FOR THE RECORD: An Agenda for Power, Steel and Aluminium [Chief Bola Ige, July 29, 1999]

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Federal Ministry of Power and Steel Press Conference     
AGENDA FOR POWER, STEEL AND ALUMINIUM

 by:

 Chief Bola Ige, S.A.N.
 Honourable Minister, Federal Ministry of Power and Steel,
 Federal Republic of Nigeria.

 

Thursday, July 29, 1999
 Abuja

Date & Title & Email

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Begin Body

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Protocols

Honourable Minister of Information and Culture,
Honourable Minister of Power and Steel, Alhaji Danjuma Goje,
Permanent Secretary, Federal Ministry of Power and Steel, Alhaji Abubakar Mamu, Commander of the Order of the Niger
Members of Diplomatic Corps here present,
Directors of the ministry,
Chief Executives of Parastatals,
Distinguished Gentlemen of the Press,
Ladies and gentlemen

INTRODUCTION

I greet you all in the name of our great country. And I welcome you to this occasion of my first formal press briefing as the minister of power and steel.

This meeting will not be the usual ministerial briefing as you may be used to. There is nothing at the moment to justify any thing like that. Instead, this will serve to set out my agenda for power, steel and aluminium over 6-, 12- and 24-month periods. Within another month, I shall have further brainstorming sessions with media chief executives and then other professional bodies on implementation details of this agenda. Also, I shall on regular basis brief the nation on state of power, steel and aluminium.

Although the ministry of power and steel and its eleven parastatals had expected to lay the foundation for the industrial growth of Nigeria, several reasons have contributed to its feeble showing over the years. The most visible of the parastatals is the National Electric Power Authority, NEPA. Even though this parastatal has installed capacity to generate enough power in excess of the national peak demand, the entire power delivery system has been characterised by epileptic and unreliable supply, bogus billing and archaic rate collection. Corrupt practices within and outside NEPA, irregular maintenance, acts of vandalism, supply of sub-standard equipment, outright criminal acts such as theft and collusion, have combined to demean efforts and image of the authority to fit public conception of Never Expect Power Always.

The steel sector has not been much prominent in the public eye but it has, in fact, performed as badly as NEPA. In this sector, there is very little to show for the huge investments and sacrifices made by the government and people of Nigeria. In particular, Ajaokuta Steel Complex and Aluminium Smelter Company, Ikot Abasi are two gigantic projects which deserve special attention. The former is the second largest steel plant in Africa and the latter one of the most modern of its type in the world. They also have a lot of filth in common.

Nearly all the steel projects have ground to a halt. Some of them are still uncompleted ten to twenty years after commissioning. Workers have not been paid for years and installations, significantly vandalised, are left to rot.

But all these have to come to a stop!

I have taken it as my first task and duty to apologise to all Nigerians on behalf of NEPA, the Federal Ministry of Power and Steel and the Federal Government of Nigeria for the waste and destruction that have taken place because of instability of electric power in Nigeria. The cost to households and businesses across the country is so colossal it is mind-boggling. It calls for a missionary approach to management; not just to clear away the debris of past errors and to prevent new blunders but to build up structures and procedures that would make strategic achievements difficult to reverse.

MISSION

Gentlemen of the press and distinguished guests, as you know too well, electricity is the life blood of a nation and steel is its backbone. These constitute the vehicle for industrial growth in any country. The new administration of the Federal Ministry of Power and Steel under my leadership will stop the rot and decline in this sector and create a conducive environment for all categories of participants – workers, contractors, consultants and investors – to ensure that they perform creditably and efficiently. Those who fail to perform well shall be dispensed with.

Management business controls, performance evaluation and accountability will be re-institutionalised in the ministry and all the parastatals will undergo significant staff re-orientation to ensure efficient performance.

After initial studies of all the installations and projects under the ministry, various reviews, reforms and re-structuring will be carried out as may be found necessary. Every sub-sector of the ministry will have targets set for six-month, twelve-month and twenty-four-month periods that must be effectively implemented.

The mission of this ministry will be to provide regular power supply throughout the federation at affordable price and to sustain production of steel and aluminium for domestic consumption and export. These goals shall be pursued relentlessly and with all seriousness.

It will no longer be business as usual.

