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‘The Afam deal brings us closer to generating power for one out of every four Nigerians’- Transcorp President

‘The Afam deal brings us closer to generating power for one out of every four Nigerians’- Transcorp President

Valentine Ozigbo is the current President and CEO of Transcorp PLC. Prior to this, he was the Managing Director and CEO of Transcorp Hotels Plc, the hospitality subsidiary of Transnational Corporation of Nigeria Plc (Transcorp) and owners of the award-winning Transcorp Hilton Abuja and the iconic Transcorp Hotels Calabar.

He is a banker and accountant with over 20 years’ experience in commercial, retail, investment, and international banking. Ozigbo is a graduate of Lancaster University, The UK where he bagged a distinction in MSc finance. He also has an MBA in banking and finance and a B.Sc in accounting, both from the University of Nigeria.

In this interview with DIPO OLADEHNDE, he explains the challenges facing Nigeria’s power sector and next Transcorp plans. Excerpt

The turn of a new year marks one year for you as President/CEO of Transcorp. How have you fit into the role and what kind of challenges have you faced?

As President and Group CEO of Transnational Corporation of Nigeria Plc (Transcorp), I have led a conglomerate of 3 businesses: Transcorp Power, one of the largest power generation companies in Nigeria with 972MW installed capacity; Transcorp Hotels, the owners of Transcorp Hilton Abuja (the leading business hotel in Africa) and Transcorp Hotels Calabar; as well as Transcorp OPL281, an oil and gas company.

Fitting in has come quite easy. My background in banking, finance, accounting and management, coupled with my core strength in emotional intelligence, means that I am exceptionally qualified to build any organization to last. My robust analytical skills and continuous improvement culture orientation means I can lead any transformation in the knowledge economy that we have today. And finally, my dynamic leadership style and ethical orientation means I can lead sustainable business underpinned by strong governance ethos.

The journey so far has been a fulfilling despite the challenges of our operating environment. In our power business for example, we have had to grapple with significant operational challenges including severe gas shortages, mandated reduction in generation from the National Control Center and importantly, revenue exposures from delayed payment of receivables in our power business. Nonetheless we have taken several actions to proactively and sustainably address these issues. These include the recent activation of our Gas Supply and Aggregation Agreement, leveraging the Eligible Customer regime initiated by the Federal Government, as well as consummating the acquisition of Afam Power Plc and Afam Fast Power Limited, thereby raising our total generation capacity from 972MW to 1938MW; expansion into alternative power generation and mini-grid opportunities, among other things”

In our hospitality business, within the year we have built a strategy to roll out new service offering. I have also championed operational excellence and top-line corporate governance initiatives that have ultimately led to the recent discharge of the hotel from the Bureau of Public Enterprise (BPE) post-privatization monitoring.

Read also: World gets a wake up call for reform from elites gathering in Davos

Last year, the World Bank approved Nigeria’s request for a $3billion loan for the expansion of the transmission and distribution networks in the power sector. Despite huge investment in the power sector, Nigerians are yet to feel the benefits of these investments, why is this so?

The attention and increased activity in the Power Industry is commendable and it is worthy of mention that no amount of investment is too much for the power sector due to its critical importance. The Nigerian Power sector however, is still not attracting the level of attention it deserves.

My recent review of an article on the activities of the Nigeria Investment Promotion Council (NIPC), indicated that it is glaring that apart from the Pioneer Status, there has been no recent action to incentivise the growth and development of the Nigerian Electricity Market. For example, I was recently going through the Nigeria Investment Promotion Council (NIPC) reports and I was looking at incentives over the years to various sectors. I discovered that apart from the pioneer status and initial investments there has been nothing in the last few years for the power sector.

Indeed, two key mistakes have been made in the past around the management of the sector. The first emanates from the mismanagement of expectations and the second is the non implementation for the master plan.  So with these challenges, it is comprehensible that Nigerians are impatient.

So, we must look at the entire value chain issues together not in part and solve the problem holistically, aligning at the technical, commercial and political levels.

The World Bank loan is expected to pay special emphasis to transmission and distribution just like the Siemens deal. This new investment will increase efficiency along the transmission and distribution value chain. There are boxes to be ticked when it comes to loan, I am optimistic that we will get it right and the world bank cannot lend money without asking the right questions or asking for proof they can payback. I hope the government applies the best execution skills towards ensuring the success of it.

Nigerians need to know that there are lots of peculiar challenges we face as a nation. There are many gaps such as the inability to transmit everything we generate, power theft and government debt leading to many losses and inefficiencies where a few people are paying for power which is inadequate to cater for the value chain. Hence the importance of good policies cannot be overemphasised.

