He said that all outstanding debts to gas companies must
be paid in order to begin to stabilize power in the country.
The minister said this in a briefing in Abuja on
Wednesday, where he stated that only N450 billion was budgeted for subsidy this
year, but the ministry needs over N2 trillion for subsidy.
Adelabu also said, in
the briefing, that the problem of lack of electricity in
Nigeria had been worsened by the debts owed the Generation Companies
(Gencos).
He described the issues as multiple technical operational
problems across all segments in the value chain, but made complicated by lack
of sustaining liquidity and infrastructure funding, as well as structural
misalignment.
“The simple technical operational issues are: shortage of
gas supplies and aging dilapidated generation machineries causing below optimal
capacity utilization,” he said.
He also listed inadequate power evacuation capacity
at Genco locations, coupled with unstable and fragile transmission lines,
devoid of automated frequency controls, lacking in fail-over or back-up
capacity with frequent human disturbances through vandalism and theft.
Others, he said, are: Aging weak distribution
infrastructures (lines and transformers) coupled with huge meter gaps causing
unbearably large technical and collection losses.
“These are issues
that look so simple on the surface and should ordinarily require little efforts
to fix over time. However, it’s been quite difficult to get these problems
fixed over the years due to the complications wrapping the entire value chain
end to end.
“The major complications are: The persistent liquidity
issues coming from inappropriate tariff regime, poor collections and inadequate
funding of government subsidies leading to huge debts owed to the transmission,
generation and gas supply companies.
“This has restricted investments required for sustaining
supply flow, capacity expansion and infrastructural improvements. It has also
not only discouraged lending to the sector by financial institutions as the sectorial
activities are not bankable, but has also made the sector unattractive to new
investors,” he said.
The second complication, he maintained, is the value chain
structural issues bordering on operations and control of generation,
transmission and distribution segments.
According to him, there has been an inability of the
Nigerian electricity supply industry to adhere to market rules and to enforce
market discipline. This, he said, has led to each segment in the value chain
operating on a best endeavor principle.
Adelabu said the third complication is the lack of clear
and unambiguous definition of the concept of electricity as a nation.
On the roadmap for stabilizing the sector in preparation
for turnaround, he said there was a need for settlement of existing sectorial
outstanding debt obligations to the gas supply and power generation companies,
using partly cash payment and guaranteed debt instruments.
“Settlement of existing sectorial outstanding debt
obligations to the gas supply and power generation companies using partly cash
payment and guaranteed debt instruments. N1.3 trillion is current debts to the
Gencos and $1.3 billion legacy debts to the Gencos,” he added.
On ongoing activities in the ministry and its agencies to
improve power supply, he said they include augmentation of the hydro plants and
thermal plants.
The recent completion of the 700MW Zungeru Hydro
Electricity Power Plant in Niger State.
He also highlighted the financing of the required
infrastructure to enable complete evacuation of the 40MW Kashimbila Hydro Power
Plant in Taraba state using the Promissory Note facility at the Debt Management
office (DMO).
In addition, he mentioned the resuscitation of abandoned
26 small and medium size Hydro plants across the country with solar hybridization,
negotiations to settle the huge outstanding debts obligations to the Gencos
using cash injection and guaranteed debt instruments.
Speaking on frequent grid collapses, he said this was
caused by shortage of gas, ageing machines in the grid value chain, low
capacity to evacuate generated power, and destruction of power stations in some
parts of the North-East geopolitical zone of the country.
He said the Transmission Company of Nigeria has over 100
abandoned projects due to variations on contract figures as a result of the
fluctuations of the FX, hence the company will not award any new contracts till
all such projects are completed.
The minister also said over N50 billion had been earmarked
in the 2024 budget to build mini grids to supply power to remote areas, adding
that electricity Distribution Companies (DisCos) should sit, and anyone found
wanting will have their licenses withdrawn.
The minister also said he has reached out to the National
Security Adviser (NSA), Nuhu Ribadu, to help provide security for power
infrastructure.
Recently, power supply has been fluctuating, sometimes to
as low as 2,000mw, as the roughly 24 thermal power plants continue to shut down
due to inadequate gas supply.
Typically, operators sell gas in dollars to power plants
since most segments of their investments are priced in the US dollar, but
Gencos have recently found it difficult to pay since they get their own payments
in naira which had been badly devalued in recent months.
Upon that, they have complained of underpayments recently,
with their association saying last year that the federal government owed them
over N1 trillion.
Although Nigeria has a huge proven gas reserves of 206
trillion cubic feet, it has not been able to take advantage of it due to very
low investment in the sector, due in part to the price regulation of $2.18 per
million British Thermal Units (MMBtu) for gas-to-power charges.
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