At this stage, it will suffice to give a broad outline of the agenda required to accomplish the mission of the ministry.

ON POWER

The power target: The target for the power sector is put in a very simple language:

Cut down incidents of wanton power failures by 50% in six months, by 75% in twelve months and by almost 100% in twenty-four months.. No excuses will be accepted or acceptable. Meet target or be fired.

This is the power creed. And it shall be adequately empowered and firmly enforced.

Because of the varied nature of incidents of power failures, it is pertinent to make further clarification. By this target, NEPA is being directed to reduce the frequency of all wanton outages to any consumer, whether domestic or industrial, to not more than a pre-set short time, probably designated for routine maintenance or emergency. Also, NEPA shall increase the daily maximum simultaneous peak electricity demand from its present 1,600 to 2,500 MW; all these within six months. Thereafter, NEPA shall build optimum capacity within 24 months.

 
 

In 24 months, that is, the incidents of power failure will be a thing of the past and consumers can say, Now Expect Power Always!

To accomplish this, power and authority of electricity will be fully de-consolidated and deregulated. De-consolidation process will break power and authority of electricity in Nigeria to its three basic components ? generation, transmission and distribution. The present agency, responsible for electricity power and authority, NEPA, will be re-structured and decentralised to run effectively and efficiently in a manner of a well-organised business enterprise.

Deregulation will allow openings for foreign and Nigerian companies (including state governments) to participate in the generation, transmission or distribution of electricity power or any combination of these as Independent Power Producers. These companies can build, own and operate and/or transfer independent electricity power.

The National Electric Power Authority (amendment) Act of 1998 will be further amended to improve NEPA?s operating performance, reduce its financial dependence on public resources, encourage private participation as well as stimulate healthy competition and protect consumers from monopolistic abuses.

To this end, a transparent regulatory framework will be formulated to set equitable operating rules for all participants including NEPA while market forces drive the pricing for consumers.

At present, we already have companies like Mobil Producing Nigeria Unlimited and Enron Incorporated in the forefront of these ventures in Nigeria to generate power from natural gas. Mobil is set to provide 350 MW of power in Bonny, Rivers State and Enron, 540 MW in Agbara, Lagos State.

Our mission is to ensure that the power sector attracts investments from Nigerian and foreign investors as well as other sources of private capital including the Nigerian Stock Exchange.

Other specific steps to accomplish our mission are classified according to the de-consolidated components as indicated below:

ON GENERATION:

Status quo: The combined installed capacity of our three hydro and five thermal power stations has not only dropped from the initial value of 5,876 Mega Watts to 5,400 MW; only 1,600 MW of this is available at the time this administration took over. This is far below the estimated national demand of 2,470 MW. The inability to generate at full or optimal capacity is as a result of the state of disrepair and gross negligence of all the eight existing generating plants. This is compounded by the fact that 36% of installed capacity are over 20 years old, 48% over 15 years old and 90% over 12 years old. This is a case of outright shirking of responsibility for twelve years without break.

The plants are in dire need of massive rehabilitation, refurbishment and turn-around maintenance.

Action: In order to make a significant improvement in generation of power within a short time, the ministry will:

1. Vigorously pursue refurbishing and turn-around maintenance works on the hydro-stations to make available some 670 MW of power in addition to present 1,600 MW supply within the six month period.

2. Encourage Independent Power Producers to provide and sell temporary power while they build new power stations.

3. Revamp thermal stations, especially Egbin station to get optimal capacities from them

4. In the short run, evoke inter-relations between the Power and Steel sectors to tap surplus power supplies estimated at some 120 MW from steel project at Ajaokuta and Aluminium Smelter Company, Ikot Abasi into the national grid to augment power available to the people of Nigeria.

5. In the long run, galvanise generation of power from NEPA?s rehabilitated hydro and thermal stations and Independent Power Providers to exceed 6,000 MW limit.

TRANSMISSION:

Status quo: The national grid is characterised by its vulnerability, age, rickety lines and incomplete loop. Its power transformers and circuit breakers are either broken down or operating at less than full capacity. The grid suffers from vandalisation of its towers, insulators and parts as well as the supply of sub-standard materials. The grid is virtually non-existent in some parts of the country like the north eastern, north western and south eastern Nigeria. Some of the transmission stations have been abandoned completely after near completion.

