by Engr. Beks Dagogo - Jack FNSE Chairman, Presidential Task Force on Power, Nigeria · 2019-09-02 · Nigeria Power Sector Reform 2/2 Presidential Task Force on Power 10. Develop

byEngr. Beks Dagogo - Jack FNSE

Chairman, Presidential Task Force on Power, Nigeria

Theme :Status Report on the Nigeria Power Sector Reform

Presented at theAnnual West African Power Industry Convention (WAPIC) 2012

Lagos, NigeriaNovember 19 – 21, 2012

The PTFP operating motto “ One Leadership , One Sector, One Mission”

Presidential Task Force on Power 2

ONE LEADERSHIP

ONE SECTOR

StatutoryLeadership

Policy ConsistencyProgramme

Control

StatutoryLeadership

Policy ConsistencyProgramme

Control

Federal Ministry ofPower

Federal Ministry ofPower

Hon. Minister ofPower

Hon. Minister ofPower

Political Will & MandatePolitical Will & Mandate

Presidential ActionCommittee onPower (PACP)

Presidential ActionCommittee onPower (PACP)

Mr. PresidentMr. President

ONE MISSION

Drive the ReformAgenda & ensure

timely delivery of theRoadmap Targets

Drive the ReformAgenda & ensure

timely delivery of theRoadmap Targets

Presidential TaskForce on Power

(PTFP)

Presidential TaskForce on Power

(PTFP)

ChairmanChairman

OUR MANDATERelying on itstechnical capacity todrive the reform forPerformanceManagement &Delivery of theRoadmap targets.

REFORM

SERVICE DELIVERY

Transition to full market mode ,Power growth with regulatory oversight

Increase & Protect power supply

NES I

TakingElectricityfor grantedin Nigeria

▪ Introduction

▪ The Power Sector Reform

▪ Reform Roadmap Score Card

▪ Power Growth Plan

▪ NIPP Contribution to the Power Sector

▪ Other Major achievements

▪ Outstanding Milestones in the Roadmap .

▪ Emerging Risk Assessment Dialogue

▪ Conclusion

Outline


Nigeria on the World Stage:

Population is the seventh largest in the World, ~160 million peopleand still growing at over 6% per annum

By United Nations’ statistics, Nigeria’s population will reach nearly 230million within the next 20 years.

The largest of any country in Africa (accounts for nearly half the totalpopulation of West Africa and more than 15% of the total population ofthe entire African Continent).

More than 40% of Nigeria’s population is less than 20 years old,functional literacy level is placed at between 30% - 40% over thepopulation and well over 65% on the (18 – 45 years) populationsegment. Indicating strong, sufficient & modern labour market.

Nigeria represents over 65% of the effective West Africa market andremains the most competitive destination for the establishment ofmedium and large manufacturing industries.

Introduction 1/5


Nigeria’s standing among peers

530

270

190145

120

40

BrazilIndonesia SouthAfrica

MoroccoIndiaNigeria

1 Capacity estimate based on consumption per capita average of Brazil and South Africa and with capacity utilization of 70%

▪ To achieve Brazil GDPper capita level by 2030(i.e., $10,000), we willneed 135GW1 of capacityto supply a projected230m Nigerians.

▪ This is a 15 timescapacity increase fromtoday.

▪ It also means we need tobuild power plants at 7GW/year for the next 18years. Only two countries– China and US – havedone this in the past

kW / thousand inhabitants

Introduction 2/5

Power generation installed capacity


5

-45,304

169,61044,956

107,91761,234

-23,815

-798,281-800,000

-600,000

-400,000

-200,000

0

200,000

SenegalNigeriaMaliGhanaCote D’Ivoire

BurkinaFaso

Benin/Togo

Energy Exchanges Per Country (GWh)

Introduction 3/5

Source: www.ecowapp.org

West Africa Power Pool (WAPP)

▪ Nigeria is a member of the Executive Board of WAPP & currently serves as Chairman

