TABLE:  Breakdown of the funds required

THE NATION

$2.7billion power rescue pill likely    31/3/2008

The Presidential Committee on the Accelerated Expansion of Nigeria’s Electricity Infrastructure recommended that with that amount the target of 6000 megawatts (MW) of electricity supply in 18 months can be surpassed.

This is contained in the committee’s report part of which was released to reporters in Abuja yesterday by Presidential spokesman Olusegun Adeniyi. Adeniyi said the Federal Executive Council (FEC) will "critically examine" the committee’s recommendations at its meeting on Wednesday.

The committee in its interim report submitted to the President had recommended an additional 16,000 megawatts of power supply.

President Umaru Yar’Adua is to present the interim report to the FEC for critical analysis, review and adoption."

President Yar’Adua inaugurated the committee on February 15, and charged it with the responsibility of formulating plans and strategies to boost power supply by 6,000 Megawatts within 18 months, (short term) with an additional 10,000 megawatts by 2011 (medium term).

The committee also supported an increase in electricity tariff but with subsidy for underprivileged consumers.

The report details of which were exclusively obtained by The Nation says: "The Technical Committee upon investigations and deliberations with key stakeholders Power Holding Company of Nigeria (PHCN), Shell Petroleum Development Company (SPDC), Exxon Mobil, AES Nigeria Barges, Ibom Power Company, Niger Delta Power Holding Company (NDPHC), Geometric Power Limited, Nigeria Gas Company (NGC), Nigerian National Petroleum Corporation NNPC, Africa Finance Corporation(AFC), arrived at the following submission:

"That 1450MW can be realised from existing PHCN plants, 3,368MW from National Integrated Power Projects (NIPP), 640MW from SPDC Joint Venture (JV) Afam/Okoloma and 805MW from the Legacy IPP’s.

"To ensure that the additional capacity can be evacuated, intervention is also required in the reinforcement and expansion of transmission and distribution network.

"These increases can only be attained upon the investment of $2.7billion and the intervention of the Federal Government of Nigeria in certain areas."

A breakdown of the funds required for the additional 1450MW from PHCN plants is as follows: Egbin, 390MW ($86.6m); Delta, 300MW ($55m); Kainji, 200MW ($8million); Jebba, 150MW ($4.0m); Shiroro, 120MW ($3.1m); Afam, 170MW ($11.5m); and Sapele, 120MW ($3.7m).

For the projects under NIPP, the committee said about $699m would be required for additional megawatts.

The breakdown of the cost of the additional megawatts for NIPP covers the following: Olorunsogo, 285MW ($32m for new gas line and gas supply price (GSPA); Omotosho, 215MW ($1.0m for new gas line and gas supply price); Geregu, 214MW (No cost but to be assigned); Alaoji, 428MW ($311.0m for Engineering Procurement Contract (EPC), transportation, consultancy, evacuation and transmission); Egbema, 321MW ($117m for evacuation, transmission etc); Olorunshogo, 428MW ($109m for Phase II) and Ihovbor, 428MW at a cost of $129m.

Also for transmission and distribution project detail, the committee said the nation would spend $1,590.13m

The details are $503.76(Essential Transmission Reinforcement-TCN); $171.38(Additional distribution capacity under PHCN); $166m (NIPP: fund requirement for Grid closure and power evacuation from South-East to North); and 749m (NIPP: fund requirement for transformers, 11kV lines, 2000 nos of kVA transformers need to be added.

On medium term intervention, the report reads: "In determining medium-term solutions to the power crisis, the committee is seeking intervention, not only from PHCN, JV’s and NIPP’s but also from the newly licenced IPP’s.

"This, the committee believes will make an additional capacity of 10,049MW available in 2011.

"The committee also got on assurance from NGC that there will be enough gas by 2011 to support about 12,000MW that will come on stream, based on the recently approved master plan by the Federal Executive Council."

On tariff, the committee said it was in support of the proposed increase in the cost of electricity.

"Product prices are a signal to the market place to deploy resources for the extraction or production of goods and services to meet demand.

"In the case of electricity, PHCN tariff has remained fixed for over five years while natural gas prices have been on the increase. PHCN tariff was last reviewed in February 2002.

"When a sector operates under price-caps, some unintended consequences materialise; less of the product is brought to market (artificial scarcity), expansion investment is postponed, quality can be compromised and service and maintenance suffer. The aforementioned is self-evident in the system currently.

"Therefore the way forward is to properly quantify the total revenue needed to make power and gas sectors commercially viable. That sensible path is correct pricing over time.

"The Nigeria Electricity Regulatory Commission NERC has developed a new tariff regime for the industry predicated on revenue requirement for the sustainability of all operators, old and new alike. Rates were last revised February 2002 from an average of N4.50/ kWh to approximately N6 kWh.

"PHCN now operates under monthly deficits of approximately N2billion and is unable to tackle the twin problem of inadequate and unreliable electricity services."

The committee noted that the Electric Power Sector Reform Act, 2005 mandates the NERC to "set up and administer a fund under the name, ‘Power Consumer Assistance Fund,’ to subsidise underprivileged power consumers as specified by the Minister."

"The contribution obligations fall on the Federal Government as appropriated by the National Assembly," it added.

The committee made six broad recommendations to the Federal Government:

•Private Public Participation (PPP) Transition. Approve private sector structured financing with international management oversight of financed asset while FGN retains ownership.

•Legacy liabilities. Determine and negotiate PHCN legacy liabilities and raise 10-year bond via capital market to settle the liabilities.

Tariff. Accelerate action on Multi-Year Tariff Order (MYTO) and power consumer assistance fund.

Gas. The power sector is the biggest user of gas for power plants. However, the sector is also constrained with commodity pricing. We therefore pray for the implementation of four enabler conditions, bankable gas supply purchase agreements, securitisation revenue, assurance of medium term pricing and central coordination of the enablers. Guarantee payment for gas supply and implementation of gas supply obligations.

VANGUARD

FEC to deliberate on 16,000Mw power generation