FG Hands Off Power Generation, Distribution

2 Comments » August 26th, 2010 posted by // Categories: Energy Development Project



FG Hands Off Power Generation, Distribution

…Awards $1.914bn contracts for 96 projects
By Chika Amanze Nwachukwu and Ejiofor Alike, 08.27.2010

President Goodluck Jona-than yesterday launched the most comprehensive plan to reform the power sector and achieve stable electricity in the country. 

Under the plan, Federal Government will no longer be involved in the generation and distribution of electricity. 

The unveiling of the power sector reform roadmap, signalling the start of full implementation of the Electric Power Sector Reforms (EPSR) Act of 2005, seeks to privatise the 18 successor companies of the Power Holding Company of Nigeria (PHCN). 

Under the roadmap, contracts valued at $1,914,258, 956 for 96 projects are underway in the National Integrated Power Project (NIPP) and PHCN. A breakdown shows a total of 43 projects in the NIPP and 53 projects in the PHCN. 

Energo was awarded the largest Engineering Procurement Construction (EPC) contract for three projects valued at $188.9million, followed by Rockson Engineering Limited’s $114million 

Speaking yesterday in Lagos when he launched the roadmap for the reform, President Jonathan, however, stated that only the 11 distribution companies and six generation companies would be fully privatised while the ownership of the Transmission Company of Nigeria (TCN) would be retained by the government but with private sector management. 

Unveiling the reform agenda, Jonathan stated that N57 billion required to pay the arrears of monetised benefits of the PHCN, which he said had been outstanding for the past seven years had been provided through a supplementary budget while another undisclosed sum had been set aside to pay the severance packages, pension and gratuity of workers of the privatised companies. 

“It should be obvious that the electricity industry can only expand just like the telecommunication industry grew after the introduction of liberalisation. Existing PHCN staff, expectedly, form the nucleus of the workforce of the new private sector – driven electricity industry. Therefore, it will be to their benefits to see reform in the sector as a panacea for progress in the individual lives and growth of the sector and our nation,” he said. 

The President noted that his administration had demonstrated sincere commitment to ensuring that government met its obligations to the workers. 

Details of the roadmap indicated that the PHCN successor thermal generating plants would be privatised through the sale of a minimum of 51 per cent equity to core investors that clearly demonstrate the technical and financial ability to operate and expand each plant. 

The President, however, said care would be taken by working closely with NERC to ensure that a monopoly or oligopoly of market power in the generation sector was not acquired through these divestitures. 

According to him, the National Integrated Power Project (NIPP) plants will be managed under Operation and Maintenance (O & M) contracts now being prepared by the Niger Delta Power Holding Company (NDPHC), the parent company of these plants. 

The mode and strategy for their subsequent divestiture will then be communicated once these plants have been commissioned, he said. 

Also under the roadmap, the Transmission Company of Nigeria would be handed over to a credible private sector company under a five-year management contract. 

According to the President, the key to the successful commercialisation of the national grid is the appointment of a contractor with the skills required to manage the huge and complex programme of construction and rehabilitation that will be required over the coming decade. 

“All the distribution companies are expected to be privatised based on a core investor sale of a minimum of fifty-one (51) percent of the government’s equity in the companies. The sale methodology will emphasise the reduction of technical and commercial losses and increased efficiency of collections. Accordingly, in addition to their offers for ownership of a minimum of fifty-one percent of the companies, bidders will be expected to submit proposals that reflect information on their strategy for meeting the efficiency targets that will be specified in the Request for Proposals,” he said. 

In drawing up the roadmap, President Jonathan said the government also identified electricity tariff as a critical factor in attracting private sector participation in the sector. 

He said as part of the efforts to ensure that relevant government agency develops a tariff structure that would be attractive to private investors, the government had taken steps to reconstitute the Nigerian Electricity Regulatory Commission (NERC), adding that the list of the members would be forwarded to the National Assembly next week Monday. 

“I took time to select the chairman that has similar credentials with the Chairman of the Independent National Electricity Commission (INEC). I decided to do so because we need a revolution in the power sector. We expect that those that will be in the commission will drive that process. I have made it clear on a number of occasions that on the attainment of stability in the sector; government will disengage from generation and distribution of electricity in the country. Government will encourage private sector participation in these areas. Therefore, as articulated in the EPSR Act of 2005, the private sector will be responsible for generation and distribution, while the government will still own transmission, but with private sector management,” he said. 

He stated that government would provide credit enhancement to the private sector to enable them produce at least 5,000 megawatts of new capacity between 2012 and 2013. 

He also disclosed that the Federal Government plans to engage the IOCs and smaller independent oil companies to fast-track bankable gas supply agreements as well as gas transport to both Federal Government power plants and the independent power producers’ plants. 

The President stated that the plan to exploit hydro source was already quite advanced, while coal would be fully exploited to build power plants in Gombe, Kogi, Enugu and Benue states. 

He, however, pointed out that the largest source of fuel to power would come from natural gas.
The unveiling of the roadmap was witnessed by 10 governors and four deputy governors, including Governors Babatunde Raji Fashola of Lagos State, Sullivan Iheanacho Chime  (Enugu), Liyel Imoke (Cross River), Christopher Alao-Akala (Oyo), Otunba Gbenga Daniel (Ogun), Martin Elechi (Ebonyi), Ali Modu Sheriff (Borno), Patrick Yakowa (Kaduna), Saidu Usman Dakingari (Kebbi) and Aliyu Akwe Doma (Nasarawa). 

The four deputy governors present were Joe Ogundeji (Kwara), Ahmed Musa Ibeto  (Niger), Abdullahi Muhammad Tijani Gwarzo (Kano) and Emeka Ndubuisi Sibeudu (Anambra).

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2 Responses to “FG Hands Off Power Generation, Distribution”

  1. ABAH O PETER says:

    This is truely a step in the right direction, but why will the government not leave every aspect of power to be competed for and managed by investors, why would they want to be responsible for transmission? i think it must be looked into again. i thought, that they will only play the part of regulators, like we have in the telecommunication industry, for instance. thank

  2. omo oye says:

    with this methord, I hope the light will be a bite stable, let us wait.

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