▪ Nigeria has a Power Sale obligation of 150 MW with a request for an upward review to

200MW in the short term for CEB (Transmission Company of Benin & Togo)

▪ Gas supply obligations through the West Africa Gas Pipeline currently supports power

production in Ghana with plans to cover other West & Northern African Countries


6

7

StructureKey Characteristics Results

Government ownedmonopoly with theFederal Ministry ofPower at the Apex ofVertically integratedmonopoly (NEPA )

▪ Internalized inefficienciesand leakages ; Annualcapital drain from thefederal budget .

▪ Uncoordinatedinvestments in generation,transmission & distribution

▪ Poor projects delivery .

▪ Huge widening gaps betweendemand & supply ; massiveindustry flight leading toworsening unemployment.

▪ High suppressed demandthroughout Nigeria.

▪ Large number ofmanufacturing & industrialoperations grounded orrelocated to neighboringAfrican Countries.

▪ Painful loss of economicdominance in the West Coast.

Funding To The Nigerian Power Industry

0

100

200

300

400

500

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

Investment ('US$millions)

Nigeria Power Sector Appropriation Funding History

Introduction 4/5

Nigeria Before Power Sector Reform


Introduction 5/5


3.9%

Nigeria’s GDP is around 7% p.a..With adequate electricity ourGDP will be above 10% p.a.

Nigeria Before Power Sector Reform

9

The Power Sector Reform has two broad missions :

Service Delivery :Relying mostly on the completion of the new NIPP projects & the recovery

of installed capacities in the up, mid and downstream , grow the availability,supply and reliability of electricity in Nigeria to an acceptable short termlevel during the divestment period.

Reform:Move the sector from the position of government ownership/management ofthe assets to a private-sector driven Nigerian Electricity Supply Industry inline with the EPSR Act 2005. .

Nigeria Power Sector Reform 1/2


▪ The Electric Power Sector Reform Act enacted ( EPSRA 2005 ).▪ NEPA unbundled into Successor companies with PHCN as the holding

company▪ Nigerian Electricity Regulatory Commission NERC created & later suspended▪ A multi-billion dollar National Integrated Power Projects ( NIPP) started and

later stalled▪ Reform stalls until President Goodluck Jonathan assumes office in May

2010.

Presidential Roadmap on Power – A short history of the journey

2) Post - May 2010

1) Pre - May 2010

▪ President Jonathan chooses Power as one of his cardinal programmes .▪ The stalled NIPP program resumes in earnest .▪ President Jonathan inaugurates the Presidential Task Force on Power & the

Presidential Action Committee on Power .▪ President Jonathan launches the Nigeria Power Sector Reform Road map

in August 2010.▪ NERC Board reconstituted

Nigeria Power Sector Reform 2/2


Develop implementation framework for strategic energy mix

Develop & launch the National Gas master-plan

Implement the Emergency Gas Plan (short term )

