We are Duty-Prepared for the Dry Season – Power Generation Companies

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To allay the usual pessimism associated with electricity supply during dry season in Nigeria, the Association of Power Generation Companies (GenCos) has reiterated its commitment and readiness to improve power generation notwithstanding through all Power plants including itsHydro Power Plants companies across the country.

The body made this known in a media chat with the Executive Secretary of the Association, Dr. (Mrs) Joy Ogaji (PhD, LLM, BL, LLB) at the forum’s headquarters in Abuja.

Addressing the media, Ogaji emphasized that Nigerians have little or nothing to be pessimistic about the availability of power during the dry season. Emphasizing this, she added that the Hydro (water source) Power segments among the power Generation Companies are up to the tasks as all mechanisms have been put in place to ensure optimal supply of power to the grid during the yuletide period and beyond.

“The Hydro GenCos are very much aware that due to the cessation of rain during the dry/harmattan season, power supply is usually a challenge. Knowing this, adequate water conservation plans have been put in place to ensure optimal generation. This has been on-going and we intend to keep improving our efforts during this period of year.”

“Furthermore, we have serious engagements with the gas suppliers through the Gas aggregator (GACN) to lessen related challenges within our control. We believe that this will ensure that our gas supply does not suffer any fatal disruption as necessary to balance the generation within this period.”

“This does not change the fact that we are almost grinding to a halt due to the heavy debt burden of over two hundred billion. We believe that government will expeditedly issue viable and sustainable solutions in this regard.”

On some of the protracted challenges confronting electricity generation companies in the country, the ES GenCos seized the opportunity to call on the media for cooperation with the association, the APGC; she emphasized the need for better sensitization and education of the general publicabout the activities of the GenCos and the forum.

“I may request the following from the Media; assist to enlighten the public on the GenCos and the activities of APGC. Help us to educate the public on the hindrances and challenges GenCos are faced with in their businesses; let the public be aware that the privatization is for good. We produce the electricity, if we are not paid, how can we buy gas, maintain our machine, and pay our workers and other market participants?

“We suffer heavy indebtedness. This has badly stunted our business objectives and we crave your indulgence as media practitioners to please assist us to enable the general public be adequately informed and be involved in the electricity sector by paying for the services, we see them as our partners in progress.” She said.

Fielding more questions on the GenCos working relationship with its partners such as the distribution companies (DisCos) and the Nigerian Bulk Electricity Trading (NBET), Dr. Ogaji stated that currently the GenCos do not have any contractual relationship with the Distribution Companies, our contract( Power Purchase agreement) with the Nigerian Electricity Bulk Trader (NBET). She reiterated the importance of sanctity of contract and the binding nature of contracts in the electricity value chain; she regrettably added that NBET has reneged in its part of the contract of fully paying the generation Companies for power generated and supplied, which she said have adverse implications on the survival of the GenCos.

Ogaji therefore affirmed the right of the GenCos to seek alternative means of selling its power through the corridor of eligible customers (supplying electricity to syndicated customers in the country), sayingGenCos right was legally protected in the EPSR Act 2005.“The Nigeria Electricity Act 2005 makes provision for GenCos to generate and sell electricity directly to Eligible Customers. Seeing that this is Statutory, yes, we are in the process of exploring the viability of this option to stay in business, if nothing changes. This is action of ours is in sync with the Presidents directive that Nigerians think outside the box, GenCos are thinking outside the box as patriotic citizens” She declared.

Speaking on how efficiently the electricity market can run, she responded: “You must take cognizance of the fact that GenCos and DisCos are two major players in an industry that is complex, diverse and directly sensitive to both the economy and the people of Nigeria. And for that matter, they are at two extremes; generation and distribution, likewise the consumption.”

“There have been blame games being played by the various players in the sector, it does not matter whose voice is loudest. NERC through its regulations have earmarked clearly what each of the players is entitled to”. “The onus now lies on NERC, the regulator to play its role as the impartial umpire to monitor and ensure efficiency. The issue of everyone crying wolf should be fast gone. The truth is, the generation companies have in keeping to the terms of their contract; generated power which has been sold by the distribution companies.”

“We have a contractual relationship with the bulk trader and what we are advocating is, Nigerian Bulk Electricity Trading (NBET) keeps to the terms of the agreement and pay us in full. We are not debt collectors. We have kept to our own part of the bargain, notwithstanding the challenges.”
“What we want is pay us our money.We do not have any contract with the DisCo yet, to ask them to pay us, rather we have a contract with NBET who is the wholesaler in this market with a guarantee to pay us 100%,”

“If DisCos who have contract with NBET have refused or are unable to pay for electricity taken and sold, by the principle of privity of contract, we are not parties hence we cannot be debt collectors. NBET should put a firm and default proof mechanism to make the DisCos pay.
On whether the privatization of the sector has been successful so far, Dr. Ogaji averred thatdoing justice to a question of this nature will take an informative response.

