Q&A NIGERIA Beyond the incentives, the government also tried to put together a credit
support or risk mitigation package, particularly for IPPs and power generation companies. The government set up the Nigerian Bulk Electricity Trading Com- pany Plc (NBET) to purchase power generated by the privatised generation companies, what we call the ‘Gencos’, as well as IPPs. NBET will buy power from the generation companies and sell to the distribution companies (Discos). Government has made efforts to mitigate risk of payment defaults (by NBET and Discos) by arranging for a Partial Risk Guarantee (PRG) with the World Bank. The initial plan was for the PRG package to be ready and in place for the privatisation. I am not aware of any company or investor for which the PRG is in place at this time and investors have been told to approach the World Bank and negotiate PRG’s directly. The process is likely to take about 18 months at the minimum.
“
What are the issues that private investors in the power sector or in any other project might run into? Generally, if you are developing a new project or for the privatised entities, you are expanding capacity (and this applies to other energy investments) then you have to get the relevant regulators to approve your investment programme or issue the necessary permits. As expected, bureaucracy can get in the way. Re- garding the power sector, NERC’s processes have improved significantly but we still find that the licensing process may take more than the six month statutory limit. The regulator’s view of this is that most delays are attributable to incom- plete or deficient documentation by applicants.
The elephant in the room that hasn’t been addressed is transmission
Beyond that, when we come to the power sector specifically, I think,
and let me be colloquial, that the elephant in the room that hasn’t been addressed is transmission. Right now, we have less than 4,000MW of power on the national grid system and everybody agrees that that’s way too small for the power needs of Nigeria. The government is currently in the process of completing ten power plants, comprising what is called the National Integrated Power Projects (NIPP). Those ten power plants have a cumulative capacity of about 4,770MW. Add to that the various Green- field IPPs (independent power producers) being promoted as well as brownfield expansion of newly privatised plants and we are going to see generation almost triple over the next few years. On the distribution side also we are seeing private investors coming in to ensure that the power delivered into the distribution system is delivered to the consumer, but what of the transmission system that remains owned by the government of Nigeria? The Roadmap for Power Sector Reform issued by government in 2010 indicated that transmission capacity just about matched existing generating capacity. Right now, we’re about to see anything from double to triple generation capacity through the system. So my view is that this is one key risk factor in the industry.
We’ve already mentioned the credit enhancement for investment in
the sector on the generation side. There is a lot of uncertainty as to how it will work. And then there is the issue of fuel for power generation. Most of Nigeria’s power generation capacity is natural gas based. There’s been some talk about more hydropower plants (government has actually recently contracted for the 750MW Zungeru Power Plant) and also there are one or two coal-fired power plants that have been discussed, but by far the majority of new power generation is gas based. While Nigeria is a very gas rich territory – we have the eighth biggest reserves of natural gas in the world – not a lot of work has been done to develop the gas fields, particularly for domestic use. The petroleum companies are refusing to sign gas sale agreements with a term that exceeds ten years. The argument is that if they are going to sign gas supply agreements for longer than ten years, they need to take investment decisions as regards drilling, exploring and exploiting of additional fields. Many IOCs are not making such as- surances because of all the uncertainty relating to the passage or non-pas- sage of the Petroleum Industry Bill (PIB) that is meant to reform the petroleum sector.
Is there any indication on when the PIB might be passed? Last year the new executive bill was introduced and that appears to have been making its way through the National Assembly, slowly. If we go by what we hear from government it does look to me as if there is an indication that it will actually be passed into law sometime over the next few months. But it has been that imminent in the past.
[Chukwubuike]: Yes, and I think what you find now is that it appears to be
getting even more complicated because of what you might call a north-south divide right now in the National Assembly as far as the PIB is concerned. It ap- pears that opposition to the bill is coming from the northern part of Nigeria and that may well be a major issue, given the balance of the Nigerian political system.
Is there any room for renewable energy in power generation? It’s not a question that’s easy to answer. First, regarding hydro, it is renewable energy but it’s so conventional that very often when we think of renewables we don’t think of hydro. The good thing about hydro that I would mention is that right now about a quarter to a third of Nigeria’s power comes from the three large hydro plants. Government is building another large plant and is talking about numerous small hydro plants.
Beyond hydro, we could look at wind and then solar which have generated
some discussion in Nigeria. The problem is that there is no special tariff or reg- ulatory framework for such renewables in Nigeria. The regulator, NERC, has a unit responsible for renewables, but it does not appear very active. We have not seen a major move towards creating a space for renewables. About two years ago, the regulator licensed a (5MW) solar plant in a northern state in
ENERGY & INFRASTRUCTURE | SUB SAHARAN AFRICA 2013 35
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92