Implement a framework to guarantee increased gas supply

Resolve labour issues associated with divesture

Execute privatization of generation & distribution assets

Engage Management Contractor for the TCN

Double the Aug-10 power supply level by Dec-13

Ensure that power supply is steady and predictable

Substantial increase in quantum of power delivered

Reconstitution of NERC to strengthen regulatiory regime

Operationalizing the NELMCO

Provision of FGN Credit Enhancement to the Bulk Trader

Establishment/operationalizing the Nigerian Bulk Trader

Establishment of cost -reflective tariff

Reform Roadmap Score Card

Key Roadmap Targets Achievement


Reform Impact on Service Delivery 1/2


Steady increase in generation

0

5

10

15

20

25

Lagos Abuja Kano PH Kaduna Aba Onitsha Ibadan Benin Enugu

March-12

September-12

Daily average hours of power delivered to 10 major Nigerian cities

Reform Impact on Service Delivery 2/2


Projected available capacity in Nigeria2012-2016

GW GW

We need to continue increasing our available capacity

2011

5.1

2010

4.0

2016

19.7

2015

14.6

2014

12.5

2013

10.4

2012

7.9

Capacity maintainedand rehabilitated

New capacity added

Power Growth Plan 1/2

10%

80%

4%

6%

Thermal

Preferred Vision 20-2020Target of 40GW

RenewablesHydroCoal


14

Power Growth Plan 2/2

1,576

1,146

4,0991,544

1,997138750

627

0

Dec-2013

4,157

10,253

TotalDec-2013

1,284

Jun-2013

1,541

378

413

Dec-2012

887

19070

Oct-2012

6,571

3,451

IPPsNIPPFGN

Projected Generation Capacity up to December 2013 (MW)


NIPP is expected to add 2523MW to the grid by December 2013

That whilst 10,253 MW will be available at the generation level , much work is required to ensure thatthere is a) enough gas by then to fire the additional thermal capacity & b) adequate transmissioncapacity and a robust distribution interface to distribute this load .

GENERATIONo 39 Gas Turbine Generators in 10 Plants located in Calabar( 5-561MW)), Egbema

( 3-338MW), Ihovbor(4-451MW), Gbarain (2-225MW), Sapele ( 4-451MW) , Omoku( 2-225MW) , Alaoji ( 6-961MW), Oloronsogo (6-676MW), Omotosho (4-451MW)and Geregu(3-434MW) . Total equivalent cost in excess of USD3.8 billion includingthe cost of the associated variations and consultancy contracts . Total generation is4775MW.

o Invested USD80,000,000.00 as a debenture loan stock in the Ibom Power project.

GAS INFRASTRUCTURE UPGRADEo 5 Lots of gas infrastructure upgrade contracts in Ihovbor, Egbema/Gbarain,

Calabar-Adanga , Oben-Sapele and Omoku . Total equivalent cost in excess ofUSD 175 million including the cost of the associated variation & consultancycontracts.

TRANSMISSION GRID CAPACITY UPGRADEo 43 Lots of various type Transmission contracts spread nationwide . Total

equivalent cost in excess of USD1.3 billion including the cost of the associatedvariations & consultancy contracts.

DISTRIBUTION NETWORK CAPACITY UPGRADEo 71 Lots of various type Distribution contracts spread nationwide. Total

equivalent cost in excess of USD 700 million including the associated consultancycontracts.

FACT SHEET - NIPP Intervention at a Glance


The Original Target Advantages in the NIPP Approach

The construction time of gas turbine generators is significantly shorter thanthat of other sources of energy ( coal, hydro, etc).

Nigeria has been flaring away its gas for years: better to use them to firethese turbines.

The excess crude savings made during the Obasanjo presidency created aunique opportunity to embark on such a huge and complex project.

The successful completion of this project was designed to bring up ourdomestic power supply to a sustainable level , for the sole reason that aminimum service delivery level is a major enabler for implementing the othercomponents of the transition to a fully privatised and liberalised market –such as cost-reflective gas and electricity pricing, attraction of foreign directinvestments, etc.


627

750

1,146

4,099

1,576

Dec-13 TotalJun-13Dec-12Oct-12

Additional Generation Capacities from NIPP (MW)

NIPP Contribution (Generation)

Ihovbor 225 Geregu 289 Omotosho 113

Alaoji 300 Calabar 450

Alaoji 512 Omoku 500 O’sogo 112


7,750810

1,010

3,770

2,160

Oct-12 Dec-12 Jun-13 Dec-13 Total

258

2,663

715

1,655

35

Dec-13Jun-13Dec-12Oct-12 Total

Transmission Sub Stations (MVA)

Transmission Lines (KM)

NIPP Contribution (Transmission)


Jul Aug Sep Oct Nov Dec

CompletedEvaluate bids

Open financial bid

Completed▪ DisCo.30-Jul-2012

Completed▪ GenCo.

