18 October 2013 – Chairman of Nigeria’s Technical Committee of the National Council on Privatisation (NCP), Atedo Peterside, has warned that if the problems of weak transmission and gas constraints are not dealt with, these will hamper the country’s aspiration to achieve steady power supply after its power sector privatisation. This is as reported by ThisDay.

Peterside says that unless Nigeria’s power transmission weakness is not dealt with by 2014, there will be a crisis when the ten National Integrated Power Plants (NIPP) come on stream. Another major problem that could hamper regular power supply is inadequate gas to fire the gas thermal stations.

“Transmission is the life-blood of this entire electricity eco-system and it is also potentially the weakest link at present. I am reliably informed that, currently, stranded capacity due to transmission evacuation constraints is in the region of 100 MW. The other weak link is gas supply and gas transportation, as Nigeria is predominantly reliant on gas-fired power plants. While gas supply constraints arising from capacity shortfalls/lags can be foreseen, the impact induces damaging shocks to the health of the entire electricity value chain.”

He expresses concern over the slow pace at which the board of the Transmission Company of Nigeria (TCN) is handling the federal government’s mandate to it owing to squabbling and infighting. “Unfortunately, the Board of TCN is yet to get its act together. Since the appointment of a chairman and some initial board members was first announced some months ago, so much time appears to have been lost in squabbling over who does what, when and how.”

He says the ability of the TCN to catch up with generation availability and also keep pace with future expansion will depend on its continued access to financing for its huge capital expenditure needs and its ability to execute and rigorously monitor project implementation.

Peterside says the architecture of the federal government’s Power Sector Roadmap rests on seven critical pillars; empowering the regulator (NERC); establishing a bulk trader; introducing cost reflective tariffs; engaging a management contractor for TCN; privatisation of the generation companies; privatisation of the distribution companies; and strengthening of the fuel-to-power arrangements.

He says that the successful sale of the power assets and their subsequent hand over to the new investors is just the beginning of the power privatisation journey. The nine former PHCN generation companies (including Omotosho and Olorunsogo) only had available capacity of 2,692 MW as at September 10, 2013, as against a total installed capacity of 6,976.40 MW.
He says that the capital to fund this incremental 4,284.4 MW required to achieve full capacity (crudely estimated at US$1 million per megawatt approximately) will cost an additional US$4.28 billion.

“For the distribution companies, some very significant investments will also be required to improve efficiencies and reduce aggregate, technical commercial and collection losses. Based on the proposals submitted by the core investors, new meters will be installed over the course of the next five years.” At an estimated weighted average cost (purchase and installation) of US$155 per meter, this amounts to over US$933 million. The bulk of this should be recoverable from consumers, but then the distribution infrastructure also needs to be modernised and expanded to achieve greater coverage. The 11 distribution companies are projecting annual capital expenditures in the region of US$370 million a year for each of the next five years.