GenCos Give Self Pass Mark, List Challenges

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Amidst unabated criticism of performance of the private sector operators that took over Nigeria’s electricity sector three years ago, the leadership of the Association of Power Generation Companies, APGC, has indicated that the operators have largely met their targets.

Dr. Mrs. Joy Ogaji, Executive Secretary, Association of Power Generation Companies, APGC, told Vanguard that most of the Generating Companies, GENCOs, have not only done well but have surpassed some of the targets. At inception, the generating companies, GENCOs were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts (MW) over a five year period.

Ogaji stated: “Today, the Bureau for Public Enterprises (BPE) confirms most of the GENCOs have exceeded their contractual obligations.” According to her Transcorp Power Limited, which at takeover date had generation average of 160mw, currently, generates about 530mw, while Egbin, according to her, at takeover in November 2013, had an average generation of below 300mw, but it is now generating an average of 1,100mw with gas availability, adding that with the completion of the remaining unit overhauls next year, Egbin will be operating at a minimum of 92 per cent of its capacity.

For the Hydros, she stated that North South Power, the concessionaire for Shiroro, at takeover had 450mw with some of the units not operating optimally, upon takeover, overhauled the units and now generates 600mw which was the installed capacity. She said Mainstream Energy Solutions Limited has increased the combined Generating Capacity of Kainji and Jebba Power Plants from 582mw as at takeover to 922mw, with overhaul successfully carried out on one of the generating units at Jebba Plant.

“These are just a few of the successes. We cited two thermal and two hydro plants for purposes of brevity,” she stated. Ogeli, while reviewing the state of the generation units from three years ago when they were handed over to the GENCOs, said the maintenance culture which existed before takeover was inclined towards a process of carrying out maintenance after breakdowns rather than scheduled preventive maintenance. She noted that this trend unfortunately proved to be a costly alternative. “Consequently, operational costs were very high for the GENCOs,” she stated. She emphasized that existing generation assets are largely old thereby requiring high operating and maintenance costs to keep them running.

The strain on these assets is compounded by the fact that there has been limited new capacity added in the years before take over. According to her, the existing transmission network is also inadequate, fragile and not reliable. She stressed that modernization of existing plants is necessary but will require significant capital investment, adding that some of the GENCOs have taken heavy loans to overhaul their plants, listing Egbin, Ughelli, Geregu 1, Shiroro, Mainstream, amongst the heavy borrowers. Notwithstanding the daring challenges, she said, GENCOs have made tremendous progress, adding that they have been in positive pursuit of set goals.

She stated: “It is a continuum, not an end to the set objectives. We achieve and stabilize then move on. No one who aims to get to the up ever rests on its achievements but keeps moving on and on”.

Challenges she said the GENCOs have been under so many challenges since they started operations. Some of the challenges, according to her, include, payment of outstanding receivables and steady payment process going forward; Non-activation of the Industry Agreements; Liquidity issues (Irregular disbursement of CBN Intervention Fund); Foreign Exchange Issues; Non-Payment of Value Added Tax (VAT) to GENCOs even-though they pay VAT for gas purchased; Lack of transparency and visibility of market collections; Gas constraints due to vandalism and other associated issues; Grid Instability and Transmission Evacuation Problems: and GENCOs limited Involvement in Adopting Cost-Reflective MYTO Tariff. Government Intervention According to the APCG boss, many of the plants sold to the private sector operators were down operationally at the time of transfer, worse still spares were not available. To address the challenges created by these, she called for government intervention to salvage the industry in the area of sourcing for foreign exchange.

“Government should give a special concession to the GENCOs in sourcing for Foreign Exchange,” she stated. Other form of government’s intervention she wants to see come to fruition include; Full payment of CBM-NEMSF, NBET, MO and all owing market participants to pay immediately all monies owed the GENCOs; A Forex stabilisation fund is created to avoid tariff hikes;

Electricity market should be run as a contract based market with penalties full enforced; and Revision of the Ancillary Services Agreement rates. She advocated for more incentive to put turbines on ancillary services if the rates are more comparable to market tariff numbers. Currently, we have a maximum return of N2, 250/MW/h for spinning reserve services as opposed to N15, 183/MWh when same energy is placed on the grid, she stated.

Source: IWIN

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