Gencos are Choking – Mainstream MD, Engr Audu

Power-plants_

The nation’s power sector privatisation, is in jeopardy, with a looming major power crisis as investors have threatened to shut power generation plants over unpaid invoices. The Managing Director (MD) of Mainstream Energy Solutions Limited , Engr. Lamu Audu, told journalists after a facility visit to Jebba and Kainji Hydro Power Plants that his company was being owed N44 billion for energy produced and consumed.  GenCos , he added, were being frustrated by the rejection of power being generated by Distribution Companies (Discos), leading to a loss of between 20-25 per cent of total outputs.  He warned that the federal government must act urgently, or face a national blackout.

Excerpts:

What difference has your company made since 2013 when you took over Jebba and Kainji Hydro Power plants?

Kainji Power Plant was commissioned in 1968 and it may interest you to note that up till the time we took over in November 2013 no unit in Kainji power plant had been overhauled. What we mean by overhaul is that basically, after a commissioning of a unit, the unit, with or without defect, should be shut down between 5 and 10 years to do a statutory overhaul. That is a basic thing to be done, laid down by the manufacturers.

For over 40 years, that was never done here and that was at the point at which we took over the power plant. The situation was the same at Jebba.  Jebba started commercial operations in 1983 and no unit was taken out for statutory overhaul until the concession  arrangement. That was the state we met the plants. When we took over, Kainji was literally zero. No unit was running, out of the 760mw installed capacity. As at today, we have recovered, 440mw.

Three units are running while one is undergoing some maintenance which is the 100mw unit, unit 12. To answer your question, we have recovered 440mw from Kainji. At Jebba, we took over with five units.  They were on the grid, yes, but considering the fact that they had gone through so many defects the out put was very low.  However, due to the ingenuity of the engineers on sight, they managed them over the years. One Unit was taken out completely in 2009 and it is still down. Procurement process for the rehabilitation of that unit is on-going. It got burnt down completely out of some issues we had with the grid transmission.  We have been able to ensure the availability and reliability of the other units.

For example, unit 2G 4 was completely overhauled and commissioned last year. Up till when it was taken out, it was the least reliable because it had issues with the generators.  So we took it out and overhauled it to be able to predict its character. We have improved reliability and availability of Jebba.

Are you saying that since the plants were installed,they were never overhauled?

No turn around maintenance at all. I repeat that in Kainji, there was no single unit that underwent overhaul.

That means that no power was generated from here at all?

Yes.  When we took over, no power was being generated from Kainji.  In fact, the day we came here, this place was even running on a generator.  We were in fact importing power from the grid to make sure that the station was not flooded, because we had to run our auxiliaries, all the pumps, just to ensure that we evacuate the water. We know that due to the issues of vandalism of gas pipelines, at a point the nation had to depend on electricity generated from only hydro power plants.

What has been the inputs of Jebba and Kainji?

Let me give you an overview of how important, hydro power operation is to a grid and the importance of having energy mix and energy security for a nation. The nation did not plan very well by investing more in thermal plants than hydro despite the fact that we have the potential to develop huge hydro power generation in Nigeria. To the extent that what you see is that we have only three hydro power plants which are Kainji, Jebba and Shiroro, delivering power to the grid.

At the point which we had this serious issue of gas pipeline vandalism and non-availability, the grid was sustained by particularly Kainji and Jebba power plants because during that period, Shiroro had issues of water. Fortunately for Nigeria, we had water, so we were generating at a point above 45 per cent on the grid, just from these two power plants. So the importance of these power plants to the national grid cannot be over emphasised because by their nature, for instance, hydro power  plants are the cheapest  of electricity you can get compared to gas. So long as God Almighty gives us water, we have the fuel to run. The operational cost is much less.

The only huge financial part is the initial cost, which is the capital cost implication. It is the cheapest and the cleanest energy source. It is also the most reliable source of energy. Currently, even the frequency management by the National Control Center in Oshogbo, often direct us to reduce generation because we run a grid system. The generators here in Kainji are designed to regulate the frequency of the grid. We also have a black-start capability whereby if the system goes bad completely, not every generator can go to a dead- grid but these generators can start from zero to bring up the grid after which other power plants can come in. This is how strategic Kainji is, not only to the nation but to the West African region. You may know also that we supply energy to Niger Republic.

What are your greatest challenges?

The challenges are enormous.   The greatest challenge is the commercial issue. This is seriously militating against our ability to continue to recover capacity and in fact to sustain what we even have today. We have serious liquidity issues in the Nigerian electricity market, to the extent that our invoices are not settled as at when due and completely. The percentage payment of invoices is between 19 to 25%. When we issue our invoice, only 19 to 25% of that invoice is paid.

Leaving you  with 75% deficit?

As we speak now, we have outstanding receivable of 44 billion naira between this two power plants since we took over. We generated and it has been consumed. When we took over, part of the concession agreement with the government was that we should recover the capacity and bring the power plants to their nameplate capacities of 760MW and 574MW at Kainji and Jebba, respectively. You can now imagine the challenge we have trying to meet up with that agreement when the other party is not living up to the spirit of that agreement. We are not getting our invoices paid and so we can’t have funds and with the situation, one cannot attract external funding because nobody will want to lend you money in such a situation. Another challenge is that we have serious foreign exchange issues. Sometimes, when our invoices are paid and we have the naira, 99% of the operational inputs into the plants are external -that is they are from offshore.

That means we need forex to be able to buy spare parts, pay for services which we need offshore. What we expected from government was that we should be given a priority, considering the priority given to power by the government, we expect that priority should be given to us in obtaining forex. I am sure that you just cannot imagine us going to the open market to get foreign exchange. We buy the dollar from the open market. This is one serious challenge facing our ability to recover and operate properly.

FG shifted positions since we took over The government actually shifted position since we took over. When we took over at the beginning, instead of implementing the Power Purchasing Agreement (PPA), there was an interim market rule that was put in place, putting aside the PPA. All those issues came in, therefore, limiting our ability to actually meet up with the requirements in the concession agreement. In order words, we cannot as we speak today, meet up with the requirements in the agreement. We cannot recover the nameplate capacity of these plants with the present situation. This we have to tell you.  From when we took over, you have been able to see what we can do. We thought the government will live up to its responsibilities in the market, but this is the situation we have found ourselves. There is no way we can continue as it is. With 19-25% of payments, we hardly can meet up with salaries payments. If nothing is urgently done to solve this liquidity issue, we may have no choice than to do the unthinkable.  We may have to shut down. When you talk about the government giving you a concession on forex, we thought that has been taken care of by CBN in the Power Stabilisation Fund.

Did you not benefit from that fund?

We need to understand that the fund, as long as generating companies are concerned, was supposed to be a settlement for our invoices, for energy sold and consumed.  It wasn’t a facility.  It wasn’t a loan.  It was part of the outstanding invoices from 2013 that accumulated which the government now felt that they needed to come in to cushion the effects of the cash flow situation in the market. That was what that fund was to us. It was our money. Ordinarily, if the invoices are being paid fully, that issue would not have arisen at all.  But on the Discos’ side, what they did was to give them loan because, the invoice payment is supposed to come from the discos end to pay us. So what the government did was to give the Discos loan to pay us.

Source: The Vanguard

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