrant industrial base.”

He said no nation has moved from being a poor nation to a rich one by relying on exporting raw materials without a vibrant industrial sector stressing that this is why the ministry has been working hard to ensure that the nation’s industries are positioned well enough to drive the much-needed industrial growth. He said based on the desire to create an inclusive economic environment where jobs and wealth will be created through the process of intense industrialisation, the federal government has already developed the Nigeria Industrial Revolution Plan (NIRP) based on sectors where the nation has comparative and competitive advantage. “It is hoped that the launching of this factory, which specialises in the production of prepaid and postpaid meters, will contribute to the growth of the power sector and by extension, the success of IRP. I charge the management to work assiduously in ensuring that this project contributes significantly to inclusive economic growth and development through job creation and wealth generation,” he said. “I wish to congratulate MEMCOL for this achievement and also ensure both and local foreign investors that returns on investment in Nigeria are among the highest in the world. In this country, the case for investing is compelling,” he added.

The General Manager, Operations, Bank of Industry ((BoI) Mr. Joseph Babatunde, said the role of the BoI as a development financial institution is to empower private sector investments geared towards industrialisation by taking bold steps to provide long and short terms loans to developmental projects. He said the BoI got approval by the federal government to invest heavily in the plastic casing for the company’s meters, maintaining that the aim of this move is to develop the value chain in the power sector. He therefore called on Nigerians and the federal government to patronise the company’s product pointing out that the success of this company would go a long way in driving the industrial sector and creating massive employment opportunities in the country. The quality of this product can measure up to standard anywhere in the world. We believe in this company and we hope it will get the necessary patronage and support from the federal government to make the company competitive in the global market,” he said

Nigeria's Epileptic Power Sector under the Spotlight, as Private Investors Take over PHCN

Nigeria's epileptic power sector has come under the spotlight, following the conclusion of the sale of the assets of the Power Holding Company of Nigeria (PHCN) to private investors.

Analysts have come unwavering with the type of regulatory actions required to make a success of the electricity market, few days after all but one of the 14 preferred bidders for the successor companies of PHCN paid up for the electricity company’s assets. “We need a regulator that is independent and has experts in various areas including engineering, law, among others. We also need a regulator well equipped for the future. Further, we need one, which would continuously co-operate with the gas regulators as you can hardly speak about electric power in Nigeria without making reference to gas. Issues relating to adequate staffing should also be given the care it requires,” Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo, said.

That will be the focus, because from August 21, 2013, the country’s electricity sector becomes fully deregulated, and electricity deliveries consequently have been opened to competition. Finally buckling to pressure, Nigeria has become of the latest emerging market economy to undertake this step, but the long era of government control has left the sector very vulnerable. “High level of regulation needs to follow this development. We must avoid a situation where the regulator becomes subservient to the operators. I therefore suggest further strengthening of the regulatory authority,” according to Bola Osunsanya, managing director, Oando Gas and Power, saying that regulator must also be on top of situations so that no operator is allowed to short-change the Nigerian public.

While it is given to assume that the onset of a private sector driven electricity industry in the country will usher in an era of better efficiency and responsiveness, experiences across sectors of the economy have shown that the new dawn of electricity supply that Nigerians have yearned for, over decades, will only come if the new generating and distribution companies (gencos and discos) are properly regulated, ensuring that there is a balance between their activities and consumers’ interests. “The regulator should be professional. Professional in the sense that the interests of consumers are very well protected. In this type of industry, the consumer is very vulnerable. So, we need a very strong regulator that is able to protect consumers from exploitation, as well as ensure that investors derive enough benefits,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry. According to him, regulation is the business of government, but what is important is to ensure that the regulatory agency is made of professionals and they should have the power and autonomy to operate professionally. The political leadership needs to give them the space to operate very well, he added.

