INTERVIEW By Simon Echewofun Sunday
Mr. Chiedu Ugbo is the Managing Director, Niger Delta Power Holding Company (NDPHC). In this interview, he speaks about the ongoing privatisation process of 10 power plants and the efforts to create access to electricity in more rural areas.
What was the vision for establishing the NDPHC?
The National Integrated Power Projects (NIPPs) was established as an intervention project to bridge the infrastructure gap across the value chain in the power sector. They include gas infrastructure, transmission, generation and distribution. It was actually centred on generation as we needed to increase generation capacity which was hovering around 6,500mw installed capacity, and available capacity was less than 3,000mw.
Government decided to step in and increase the capacity of generation plants and to build these plants you need to supply gas to them as they are all gas thermal plants. There were 10 plants conceived at the time and if you have to build them, you need a supply of gas infrastructure. So where there were no existing gas pipelines, we made investments there.
When setting up a generation plant, you need to evacuate the power. So we made a significant investment in transmission substations and transmission lines spanning thousands of kilometres. When you evacuate the power and you want it to be distributed; load rejection is because the distribution facility is not enough. So at the time NIPPs was conceived, it was a part of the design that if you generate the power and evacuate, the consumers should also be able to receive the power. So within the resources that were available, there was also a significant intervention in distribution infrastructures like injection substations, 32KV lines, 11KV lines, and transformers across the country. It was actually designed as a project to increase power delivery to Nigerians.
Since NIPPs was conceived in 2004 and commenced in 2005, a lot of projects have been done. When we came in, the clear mandate that we had was to provide power to Nigerians. To do this, we had to complete the outstanding projects in transmission and distribution. In generation, the design is 10 power plants: we have two that are wholly uncompleted, two others are partially completed and we have to complete these projects, we are pursuing that vigorously.
We are also working on ensuring that those not connected to the grid in the rural areas get power in their communities. We are doing 20,000 solar home units. The Vice President commissioned one of such communities recently. We are receiving consignments for the rest of the communities, which is part of the mandate we have to bring power to Nigerians.
We are also working on the existing generation stations. We can’t do with all these massive projects so the mandate is also to privatise them. It started before this administration and we are continuing with it to ensure we complete the privatisation of these projects. It is ongoing and the transaction has advanced.
We have a few market issues that are hindering the conclusion of the transaction but we are also devising means to solve the issues and complete the transactions. Investors are available, ready and willing. They are just waiting for the government to do one or two things and we are working on them. We will ensure that the demands which are reasonable are met and we won’t want them to take advantage of the government and consumers and be asking for what is inordinate. We told them that we will not grant inordinate demands that are not part of the transactions but will grant the ordinate ones so we can close these transactions.
We have about $4bn in generation in 10 power plants. There is always confusion about how much we are selling the power plants. We received offers of about $5.6bn but the cost of developing these projects is about $4bn. For the distribution projects, we have spent $1 to $1.5bn so far. Over $2bn have been spent in transmission. So, in all, it is in the neighbourhood of $8.5 billion and the projects are there for people to see. The Ikot Epkene switching station is a transmission line that runs from there to Jos, Plateau State. It is a 12 circuit substation with lines coming from Calabar, Afam, Ikot Abasi and Alaoji.
The line then moves to a masterpiece substation at Ugwuaji in Enugu State, from there to Makurdi, down to Jos. That is part of the project, and there are 64 of such sub stations built under NIPPs in the space of 10 years.
What percentage of the shares will government be selling in the 10 power plants?
The $5.6bn offer we got from investors is for 80 per cent of the shares of the generation assets alone. It is not for every investment we have made. The privatisation transaction went through a competitive process starting with an expression of interest for those interested in the 10 Generation Companies (GenCos). The bids were evaluated and those that met the requirements were issued a request for proposal and then tendered their technical and financial proposals. Both were evaluated and those who met the benchmark moved in 2014. The financial proposals we received from the preferred bidders was the total of $5.6bn for 80 per cent of the shares.
Yes, because of the internal issues like gas supply and some other external issues involving the liquidity and market issues. We now say we will deal with the GenCos based on where we have gas and we don’t have internal challenge, we presented those first. One of these plants is 561mw Calabar NIPPs; we have Omotosho NIPPs, Geregu, and Ihovbor in Benin being the fourth. For Egbema NIPPs, we are trying to complete it but if we do not complete it, we have approval to sell it ‘As Is’.
The important thing is that we are not just selling it; we want to make sure that the Nigerian consumers benefit from the project. So we want to see the projects completed, and see that they deliver power for the benefit of Nigerians. That is the mandate and that is what President Buhari’s administration seeks to achieve.
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