Nigeria’s power sector is riddled by debt and Transcorp Power is owed about $250 million. How has the debt impacted your operations?

It is unfortunate that we are owed about N80 billion. This type of exposure would have been more catastrophic if not for our strength and capacity, we would have collapsed with that level of debt. What is even sad is, if we don’t have solutions to deal with the problem in the future there will be more accumulations as time progresses.

We have been engaging with government to explore options, there are plans to put some of this obligation in the budget as subventions that government will need to now take care of which will clear the arrears and fix the issues going forward however it must not be allowed to fester and continue in the future.

As a Genco, the existing agreement with government is to generate power and sell to a government agency which is known as Nigerian Bulk Electricity Trading (NBET), so the government has taken the sole responsibility to pay Transcorp its debts not Discos.

Read also: Nigeria to rank top in World Bank Ease of Doing Business list by 2023 – SGF

Additionally, there are ongoing conversations about the deployment of debt instruments to enable us monetize and keep thriving however what is most critical is how to improve impairment system such that even with these inefficiencies mentioned, whatever funds are ultimately generated, there is efficiency in distribution. I like the system that Nigeria Electricity Regulatory Commission (NERC) and Central Bank of Nigeria (CBN) is championing to automate the payment system which implies we would have an efficient market to make sure no future debt is accrued. We are hoping the government will clear those outstanding debts so that Transcorp can also clear its debts with gas suppliers and other lenders. We are optimistic and the body language of government is actually encouraging.

As one of the leading power generating companies, we are at the forefront of advocacy and engagements to address the myriad of issues plaguing the generation segment and the power sector as a whole. We do this as an entity as well as an active member of the Association of Power Generation Companies. We also provide advisory to the government, key players and agencies on relevant issues and interventions necessary to ensure a thriving power sector.

What are Transcorp plans for the Afam Electricity Generation Company (Afam Power Plc and Afam Three Fast Power Limited) recently ratified by the Council on Privatization?

At Transcorp, the Nigerian power sector is one that is close to our hearts and is deeply aligned with our purpose; Improving lives and Transforming Nigeria. As stated by our Chairman, Tony O. Elumelu, “If we fix power, we fix Nigeria”. This sums up our interest in this sector. This investment reiterates our commitment to our strategic goal of contributing at least 25% of power generation in Nigeria and that explains our increased foray despite the value chain issues in Nigeria’s power sector.

We are excited at the opportunity to be the preferred bidder for this project, and we worked very hard to achieve this goal, after meeting the technical and commercial qualifications.

This is a very strategic investment in Nigeria because it is the first power plant in the country and has a capacity of 966 megawatts. So, it’s a good deal anywhere in the world. Its equally situated in an area that has much more gas than most places and has two transmission lines that are easily assessable.

We are very excited about the deal because it will help us achieve our global ambition which is to be able to generate power for one out of every four Nigerians. We will eventually introduce other energy sources as time proceeds.

In terms of next steps, we recently received final approval and have proceeded into the negotiation phase. There are still a few issues to be resolved. Once we reach a middle ground and payment the next question is when the takeover will be. We expect that will be before Q2 this year.

There are speculations Transcorp Power Plc is also making significant forays into the gas business with its acquisition of two oil prospecting licences. What are your thoughts on this?

With Gas constituting 60 percent of our cost exposures, we understand that the success of our business is tied to a robust gas strategy. Thankfully, Nigeria is rich in gas and this underscores why we have prioritized upstream energy as a major component of our gas strategy. We own OPL 281 and through our group company, there are also discussions to acquire additional oil assets. Together, we want to be a major stakeholder in oil exploration and gas processing such that if it’s possible we will like to generate all the gas we need for our business and in fact sell gas to others.

Apart from exploring gas commercialization opportunities being amplified by the government, there are discussions in the pipeline to acquire additional oil assets although they are bound with confidentiality clauses so we can’t disclose them right now.

What is the next big news we will receive from Transcorp or where do you envision Transcorp in five years’ time?

Our strategy in the next five years is to deepen our play in areas we already have operations, we plan to increase our investments in hospitality, increase exploration, expand our gas operations and beyond just taking the gas to power, we will also process the gas.

At Trancorp, we carefully select the sectors we invest in. For us to invest in a sector we look at few parameters, the sector must be impactful, it must be growth ready and must be able to generate enough funds for its sustainability. Watch out for Transcorp in the coming years.