December 8, 2022
  • December 8, 2022

NIPP power plants owed N150bn but offer cheapest tariff – Report

By on September 25, 2022 0

The Nigerian Electricity Market (NEM) owes at least N150 billion to Generation Companies (GenCos) built under the National Integrated Power Projects (NIPPs), just as GenCos have the lowest tariff. cheapest among the approximately 24 gas-fired power stations in the national grid. .

According to an operational report obtained by Daily Trust on Sunday, there are 10 GenCos NIPP operated by the Niger Delta Power Holding Company (NDPHC), eight of which are active.

In the latest operational report, the officials said, “The NDPHC is the backbone of Nigeria’s power industry. The company owes around 150 billion naira to the system, but it is still standing. Enterprise power is the cheapest per kilowatt among thermal generators; hydroelectricity is the cheapest.

“Despite this low price, the NCC still gives it the lowest priority when purchasing power, and it is the first to be asked to opt out.”

NDPHC Managing Director, Mr. Chiedu Ugbo, said in the report, “I manage production assets. I have a 28% lower tariff than my peers, which means that I subsidize the sector by 28%.

“We have met with the regulator several times on this to say that the government needs to decide whether we are a social enterprise or a commercial entity because if they increase our tariff, it will lead to an overall increase in revenue, judging by the 4,000 megawatt capacity that we have.

“Again, I have over 3,500 MW of capacity, but I’m told to only deliver 700 MW, and that’s what I get paid on. Now DisCos is handing around 50 percent. That means that I am paid at 50%.At present, what the industry owes the NDPHC is around 150 billion naira.What company is surviving with this level of debt?

MD of NDPHC Mr. Chiedu Ugbo

Recently, the Bureau of Public Enterprises (BPE) announced ongoing plans to privatize the five most active GenCos NIPPs and has already pre-qualified 16 companies to do so. The five NIPP plants include Geregu, Omotosho, Olorunsogo, Odukpani and Benin-Ihovbor GenCos.

However, players in the electricity sector have argued against this, noting that greater priority should be given to their operations and assets being optimized to bring down the currently skyrocketing electricity tariff.

Nigeria Consumer Protection Network (NCPN) Chairman Kunle Olubiyo told our reporter that since NIPP power plants have the cheapest tariff among gas-fired power plants, the System Operator, a segment of the Transmission Company of Nigeria ( TCN), should optimize the distribution of their electricity to the national grid in order to provide a cheaper tariff to electricity consumers.

Although Olubiyo insisted that some of the new companies bidding for the plants have no experience in the power sector, he said: “The NIPP plants have always been the infrastructure that provides the power supply and national energy security”.

Corroborating the Electricity Consumer Advocate’s observations, the NDPHC’s latest operational report shows that the NDPHC, as the parent company of the NIPP plants, is responsible for providing at least 50% of the transmission and distribution infrastructure in the country.

While the NIPP plants provide more than 3,500 megawatts of electricity to the national grid, the NDPHC delivered 22 substations between 2015 and 2021. Additionally, from 2015 to 2019, the NDPC completed 2,194 kilometers of power lines respectively. transmission of 330 kilovolts (kV) and 887 km of 132 kV.

In addition, the country now has 10 new 330/132kv substations and eight 132/33kv substations connected to the national grid. These added capacity levels of 5,590 MVA/330 kv and 3,493 MVA/132 kv respectively.

From June 2019 to January 2021, the NDPHC transmission department completed four new substations, including Awka, Nkalagu, Ihiala and Orlu substations.

For electricity distribution, NIPP has completed over 360 injection substations with a combined capacity of approximately 3,540 MW. It has also constructed approximately 2,600 km of 11 kV power distribution lines and 4,600 km of 33 kV distribution lines, which supply electricity directly to transformers in residential areas.

There were also 296 proper distribution projects, which included injection substations, 1,924 33 kv lines, 4,600 km of 11 kv lines and other infrastructure.

The company also increased its distribution capacity with the installation of 25,900 completely self-protected transformers (CSP) across the country.

Despite these efforts, officials said the company still faces power market challenges, including a delay in valuing its assets.

“Many years later, neither the TCN nor any of the DisCos have paid for the facilities they have already been given, from which they generate revenue. Despite its strategic importance, there is no single Take or Pay contract like the government has with other production companies.

“The NDPHC also does not receive a dime to offset its spinning reserve to offset gas and other expenses related to the maintenance of its turbines when electricity is not taken,” he noted.

However, the company, jointly owned by the federal, state and local governments, has forged ahead and contributes daily to power generation.

Commenting on this, the Managing Director of NDPHC, Mr. Chiedu Ugbo said, “Despite all this, the company has continued to operate efficiently without once returning to the Treasury for bailout since the initial capital was provided.”

Further explaining the company’s portfolio, Ugbo explained that “NDPHC was carrying out interventions in the field of electricity transmission across the country.

“President Muhammadu Buhari earlier this year commissioned the Lafia transmission substation. In 2021, we commissioned a 2×60 megawatt substation at Awka to improve the transmission capacity by about 100 MW. We have done a similar project in Abeokuta and Akwa Ibom State.

He, however, assured that the problems in the electricity sector would soon be resolved with the various interventions.

NDPHC Plans for Renewable Energy

According to the NDPHC report, the company has installed more than 20,000 solar home system (SHS) units and plans to generate electricity from hydroelectric dams in what could be called its second phase of the project. of power generation after completing the “Big Ten”. GenCos in Kogi State and the Niger Delta region.

Mr. Ugbo had announced a partnership with the Federal Ministry of Water Resources to develop small and medium hydropower projects. He said: “In the field of renewable energy, we are working on solar energy, not only stand-alone, but also on a mini-grid and at utility scale, that is to say from a side. We also believed that part of the program was hydroelectric and the best way to start it was with dams.

Minister of Water Resources Engineer Suleiman Adamu during a visit by the NDPHC team noted that Nigeria has more than 240 dams, most of them with hydroelectric capacity, adding that the dams have a capacity of 40 MW and less.

Adamu said most of the projects were halted due to poor planning, as he sought the intervention of the NDPHC.

However, for the company to step in, it will need to have most of its assets valued so that it can earn marginal returns on investments and then reinvest them in these areas of critical need.

Experts call for recovering NIPP investments

Some power sector advocates who have commented on the NIPP’s operations have spoken of strategies authorities could use to recoup the huge investments in gas, generation, transmission and distribution projects by the NDPHC.

In his presentation, the organizer and director of the forum of the Nigerian Power Consumers Forum (NPCF), Mr. Michael Okoh, urged the Nigerian Electricity Regulatory Commission (NERC) to expedite the process of assigning real values ​​to the NIPP intervention projects, particularly in the field of electricity transmission. and distribution so that the federal government can be part of its investment and then reinvest it in other electricity sector infrastructure.

He said: “Based on a rough estimate, if NERC carries out this assessment, the NDPHC can recover nearly $4 billion, or about 1.725 trillion naira, which can be reinvested in supplying meters, transformers and power lines, especially on distribution networks. in the form of a subsidized loan to DisCos operators.

Also supporting this view, Mr. Olubiyo, who oversees the Nigeria Consumer Protection Network (NCPN), noted that while NERC was working on the ratings, some amounts might be set aside by the TCN as down payments on income from investments by the NDPHC/NIPP.

“This modality of cost recovery by the NDPHC, in the meantime, should be worked out on account payment or deposit pending conclusion of the assessment,” Olubiyo noted.