UGHELLI POWER FIRM GETS N13B AFC, BANKS LIFELINE

To boost electricity supply in the country, the Africa Finance Corporation (AFC) in conjunction with UBA Bank Plc, as co-arrangers, and FCMB and Fidelity Bank as co-financiers has provided a N13 billion debt financing facility for the acquisition of Ughelli Power Plc.  The aggregate commitment of AFC for the acquisition is N8 billion.  

Meanwhile, there is intense lobby at the Bureau of Public Enterprises (BPE) to extend the payment deadline for Enugu Electricity Distribution Company, which could not be paid for when the deadline ended on Wednesday. 

In a related development, Eastern Electric, the reserve bidder for Enugu Electric Distribution Company, has made overtures to the BPE to respect the law and immediately allow it make payment following the inability of the preferred bidder to meet up.

Besides, an indigenous firm - Forte Oil Plc, said Sunday that its subsidiary, Amperion Power Distribution Company Limited (Amperion Power) has completed the acquisition of a majority stake in the 414MW Geregu Power plant with payment of $99 million. Nigeria began restructuring and reform of its electricity sector in 2000 with the issuance of the National Electric Power Policy (NEPP) to unbundle the sector and establish a regulator, with a mandate to create and develop a competitive electricity market. 

The provisions of the NEPP were subsequently enacted   in the Electric Power Sector Reform Act 2005 (EPSR Act),  providing the key legal and regulatory framework for the reform, including the establishment of the Nigeria Electricity Regulatory Commission (NERC), paving the way for private sector participation in the power sector.        

Ughelli Power Plc is one of six power generation limited liability companies established under the provisions of the EPSR Act following the unbundling of the vertically integrated PHCN. Ughelli Power Plc is a gas fired thermal power plant acquired by Transnational Corporation of Nigeria Plc (Transcorp) in the first round of the Federal Government of Nigeria’s privatisation of power generation assets formerly owned by the Power Holding Company of Nigeria (PHCN). Ughelli Power Plc was incorporated in 2005, is situated in Delta State and has an installed capacity of approximately 900MW.  It currently generates approximately eight per cent of the total electricity within the Nigerian national grid.      

Transcorp is the lead sponsor in the Transcorp Ughelli Power consortium, which will be purchasing 100 per cent of the shares in Ughelli Power Plc.  Transcorp, incorporated in 2004, is a diversified conglomerate with strategic investments and core interests in the hospitality, agribusiness and energy sectors.  

AFC, a multilateral finance institution, was established in 2007 and has a current capital base of US$1.2 billion.  It was established to be the catalyst for private sector infrastructure investment across Africa.  AFC fills a critical void in providing project structuring expertise and risk capital to address Africa’s infrastructure development needs, and is increasingly being seen as the benchmark institution for private sector investment in the core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications. President and Chief Executive Officer of the AFC, Andrew Alli stated: “AFC’s long-term vision is to help address Africa’s infrastructure deficit and ensure sustainable economic growth for the continent.   Growth of the Nigerian economy cannot be fully realised without an efficient and functioning power sector. Power is one of AFC’s high priority sectors for investment, and arguably Africa’s most significant need. To this end, AFC stands as both an advocate and support of privatisation of the power sector in Nigeria, and has partnered with the U.S. government through United States International Development Agency (USAID) in the USD7 billion U.S. Presidential “Power Africa Initiative” to accelerate investment in Africa’s power sector over the next five years and increase access to clean, geothermal, hydro, wind and solar energy.   AFC’s investment in Ughelli power will contribute towards reducing Nigeria’s chronic power deficit, foster economic growth and create employment.  

AFC was created to address the infrastructure investment deficit and is privileged to be providing an African private sector investment solution, to drive economic growth and industrial development in Nigeria.”

At the close of the official deadline on Wednesday, all the preferred bidders for the nation’s utilities for privatisation had paid up except Interstate Electrics, which was unable to pay the remaining 75 per cent of the bid price for Enugu Electricity Distribution Company.