The grid is overloaded. The Shiroro-Abuja 132KV line with capacity for 100 MW being constantly driven at over 50% of its limit is a typical scenario.

Action: The line of action will be strategic intervention aimed and directed at pre-determined critical areas for maximum relief effects. These are summarised below:

a) The following rehabilitation works will be carried out to improve quality and stability of power:

  • Three 150 MW 330/132 kV transformers at Mando Road substation, Kaduna, New Haven Enugu, Gombe substations

     

  • 71-km Kaduna – Zaria 132 kV line and 2,000 damaged insulators along Kankia-Katsina 132 kV line.

     

  • Alausa?s 45 MW, 132/33 kV substation to increase reliability of power supply in Ikeja industrial area.

     

  • Two 30 MW 132/33 kV substations in Sokoto

     

  • One 132/33 kV substation in Otta that was vandalised in 1996.

     

  • One 33 kV double circuit line project in Aja-Lekki which was gutted by fire 2 years ago (Rehabilitation is in collaboration with Lagos State government and private investors)

     

  • 33 kV double and single circuit lines and two 30/40 MW, 132/33 kV substations in Ilesha

     

  • 33 kV capacitor bank in Maiduguri

     

  • The 150 MW, 330 kV inter bus transformer at the Afam power station which was damaged in 1997

     

  • Gombe-Potiskum-Maiduguri 330 kV lines and associated 330/132 kV substations at Potiskum and Maiduguri.

     

  • Shiroro-Abuja 330 kV lines and associated 330/132 kV substation in Abuja.

     

  • Sixteen. 33/11 kV injection substations and 2.5 MW, 7.5 MW and 15 MW transformers and accessories

     

  • 40 power transformers of 150 MW, 60 MW and 30 MW ratings and five 30/40 MW mobile substations.
  • b) Implementation of comprehensive Energy Accounting Scheme and grid metering to ensure that energy consumed is accounted and paid for.

    c) Deregulation will allow Independent companies to build and own or operate transmission lines.

    DISTRIBUTION:

    Status quo: Distribution of power is the main point of contact with the public and industries. It is the bane of power delivery in Nigeria. The present mode of distribution and marketing of power is over-centralised and fraught with serious malpractice. Bills are irregular, erroneously or arbitrarily estimated. Incidents of non-technical losses occasioned by illegal connection, use of sub-standard materials or outright consumer theft contribute significantly to undermine the system.

    Action: In order to bring sanity and efficiency to distribution and marketing of power in Nigeria, the following will be carried out:

    a) Immediate commencement of a rectification process involving installation and replacement of injection transformers, distribution transformers, feeder pillars and circuit breakers and badly overloaded distribution accessories in order to minimise occurrence of power outages. The first phase will include:

  • 2,100 distribution transformers of 15 MW, 2.5 MW, 500 MW and 300 MW ratings nation-wide

     

  • 202 feeder pillars and 4,500 feeder pillar units.
  • b) Distribution of power will be deregulated in such a way that independent investors can participate over a pre-specified area covering two or more injection sub-stations

    c) Distribution by NEPA will further be de-consolidated and decentralised to confer more power and responsibilities on managers in charge of a district.

    d) Total energy accounting principles will be operated and consumers will pay only for power consumed. The new system will be based strictly on ?he who does not pay gets no supply? and ?he who gets no electricity supply does not pay?

    e) Consumers who make capital contributions will be credited for these.

    f) Regular single phase and three phase meters will be available within four weeks of application.

    g) New pre-payment meters will be introduced in metropolitan areas so that the consumer will consume exactly what he has pre-paid for.

    h) Costs of purchasing new meters will be spread over 12 to 18 months to encourage enrolment as well as to discourage incidents of theft and re-sale.

    i) New billing and payment systems will be introduced within six months. From about September 1999, bills will be paid into banks as is done with telephone bills, except in areas where there are no banking facilities j) Consumers will be informed in advance about power interruptions and each district manager will publish the table of power outages under his jurisdiction for evaluation of his performance.

    k) To complement easy access to electricity and easy payment terms, very tough penalties will be advocated against unscrupulous people for illegal connections, theft of NEPA materials, impersonation and other fraudulent practice. Legislative changes will be made for up to 24 months in jail without any option of fine for convicted persons instead of the present obnoxious 21 year imprisonment sentence which leaves all criminals off the hook.