Status

31-Aug-2012

Commencement of Negotiations01-Dec-2012

Announce preferred bidder01-Oct-2012 31-Oct-2012

01-Sep-2012 31-Oct-2012

CompletedReceive approval from NationalCouncil of Privatization (NCP) 28-Sep-2012

17-Jul-2012

Submit & harvest bids

CompletedDue diligence for investor tovalue assets

CompletedQualification into the bid process

CompletedEvaluation of the expressionsto qualify those who passed

CompletedExpression of interest based onads of GenCos & DisCos.

Completed

Completed

2012Process Steps

1

2

3

4

5

6

7

8

9

10

Roadmap Progress Score Card on the Privatization program .


20

Removing theObstacles to PrivateSector Investment

Divestiture of PHCNSuccessor Companies

Improved ServiceDelivery

Generation

Enabling commercialframework forFuel-to-power

Imperatives for Concluding the Power Sector Reforms

Transmission

Distribution

Reform

ImprovingServiceDelivery

11

22

• Constitute the TCN Board Dec 2012• Achieve Market Operator settlement system integrity . Dec 2012• Release June – October 2012 MYTO-2 subsidy funds . Dec2012• Conclude government credit enhancement for IPPs. Dec 2012• Conclude minor review on cost-reflective tariff refinement . Dec 2012

• Meet all conditions precedent for declaration of the Transition Market Mar 2013• Conclude labour issues. Dec 2012• Handover successor Genco and Disco companies. June 2013• New owners commence operations & recovery of full installed

capacity. Sep 2013• Genco’s commence full payment of monthly gas bills to gas

suppliers Dec2012• Genco’s sign & operationalize Gas Sales Agreements Feb 2013• Develop & approve a clear framework for treating legacy gas debts. Dec 2012

• Increase Actual Generation Capability from 5,370 to7,046MW. (Grid deliverability is currently constrained to 4,300MW) Dec 2012

• Increase peak generation from 4,300 to 5,000MW Dec 2012• Increase average generation from 3,600 to 4,500MW Dec 2012

• Deliver short term TCN Transmission projects & completeongoing NIPP projects. Conclude on framework for the take-offof the Transmission Development Fund. Dec 2012

• Rehabilitate & increase short term distribution power uptake profilefrom the current level of 4,300MW to 7000MW Dec 2012

Improve billing & collection efficiency from 31% to 90% (post privatisation) Dec 2013

PreferredDeliverytimeline

1.11.1

1.21.2

2.12.1

2.22.2

Outstanding Milestones in the Roadmap


21

▪ The Presidential TaskForce constantly engagesthe project owners onthese issues to provideanswers and mitigationplans in advance .

▪ PTFP expects to deliver alloutstanding Roadmaptargets by December 2013

Emerging Risk Assessment Dialogue

How do we protect themegawatts from

dropping during theassets handover

period?

What happens if thesebidders fail to meet the

scheduled conditions fortake-over ?

Is there adequate clarity onthe funding mechanism forthe expansion /maintenance

of the transmissionnetwork?

If we grow generation ,can we evacuate anddistribute all of it ?

Can we justifyspending freshmoney on assetsmarked for sale?

Can we justifyspending freshmoney on assetsmarked for sale?

How can weimprove market

liquidity andsettlement

discipline duringthe transition

period?

How can weimprove market

liquidity andsettlement

discipline duringthe transition

period?

Our security agenciesshould play a more pro-active role in preventing

security threats toproject and facilities.


22

Major Challenges affecting project delivery and reform

1. Huge and often unreasonable request for compensation by communities alongtransmission rights of way amounting to billions of Naira which in some casesmore than double the cost of the projects .

2. Increasing cases of vandalization & theft of high tension transmission cablesfrom ongoing transmission projects .

3. Refusal by government agencies to pay for energy consumed , leaving hugedeficits in revenue collections by the Distribution companies.