Information released from Ministry of Power indicates that apart from the preferred bidder for Enugu Disco which failed to make payment that of Sapele Power Station had made ‘substantial part-payment’. It is not immediately clear if ‘substantial part-payment’ also qualifies as beating the deadline. Spirited attempts to get Vice President Namadi Sambo, who is the chairman of the National Council on Privatisation, to make a special case for Interstate Electrics were unsuccessful. A source said the promoters of the defaulting firm have been told in clear terms that international development partners like the USAID and the Department of International Development (DFID) of the British government, which are involved in the bid process as observers, would not accept it. “This was why the bids from Dangote and Rockson Engineering for two generation firms were disallowed in July, last year; both bids arrived only a few minutes late.

Interstate Electric was also given the example of Mike Adenuga, who could not be awarded a GSM licence in 2001 when MTN, NITEL and Airtel received theirs because of a mistake,” Meanwhile, Minister of Power, Prof. Chinedu Nebo is getting set to formally declare the Transition Electricity Market, to enable the new investors commence business in earnest and further drive the process. He said in Abuja, “The completion payment now entitles the preferred bidders to take full possession of the 15 PHCN unbundled entities (10 Distribution companies and five Generation companies).”

Nebo reassured of government’s resolve to pursue the transformation agenda to the end, and monitor the emerging transition market, in order to protect the interest of both the citizenry and the investors.

He said the stability of the national grid was being enhanced to ensure effective transmission of any quantity of power being generated in the new dispensation. He said efforts were also on to provide more electricity off-grid, especially for the rural areas, while also sustaining subsidy for low income electricity consumers in the nation’s tariff structure. The promoters of the consortium have gotten their lawyer to formally write BPE on the need not to drag the privatisation process into unnecessary litigations.

Eastern Electric had on Wednesday declared preparedness to pay $126 million for the takeover of the company which provides power to the southeastern part of Nigeria, following the failure of Interstellar Electric to do so. The consortium was formed by the five Southeast state governments: Nestoil, a major indigenous operator in the upstream sector of the Nigerian petroleum industry; Aba Power Ltd and Geometric Power Ltd, and Diamond Bank and members including NRECA of the United States and the NETGroup of South Africa.

The firm’s statement read: “We shall not have difficulty raising the funds. The BPE is still holding on to our $10 million bank bond raised when we were bidding for the Enugu Disco.”

The BPE had on Monday announced that it would not extend the Wednesday deadline for the payment of the outstanding 75 per cent of the bid prices for successor companies of the Power Holding Company of Nigeria by the preferred bidders. BPE said if they failed to pay by 5 p.m. last Wednesday, they would lose the bids, while the reserved bidders would be invited to take over the assets.

A source at the BPE said that the agency has to give some period of grace to Interstate Electric Limited to make payment and also to CMEC/EUAFRIC Energy JV, the preferred bidder for Sapele Power Plc, which had earlier paid a substantial amount of the 75 per cent balance.

Interstates, which is promoted by businessman, Emeka Offor, was preferred to acquire the Enugu Disco and like others, it had initially paid the mandatory 25 per cent bid price but was unable to meet up with the 75 per cent balance at the expiration of the deadline set by the BPE.  

Also, a source in the Interstate who spoke in confidence said:  “We are making frantic efforts to ensure that we make the payment in the next few hours.  There is still hope for Interstate Electric Limited to take over the Enugu Distribution Company.  Though, the BPE gave us up till Friday, August 24 to make the final payment, we were not able to pay.  But I assure you that in the next 24 hours, the company would have fully paid for the power firm”, he said. A source in BPE confirmed that the agency was trying to relax the rule contained in the Request for Proposal (RFP) to give opportunity for Interstate Electric Limited pay their outstanding balance.

Head, Brand and Corporate Communications, Odion Aleobua, said in a statement yesterday, that Amperion Power completed the acquisition of the power plant ahead of the Wednesday, August 21, 2013 deadline with the payment of $99 million to the BPE representing 75 per cent balance for the power generation asset. 

