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.
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