External

1. Securing Labor appreciation & support for the clear benefits that will result fromthe power reform agenda.

2. Insufficient revenue collection from the market & risk of market illiquidity .3. Under funding of critical transmission projects & dysfunctional capital budget

releases leading to a huge number of uncompleted/abandoned projects whichget caught up in variations caused by funding delays.

4. Widening technical manpower gaps across the power value chain whichrequires urgent action since the projected power growth will require an equalgrowth in the profile of the required technical manpower

Internal23

Current Assets On-going projects New Initiatives

Legacy Assets (installed) Thermals 5.6GW Hydro 1.3GW Wind (pilot) 10MW

Mambilla Hydro 2.6GW Zungeru Hydro 0.7GW S&MH (pilot)

New IPPs in planningstage 2.6GW

Coal (feasibility) MOUs 30GW (GE,

Siemens, Daewoo)

Infrastructure Expansion Profile & the Investment Opportunities 1/2

Generation

Transmission

Fuel to power

SupportServices

Grid Stability Projects Grid Capability 4.3GWE

Grid Expansion Projects 10.4GWE by Q4 2013

SuperGrid ( Conceptual) 40GW by 2020

ELPS-C Pipeline SPDC(NPDC) 50mmscfd Oben Gas plant 30mmscfd OB3 Pipeline 120km (48”)

SPDC/CNL 100mmscfd SPDC SS 180mmscfd CNL Okan 300mmscfd Bosi/Erha 300mmscfd

Gas to Power averagedaily consumption of650mmscfd

Provision of specialized training for electricity industry technicians and managers. Assembly Plants for intermediary power equipment & accessories including meters Consultancies in Regulatory & Consumer education initiatives Provision of Power Sector specific equipment testing, calibration & logistics services Energy Efficiency Initiatives & products .


GeneralElectric

Siemens AG

Daewoo E&C

Electrobras

The 2015- 17 power projection is underpinned by several MOU’s with the followingorganizations

▪ Facilitating and promoting private sector investment up to10,000MW.

▪ Promoting power sector investments by sponsoringfeasibility studies for approved projects.

▪ Facilitating and promoting private sector investment upto 10,000MW.

EDF/ETDE

▪ Facilitating and promoting private sector investment upto 10,000MW.

▪ Facilitating the development, financing, procurement,manufacture, commissioning and operations of10,000MW

Multi-LateralG-to-G AgencySupport

Promoting the development of small / medium hydro-power plants as embedded generation for ruralcommunities


Infrastructure Expansion Profile & the Investment Opportunities 2/2

Each of these MOUs present opportunities for new ventures by serious Nigerian-ledpower development consortiums.

The MOUs are designed to make significant equity contribution in kind or cash, as wellas provide credibility for local vehicles seeking international financing.

25

The Power Sector Reform has recorded major achievements andmilestones under the close monitoring & facilitation of the PresidentialTask Force on Power & the Presidential Action Committee on Powerwhich were recently reconstituted to re-double the reform momentum..

The achieved milestones already having impressive impact on servicedelivery in that not only average power on the grid has increased butalso the average number of hours of supply in our major cities.

The next major step in the privatization is the declaration of the onset ofthe Transitional Electricity Market wherein market participants shalloperate via fully bankable commercial contracts .

The Nigerian Electricity Market will present a once in a lifetime range ofopportunities for Nigerian businesses - small, medium and large to buildsustainable local enterprises similar but much larger in scale than theimpact from the telecom reform agenda.

Nigerians should appreciate & support the efforts of President GoodluckE. Jonathan who has demonstrated unwavering political will &commitment to the power reform agenda.

Conclusions


Thank You

27Presidential Task Force on Power

Documents

by Engr. Beks Dagogo - Jack FNSE Chairman, Presidential Task Force on Power, Nigeria · 2019-09-02 · Nigeria Power Sector Reform 2/2 Presidential Task Force on Power 10. Develop