This, the company said was in addition to the $33 million mandatory down payment made on February 21, 2013 to the BPE by the group to complete the required bid sum of $132 million.

Nigerian Citizen: Paying a lot for nothing

Tribune reported that as of August 12 2013, Nigeria’s power generation rose to 2,766 megawatts (MW) from 2,628.6MW. However, three months ago our electricity distribution companies had reportedly realised N189 billion as revenue despite poor supply to consumers – compared with the N151 billion collected for the entire year in 2011.” What is going on? 

http://bit.ly/1doggBH   

Last month Twitter-sphere lit up about the increase in fixed charges for consumers using pre-paid meters. Charges have gone up from N245 in 2010, to N300 by 2012, now N702 and will apparently continue to rise. This means when a million Nigerians each pay a fixed charge of N1000 every month, regardless of whether there is electricity or not, companies earn 1 Billion Naira a month.

In response to the outcry Nigerian Electricity Regulatory Commission (NERC) Chairman, Dr. Sam Amadi in an interview with Vanguard, allegedly said N750 was not too much and that the Nigerian rate for fixed charges is around the lowest in the world. He went on to say, “the problem we have is that Nigerians are used to paying nothing.”

Let’s put this in perspective. Tribune reported that as of August 12 2013, Nigeria’s power generation rose to 2,766 megawatts (MW) from 2,628.6MW. This surely has to be lowest generation of power in the world for what has been spent on the power sector. However, three months ago our electricity distribution companies had reportedly realised N189 billion as revenue despite poor supply to consumers – compared with the N151 billion collected for the entire year in 2011.

The situation regarding lack of power is a national disgrace that is compounded by the following issues.

One, there is something really wrong with a system which forces people to pay for something they have not enjoyed and will not enjoy. There is a name for this: exploitation. Or in the development speak of Why Nations Fail it is a symptom of extractive institutions i.e., designed to take income, wealth and resources from one larger subset of society for the benefit of a different smaller subset.

The second is that we have not heard a fair justification for increasing the fixed charges when the electricity tariffs are going up too (N8.89, N10.99, N12.61). In order for consumers to appreciate the fixed charge which is meant to cover the fixed cost of supply it would have been useful to explain what these fixed costs are i.e., is this payment for the electricity cables, the cost of administration, the salaries of employees or maybe the cost of meters since it is still unclear who is supposed to pay for them. The failure of distribution companies to provide meters for their customers has been hinted at by the latest actions of NERC instructing companies to sell the meters and reimburse customers through their bills over time. It is possible that fixed charges significantly higher than the present might be justifiable but the performance to date has simply damaged consumer confidence further.

One would also ask – if our large population in Nigeria is supposed to be an advantage – why are the economies of scale not working to the advantage of consumers? Could the problem be tied to the lack of meters? Since the biggest defaulter of electricity bills is reportedly the Federal Government, then Nigerians should know if the FG is now fully or partially (if so to what extent) on meters. If the answer is that much of the FG is still not on the meters, then it means Nigerians who are using pre-paid meters and those who are not (but who continue to get unreasonable bills) are being made to unfairly subsidize the FG.  A quick visit by NERC or any interested CSO to some Abuja ministry offices should prove illuminating.

Third, is the issue of investment in power a.k.a privatisation. Carlos Slim – one of the richest men on earth comes from an extractive society. According to Acemoglu and Robinson, Slim did not make his money by innovation. ‘His major coup was the acquisition of Telmex, the Mexican telecommunications monopoly that was privatized in 1990.’ Slim did not put in the highest bid, but he still won. He did not pay for the shares in Telmex right away; instead he delayed payment and used the dividends of Telmex (after taking control of the company) to make his payments.

What has this got to do with Nigeria and what we allegedly pay for electricity? Probably everything. Dr. Amadi explained that, "this new increase is a basic requirement to attract investors in the power privatisation bid process but as time goes on, the price will drop when investors have recovered their money."