    Government is determined to put an end to the criminal destruction of NEPA facilities, some of which border on sabotage. Henceforth, any person, acting alone or in collusion with NEPA staff, found guilty of tampering with electric plants, fittings, or towers will serve jail terms without an option of fine.

    Also, landlords, tenants or occupiers of premises who deal with or allow illegal connections or installation of illegal meters will go to jail without an option of fine. Employees of NEPA or any persons who aid, abet, counsel, procure or conspire with any one to tamper with NEPA fittings, plants, meters, cables or other accessories shall go to jail if found guilty.

    All trials shall be by well-constituted courts

    l) Accurate estimation of the projected national energy demand load will be made taking into consideration inadequacy in present distribution system and consumers suppressed load arising from it. This will allow better forecasting of consumer demand load to ensure more reliable planning and expansion programmes.

    m) Instituting a Public Complaints Bureau that will be linked directly to the Honourable Minister

    RURAL ELECTRIFICATION:

    Status quo: Nation-wide rural electrification scheme designed to augment the programmes of NEPA has suffered tremendous setbacks arising from lack of funds and mismanagement. The programme to electrify a significant part of the Local Government Headquarters and villages and connect these to national grid is yet to get halfway.

    Action: My ministry intends to vigorously pursue and boost rural electrification by taking the following actions:

    a) Accountability will be re-introduced into this laudable project
    b) Enlisting the co-operation and collaboration of State governments
    c) Inviting foreign and local investors who will in turn sell power to NEPA
    d) Strengthening the department in charge of this programme
    e) Of the 846 ongoing federal rural electrification projects that are yet to be completed (186 that have reached 75% completion) will be completed and hooked to the national grid in the next few months.

    ON STEEL AND ALUMINIUM

    State of the steel sector

    The steel and aluminium sector is in a very bad state. The situation is so bad that it is unprintable in some cases. The first thing I have done is to stop the stealing and arrest the rot. Surgical operations will be deployed to clean up this sector.

    From preliminary reports, my meetings with the parastatals and on-site visitations, I have decided on immediate technical and financial audits for all the companies or parastatals under steel and aluminium sector.

    Arising from the critical nature of this sector within the economy, my ministry has laid out plans to jump-start the sector in the interest of the huge investment that the government has made so far.

    The programme of salvaging the steel and aluminium sector comprises concurrent (not consecutive) slightly staggered reforms. The highlights are:

    a) Investigate and stop the rot in the sub-sectors
    b) Commence technical and financial audits
    c) Institute project monitoring and evaluation in all sub-sectors
    d) Decentralise all integrated and so-called ?self-sufficient? programmes
    e) Open up captive and ?self-contained? programmes where possible
    f) Rehabilitate all viable sub-components where this makes sense
    g) Pay all or significant part of outstanding wages of staff
    h) Commence staff training wherever possible during idle periods
    i) Prepare sub-components for production and transparent accountability
    j) Restructure companies or parastatals and reconstitute their boards

    The rest of the agenda on the steel sector is divided into three parts outlined below:

    [I] FROM IRON ORE TO IRON RODS

    Plans to commence production of iron and steel and associated products in Nigeria within six months are briefly mentioned from iron ore to billets to iron rods.

    At Itakpe Iron Ore Mining Project:

    The action plans are itemised below: Immediate transportation of already processed 200,000 metric tonnes of 66% Fe ore to Delta Steel Company, Aladja. This will be made from Itakpe on the standard gauge rail to the river port at Ajaokuta Steel Complex and from there to Delta Steel Company, Aladja on barges on Niger and Warri rivers.

    The warehouses at Itakpe Mining Company will be freed thus making possible the commencement of hitherto suspended iron ore mining and beneficiation processes in Itakpe plants.

    At Delta Steel Company, Aladja:

    In this company, minimal repairs will be made to gear up production of billets using existing facilities and raw materials from Itakpe. Partial refurbishing of direct reduction plants and electric arc furnace will then be carried out concurrently with the production of billets. Billets produced are trucked to the three inland rolling mills at Jos, Kastina and Osogbo.