According to her, the privatization programme was to allow government to transfer public assets in the power sector to private hands, for efficiency and cost-effectiveness, saying it was not meant to portend waving a magic wand. She highlighted that, right from inception, the GENCOs were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts (MW) over a five-year period. We are in the third Year and we have an available capacity of over seven thousand megawatts if the transmission companies can transmit it.

‘’Today, the Bureau for Public Enterprises (BPE) confirms most of the GENCOs have exceeded their contractual obligations. For Instance, UghelliTranscorp at takeover date had generation capacity of 160 MW and by September 2016, they are now generating 450MW. Similarly, Egbin at takeover in November 2013, Egbin averaged generation of below 300-MW due to the dismal operational state of its six units. “Atits lowest point, only two of the six units were partially operational. Egbin is currently generating 1320 MW with gas availability.

With the completion of the remaining Unit Overhauls next year, Egbin will be operating at a minimum of 92% of its capacity. On the other hand the Hydros like Shiroro at takeover had 450mw with some of the units not operating optimally, they have overhauled the units and Shiroro now generates 600mw which was the stalled capacity. Mainstream Energy Solutions Limited has increased the combined Generating Capacity of Kainji and Jebba Power Plants from 582MW as at takeover to 922MW. Overhaul has been successfully carried out on one of the generating Units at Jebba Plant. Capacity recovery process on other unavailable units continues which will enable the plants recover to full installed capacity.These are just a few of the successes. We cited two thermal and two hydro plants for purposes of brevity’’ She opined.

Reacting to the position of the GenCos on Aliko Dangote’s recent outburst against electricity sector’s unbundling, Dr. Ogaji was quick to add that the business mogul owed the right to his opinion, saying such should not be a cause for any alarm. While emphasized on the gains of the Power sector in three years of its unbundling, the former Head of the Regulatory and Transaction Monitoring Unit of the Presidential Taskforce on Power however demonstrated her expertise on how to monitor progress so far achieved in the Nigerians energy sector since its privatization.

“Fundamentally, we believe and know that there have been gains of the privatization exercise. I may however have to make two further points on this;

“Dangote, as an individual and being a distinguished figure in the Country and a figure to recon with in our economy, has every right to air his opinion. To that extent, we must respect his views, on merit, just as we must respect the views of any other individual.”

Fielding further question on whether or not the GenCos are generating enough for the country’s energy demand, she responded thus:

“The rule of thumb for an industrial nation is about 1MW for every thousands of the population. This puts Nigeria’s energy needs in about 180,000MW range given its population of about 180 million. The Federal Government has a target of 40,000MW by the year 2020.”

“It is not about projecting the megawatts, we should also put other building blocks which goes with generating the megawatts such as a firm, independent and knowledgeable regulator, a default proof payment plan, firm payment guarantees and incentives for investors. In summary, government providing an enabling environment and avoiding interference, focusing on policies and giving direction.”

“More often than not, the GenCos have sufficient generated power available, without the capacity to transmit and distribute to the final consumers, all the effort is wasted. That is the scenario; that is the basic dilemma the industry faces. The table below illustrates the fact vividly.

Stranded capacities of various power plants as at 20th July 2016.
Name of Power Station Available Capacity Generated Capacity Stranded Capacity
Egbin 880MW 201MW 679MW
Transcorp 529MW 280MW 249MW
Shiroro 450MW 412Mw 0MW
Geregu 276MW 0MW 276MW
Kainji/Jebba 836MW 656MW 170MW
Sapele 120MW 65MW 55MW
Others 4775MW 1190MW 3562MW
TOTAL 7856.52MW 2804MW 4991MW

“However, the essence of privatization is to shore up our energy generation level and that is why the serious efforts being made are obvious, and the results are gradually manifesting. Gas is a measure challenge though, which again is tied to payments” She stressed.

On the calls for alternative sources of energy and its impact on GenCos, the Executive Secretary quipped: ‘’First, injection of alternative sources of energy into the industry is quite worthwhile. To this extent, the calls are timely and welcome. GenCos fully buy into them. However, these are GenCos as well and we call on the government to ensure that adequate payment modalities are designed to enable a smooth sail for these incoming ones as well as firm guarantees for the existing GenCos.

‘’We note that these calls are in two perspectives; renewable alternatives and alternatives in general. Our economy necessarily demands diversification into this two. We know that in the GenCos family, many power plants are gearing into efforts in these areas. Some have drawn up reasonable business plans to attain this. Some have gone beyond plans and are already tackling studies and designs to stand on the platform.’’

Meanwhile, Dr.Mrs.Ogaji summarily revealed the measures put in place by the GenCos and expectations from the federal government to grow operations in the sector, saying expansion plans are in the pipeline.

“The GenCos have business plans which most of them have exceeded; they have worked on other expansion plans which will be implemented soon as the liquidity situation improves. Raising funds for expansion and construction of new plants often presents a challenge. Slow execution of PPAs is another challenge that hinders GenCos from raising required funding. Since Power is the lifeblood of the nation, we are watching out for what plans the government will come up with to ameliorate the current quagmire in the electricity value chain. We want government to know that we are willing to work with them to arrive at an amicable solution” She quipped.

Source: IWIN

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