We have our answer. It is not about us. It is about the investors. Only few still argue against privatization, because it is clear that governments don’t have the right incentives to manage utility services efficiently. However, what the telecommunications sector has taught us is that while privatization can revolutionalise and open things up – there are still issues with regulation where consumers continue to be shafted. Despite infrastructure and security challenges, the telecommunication companies are raking in cash, yet services are poor and millions have few options and no redress. There is something painfully unjust about a system which allows the same people responsible for ruining our utilities, to buy them. Over $20 billion has been invested in the power sector since 1999 and we are still struggling to produce less than 3000mw.

It is time Nigerians come together to learn more about the power sector that bedevils us and to make justice in this sector a central issue for every political platform and all politicians. Is the transition to this privatized sector truly evolving in a way that will benefit the Nigerian consumer? If not, what are they going to do about it? Anyone without a B+ answer should not apply for any level of political office in 2015 or beyond.

The power of soccer: A ball that charges your cell phone

Four former students from Harvard University have proved beyond doubt that a football can indeed be a powerful thing -- by creating a ball that can charge a mobile phone.
Julia Silverman, one of the co-inventors, told CNN that the product dubbed the "Soccket" ball uses basic technology to create and store electricity.
"We combined a ball with a simple charging device," she said.
"It means when the ball is kicked, it moves around a magnet inside a coil and charges a super capacitor. This stores energy that is released by whatever you plug into it."
Where normal balls have a valve to add more air, the Soccket ball has a plug socket that is compatible with a DC adaptor, allowing everything from a light bulb to a mobile phone to be run from the energy stored inside. 

Silverman, who lives in Boston, Massachusetts, traveled to South Africa to road-test the latest version of the ball over the month-long World Cup tournament.At FIFA's Football for Hope tournament, taking place on the outskirts of the Alexandra township near Johannesburg -- where a population of between 350,000 and 500,000 live in an area of 7.6 square kilometers -- the 21-year-old told CNN that the ball could have most impact in the poorest areas of the world.

"For 15 minutes of play you would get three hours of light. Low-energy products work the best, so you wouldn't be able to run a microwave off of this, but we're hoping to make a difference to those 

who have no energy whatsoever, where it could allow a child to read for three hours at night for example.

"Areas like the Alexandra township could benefit. Our biggest goal is to make the product available to [poor] users.

"We're thinking that in wealthier communities, like America, we'll charge the full price plus a small mark-up so that a child in Africa would get a ball too, for a nominal price."

The leather orb bounces and acts like any normal ball, according to the Soccket team, though the 2010 model is a far cry from the original design of 2008.

"Our first prototype was a hamster ball with shake-to-touch torch inside [a torch that stores charge when shaken.] We rolled it around and when we switched on the torch the light came on, so we thought this could work," Silverman said.

"We then moved to a ball with a bladder that had a light fitted into it. But the model being tested at the 2010 World Cup is the Soccket 2.0, which has a DC jack. So any appliances that have a compatible plug would work."

Children from the township played with the usual enthusiasm of football-crazy kids when given the ball for a test drive.

Teko Moleke, a 12-year-old from Alexandra, told CNN he thought the ball was "magic" when shown how it could power a light -- a reaction that Silverman said had been common on her travels.

"The kids who have played with it haven't noticed it is any different, one even said to me it is better than the Jabulani [official World Cup ball] -- but it needs to be robust because some of these kids are kicking the ball very hard!"

Africa, where only one in four people have access to electricity according to a World Bank report conducted in 2009, provided inspiration for the project after each of the four had spent time there.

The ambition now is for limited-edition prototypes of the ball to be put for sale online by the end of the year, and for major charities and NGOs to help with global distribution.

"We're still not sure whether we want to move production to China or keep production to the local areas where the ball will be sold. It's something we're kicking around at the moment," Silverman said.

"We've also thought about basketball and expanding to other sports and we're looking to expand from the DC socket so that other plugs can be incorporated."