    Capacity is built up after completing refurbishment works and receiving of new super concentrate ore (68% Fe ore) from Itakpe. Efficiency will improve and cost of production reduced when the 271-km standard gauge rail from Ajaokuta to Aladja is completed ensuring direct rail link between Itakpe and Aladja.

    At the Rolling Mills, Jos, Katsina and Osogbo:

    The three rolling mills will be treated in similar manner, albeit starting at different times. Firstly, optimal repairs in the rolling mill will be carried out during the period when Itakpe Mining Company freights iron ore concentrates to Delta Steel Company. Repair works will continue during the period of refurbishment and initial production of billets at the Delta Steel Company.

    Once billets from Aladja reach the rolling mills, production of wire sections up to 12 mm will commence and this is programmed to be within three months

    [II] AJAOKUTA STEEL PROJECT

    This project which began in 1972 and spans a vast area of 240 sq. km is said to be ?98% physically completed and 80% technically completed?. The heart of the plant, the Blast Furnace and Basic Oxygen Furnace have never been completed or fired. Peripheral accessory-plants have been completed, tested and used until they broke down.

    The main lines of action are:

    1. Technical and financial audit will go on while the ministry awaits inputs from Tiajpromexport (TPE) of Russia, the original project contractor whose contract was arbitrarily terminated by previous government. Contacts will also be made with the Ukrainian government.

    2. Review management structure of the company as well as existing contracts

    3. Commence operations of stand-alone ancillary facilities such as:

    a) Engineering services workshops to fabricate spare parts for major industries such as NNPC and WAPCO as well as carry out repairs of NEPA?s damaged transformers

    b) Alumino-silicate refractory to produce refractory bricks required by cement factories and for lining other furnaces in Nigeria.

    c) Lime kiln to produce hydrated lime for water boards throughout the federation

    d) The captive 110 MW Thermal Power Plants will be refurbished so that about 70 MW of its energy can be released and sold to NEPA to boost national supply.

    4. Determine the next line of action based on outcome of technical and financial audit exercises.

    [III] ALUMINIUM SMELTER COMPANY, IKOT ABASI (ALSCON)

    This project which has been fully paid for by previous administration of the federal government of Nigeria is said to be ?85% physically completed and 20 50% technically completed after ten years!

    My ministry has taken prompt steps to straighten out outstanding issues such as:

    Imo River dredging project. Although this project was fully paid for since 1996, work at site never commenced. However, last week, I extracted assurance from the dredging company that works will commence within one week of obtaining clearance from Dr. Kolade?s Panel on review of contracts.

    Current operational accounts: The ministry has demanded and received current position of the following accounts:

    i. Completion of the ALSCON project

    ii. Cost of re-starting plant shut down at the end of May 1999 by the German operators

    iii. Liabilities of the company

    iv. Sales and revenue of the company

    It will suffice to say that the government is committed to re-opening the shut down factory within three months but will base its further actions on the following conditions:

    a) That it will no longer be willing to spend one more Kobo on the project having bankrolled every aspect of the company so far up to the tune of N250 billion, that is, about DM5.0 billion

    b) That the other foreign partners ? Ferostaal AG of Germany (20% shares) and Reynolds Inc of US (10% shares) should pay up their outstanding shares

    c) That the share capital of the ALSCON be raised from its meagre $500,000 to nothing less than $1.0 billion.

    d) That part of the payments already made by Nigeria be turned into shares under the new capital base and the rest be treated as loan at standard bank interests

    e) That other investors be invited to buy shares and/or take part of Nigeria’s 70%

    f) That ALSCON be restructured and the so-called ?turnkey? project completed once and for all.

    CONCLUSION

    Gentlemen of the press, ladies and gentlemen,

    You have heard the agenda for power, steel and aluminium sectors of my ministry. The Honourable Minister of State, Alhaji Danjuma Goje, the Permanent Secretary, Alhaji Abubakar Mamu, Commander of the Order of the Niger, the entire team of management of the ministry and all the parastatals and I will strive very hard to successfully implement this agenda. I shall keep you and the public posted on the progress of our work from time to time.

    We have the mandate of Mr. President who has promised us adequate financial support. I have on my part assured him that every Kobo will be judiciously spent and accounted for.

    We have the will power and commitment for accomplishment. And with the grace of God and the support and co-operation of all of you, we will succeed mightily.

    Thank you for your attention.

     

     

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