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Buhari: Experts differ on power sector privatisation review

By BusinessNews Staff on April 16, 2015

Power sector stakeholders have expressed divergent views about how the incoming administration of Maj.-Gen. Muhammadu Buhari (retd) should handle the industry, especially the privatisation of key power assets.

While some are calling for a review of the privatisation of the power sector, others see it as unnecessary and uncalled for.

According to some of the experts, a review of the privatisation exercise is imperative because the supply of electricity across the country has not improved despite the fact that the sector has been in private hands for more than 16 months.

Top industry stakeholders as well as operators in the sector, in separate interviews with our correspondent, said the aim of privatising the sector had not been met as the country was still struggling to generate 4,000 megawatts of electricity.

According to them, the projection before the sector was privatised was that by the end of 2014, Nigeria would have been generating over 10,000MW.

But official figures from the Federal Ministry of Power on Monday showed that the country’s peak generation as of April 12, 2015, was 3,263.6MW, while the energy sent out was 2,988.72MW.

The Chairman, Society of Exploration Geophysicists, Nigeria, and former Head of Exploration, Nigerian National Petroleum Corporation, Prof. Charles Ofoegbu, said despite the inauguration of completed power plants by the present administration, the sector had failed to deliver adequate electricity to the citizens.

He said, “The privatisation of the power sector needs to be reviewed. The incoming government needs to do this before it can get the issue of power supply right. We keep inaugurating power generating plants, but I had warned in the past that power supply would keep diminishing and we have discovered that we are not making progress but rather retrogressing in the sector.

“This is beginning to happen because we are getting shorter hours of power supply whereas we are inaugurating many distribution and generation firms.”

Ofoegbu argued that an adequate gas master plan was not implemented, a development that he noted had rubbished the privatisation exercise.

He said, “The reason for this is because we did not implement an adequate gas master plan. It has not been fully implemented and you are beginning to put in place generating points on a master plan that is not implemented. Gas supply is not there. We don’t have adequate gas supply. There are some power stations that we have in this country that don’t have pipes that take gas to them.

“Why should that be the case? Why should we not plan? Why should we not do the first thing first? Then you inaugurate these massive projects while there are no raw materials to power them.”

When contacted, the Chairman/Chief Executive Officer, Nigerian Electricity Regulatory Commission, Dr. Sam Amadi, told our correspondent that the incoming government would have to follow due process before it could review the privatised power sector.

Amadi said, “A government that comes into power has a responsibility of making policies.

“It can change policies, improve existing ones or can more vigorously pursue existing policies. So, through due process, the National Electric Power Policy, which also led to privatisation, can be reviewed by the incoming government to meet certain demands and improve the industry.”

Analysts at FBN Capital Research noted that addressing the power challenge was a priority for the incoming administration.

They said in a report, “One of the priorities for the new administration will be the power sector. The outgoing Federal Government broke up the former Power Holding Company of Nigeria, privatised its generation and distribution arms, and indicated that transmission could also have a future in the private sector (rather than under private management).

“Successful transformation of the sector could have proved a major vote-winner in the presidential elections but remains far off. South Africa offers a salutary lesson in the cost of neglecting the industry’s investment needs. It was often noted that it generated substantially more power (than Nigeria) for less than one third of the population.

“The new administration may care to look at the consistency of tariff policy. The National Electricity Regulatory Commission indicated in Abuja on March 16 that exchange rate weakness could well lead to a rise in the tariff from mid-year, yet announced a 50 per cent reduction the following day. The cut did not apply to residential users, who were granted a six-month reprieve from the increase imposed on commercial and industrial consumers with effect from January 1, 2015.”

The analysts also urged the incoming government to resolve the impasse, which has prevented Geometric Power/Aba Power from starting production at its $500m generating plant in the capital of Abia State.

But the Chief Consulting Partner, Energy Services International Limited, Mr. Akin Bada, argued that the privatisation should not be reviewed; rather, the power sector should be enabled to deliver.

He said, “PHCN was sold to people who were adjudged to be the best buyers. It went through a long due process before it was sold. So, these buyers need to have the chance to take charge. They have not been given the chance to take charge.

“Secondly, there was no thorough due diligence on the PHCN assets because the workers there were at war with the Federal Government on the sale of the assets. During that period, none of the buyers could actually go in to assess what they were going to buy. So on getting there, they found a different thing and they must tackle these issues before things will work well.

“Also, in through last three or four months, every week we hear of the blowing up of gas pipelines, and gas is our major source of fuel to power plants. And when there is no gas, no energy will be sent. So, yes there are challenges but reviewing the whole thing by going back to the drawing board may not solve any problem. We have enough regulations and organs to take it to the next level. They should be enabled and not reviewing the exercise.”

The managing director of a power distribution company in the South West told our correspondent that reviewing the privatisation depended on what the incoming administration wanted to consider in the entire process.

The official, who spoke in confidence, said, “I don’t think a total review of the whole exercise will mean well for the sector. But reviewing some policies in the sector that will allow power firms to perform better will make a whole lot of sense.

“There are some issues that we often discuss with the regulator and such concerns can be looked into by the incoming government. So, it depends on how they wish to go about it.”

[Punch]

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