Only proper alignment of policies with regulations would ensure the efficiency and effective operations of the power sector in Nigeria, the chairman, Egbin Power PLC, Kola Adesina, has said.
Mr. Adesina, who was proffering solutions to the challenges in the power sector, also underscored the importance of better collaboration and synergy among all players in the sector.
The Managing Director, Sahara Power Group Limited, was speaking in an interview with PREMIUM TIMES in Abuja.
He said despite the privatisation programme aimed at bringing efficiency, reducing cost of doing business, and engendering service quality in the sector, the major challenge has been the misalignment of operational processes.
“At the moment, the power sector is not what it should be. But, it could do better with more collaboration and synergy among all players to consolidate and enhance the gains from the privatization exercise,” he said.
As a value chain, Mr. Adesina said the sector was not properly and structurally aligned to deliver service as desired.
“All the players – gas suppliers, electricity generation, transmission and distribution companies need to align properly and work together to deliver electricity constantly to consumers,” he said.
The gaps in the value chain, he noted, was making it difficult for the power sector to realize its potentials, beginning with the gas suppliers, through the generation, transmission and distribution companies.
He said the multi-year tariff order, which does not allow the operators to charge cost-reflective tariffs, has prevented them from recovering costs of investment in the development of gas fields, gas supply infrastructure, importation of machines and spare parts used in generating electricity.
“The day the tariff is lower than the cost of production in the entire value chain, failure begins to set in. That is the position we have today in the Nigerian power sector. To survive, operators would look for alternative markets where gas and other variables and enablers can be economically priced,” he said.
Mr. Adesina said for the sector to work efficiently, government and all players need to come together to discuss to the fullest possible extent the technical, legal, commercial, regulatory, pricing, liquidity, infrastructure, spare parts and equipment required to supply electricity.
He said after the market has been properly dimensioned, in terms of requirements for gas-fired, hydro and renewable plants, along with all the enablers, all parties must agree on their respective roles captured in a masterplan and binding contractual agreement.
While government should commit to ensure investor-friendly monetary policies, particularly on interest rates on loans, exchange rate and inflation rate to enable operators import the required infrastructure, he said there was need to quickly resolve the issue of appropriate pricing to have stability in supply.
Despite the challenges in the sector, Mr. Adesina said Egbin Power in the last five years post-privatization has increased its electricity generation capacity to the national grid.
“From less than 400MWs, Egbin Power is generating 1,100 MW and shall attain 1,320 MWs in April 2018. Egbin Power has raised the performance bar in the sector through continuing investments in human capital and infrastructure, resulting in on-going drive for sustainable performance and expansion,” he said.
“We have had to contend with policy summersault and operational challenges occasioned by defaults in contractual obligations from Day One, the absence of a cost reflective regime, foreign exchange variance of over N200 per naira and inflation rate that rose from 8% at takeover to 18-19%, as well as over N140 billion debts owed us by Nigerian Bulk Electricity Trader, NBET.
He lamented the huge loss of over 200 per cent from each Naira invested in the acquisition of the plant as a result of inappropriate pricing, pointing out that of the 1,100MWs generation capacity, not more than 600MWs could be evacuated due to inadequate transmission infrastructure.
To break even and continue to operate well, he said Egbin Power should be able to evacuate a minimum of 800 MWs every day.
He said the company was determined to forge ahead with its Egbin 2 expansion plans, even beyond Nigeria’s shores.
“We are determined to forge ahead with our plans believing that everything would come together soon. We are going to look for private capital to do that.
“We are engaging several partners in the quest to raise more capital. We are currently in discussions with some respected International organizations on various partnership models. That would give us about 3,120 MWs in four years’ time. But, we hope to attain a 5,000 MWs capacity in the next five years,” he said.
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