• Wednesday, July 24, 2024
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BusinessDay

Political uncertainty slows power sector investments

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When equipment at a major sub-station in the Amuwo – Odofin area of Lagos was damaged by a recent power surge, engineers of the Eko Electricity Distribution Company (Disco) which services the zone were unable to repair the fault on time due to lack of funds and authorization from headquarters to do so.

“The owners of the Disco are still looking at the political landscape, unsure if it is Jonathan or Buhari that will take over,” said a worker at the Disco speaking to BusinessDay anonymously.

“Because of that, they are unwilling to spend money for now.”

The lack of capital expenditure (Capex) investments by Discos, generating companies (Gencos) and the Transmission Company of Nigeria (TCN) is having a negative impact on electricity supply in the country.

It is estimated that Nigeria needs an annual investment of $3.5bn to achieve its generation capacity target of 40,000 megawatts (MW) by 2020.

Nigeria’s, current peak grid power generation stands at about 3,874.5 MW (February 27) with a per capita electricity usage of 136 kilowatt hour (KWH).

This compares with an average per capita electricity usage of 4,803 KWH in South Africa, which generates about 41,000 MW.

The government recently expanded assistance to the sector, through the use of soft loans and grants.

The Central Bank of Nigeria (CBN) disbursed a total of N57.72 billion, to private power firms, including EKO Disco as part of the N213 billion: Nigerian Electricity Market Stabilisation Facility (NEMSF).

A breakdown of some of the recipients show that the Enugu, Kano and Port Harcourt DISCOs received N10.25 billion, N7.63 billion and N6.58 billion respectively as fresh funds while the Eko DISCO, which got N5.164 billion during the first phase of disbursement also got an additional N43.3 million.

To work around the inadequate power supply, Nigerians have resorted to generating electricity themselves using diesel and petrol‐powered generating sets.

The Ministry of Power estimates that total electricity generated through these methods accounts for up to about 6,000 MW, more than the total commercial power generated and supplied to the grid.

Global Business Intelligence (GBI) – a research firm – estimates that Nigerians spent about $455m (N70.5 billion) on generators in 2011.

The Discos – which are closest to consumers– are at the end of a complex chain of players in the power sector which include the gas suppliers, IPPs/ Gencos, the bulk trader (NBET), and TCN.

The new private owners of power assets are struggling to meet capital expenditure pledges made as issues ranging from gas unavailability for power turbines, need for market reflective tariffs and power cheats from bypassed meters and unpaid bills crimp revenues.

  “Retail billing collections by DisCos have dropped to 45 percent in the first two months of 2014 and this will impact on all the Market Participants and Service Providers, including TCN,” Nexant a San Francisco based consulting firm said in a recent financial assessment of TCN.

West Power & Gas Limited (WPG), which paid $135 million to acquire the assets of Eko Disco, said last year that it had allocated $250 million for the rehabilitation of the Disco.

However ongoing blackouts in most parts of Nigeria shows that such bailouts have yet to materialize in the form of Capex spend.

Other areas of the power sector affected by the current political uncertainty include the stalled NIPP privatisation process and lack of investments in gas pipelines and infrastructure.

PATRICK ATUANYA