The enormous challenges of weak electricity transmission network and low generation capacity inherited from the defunct government-owned Power Holding Company of Nigeria (PHCN) is putting the brakes on the investment drive of new owners of the distribution companies (Discos), BusinessDay has learnt.
The Discos, that are the closest to the customers on the electricity value chain, have been grappling with revenue collection from customers since the take-over late last year, when power supply in many parts of the country declined.
Some of the Discos that have already invested in upgrading their power assets, it was gathered, are now very wary of making further investments pending when transmission and generation capacities would increase.
Also, some of the generation companies (Gencos) that are looking to add to capacity are being constrained by gas supply shortages. Generation, which peaked at 4,517 megawatts (MW) in December 2012, is now hovering between 3,000MW and 3,500MW, no thanks to gas supply shortages.
A top official in one of the Discos in Lagos said revenue collection in November was not at all encouraging. He, however, added that collection improved in December because of the strategies they put in place.
“Capacity expansion will be gradual and will remain subject to considerable risks and delays. While significant demand for electricity undoubtedly exists, disputes over tariffs, gas shortages and concerns about the country’s business environment could all weigh on investment,” said Business Monitor International in its Nigeria Power Report Q1 2014.
The challenge of gas supply to power plants and system collapse have continued to limit generation capacity, with massive investment required to upgrade dilapidated power generation and transmission facilities, some of which have become problematic due to their age and years of neglect.
“The new investors should drive the government to do its part particularly in the areas of gas supplies and transmission. Power that does not reach the consumers does not translate to money,” Akin Adetunji, executive vice chairman, Terra Energy Services Nigeria Limited, told BusinessDay.
“The root of the matter goes beyond revenue collection. The market is still very unstable. Generation capacity has not radically improved. And transmission network is also weak. Even if generation improves, the transmission network is not strong enough to evacuate generated power. There is an urgent need to expand the transmission network,” said an industry watcher.
In what is an acknowledgement of the need to expand the transmission capacity, the Federal Government in its 2014 budget proposal allocated about N25 billion to the Transmission Company of Nigeria (TCN), out of the N62 billion to the power sector.
The TCN, which is the link between the Discos and the Gencos, is still government-owned. It was contracted to Manitoba Hydro International in 2012.
Femi Asu
