PROF. BART NNAJI CON, NNOM CHAIRMAN, PRESIDENTIAL TASK FORCE ON POWER
THE PRESIDENCYFEDERAL REPUBLIC OF NIGERIA
POWER SECTOR OUTLOOK IN NIGERIA:
Governments Renewed Priorities
SECURITIES AND EXCHANGE COMMISSION JUNE, 2011
2
Background: Nigeria on the World Stage
Nigeria: • Population is the seventh largest in the World, ~150 million
people • The largest of any country in Africa (accounts for nearly half the
total population of West Africa and more than 15% of the total population of the entire African Continent).
• Nigeria’s population is not just big but also growing at a very fast rate. On the current population estimates produced by the United Nations, Nigeria’s population will reach nearly 230 million within the next 20 years.
• More than 40% of Nigeria’s population is less than 15 years old.
In a nutshell, Nigeria has a large and energy hungry population.
3
Background: Nigeria on the World Stage
Country * Generation Capacity
(GW) Watts per capita S. Africa 40.498 826
Egypt 20.46 259 Nigeria 5.96 40 (25 available) Ghana 1.49 62 USA 977.06 3,180
Germany 120.83 1,468 UK 80.42 1,316
Brazil 96.64 486 China 623.56 466 India 143.77 124
Indonesia 24.62 102
Sources: • World Fact book - http://www.cia.gov/library/publications/the-world-factbook/index.html
* Energy Information Administration – www.eia.doe.gov
Funding To The Nigerian Power Industry
0
100
200
300
400
500
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Investment ('US$millions)
Source: Presidential Retreat On Power
4
Background: Pattern of Investments in the Nigerian Power Industry
General:
• Only 40% of the nation’s population have access to electricity supply
• High operating costs (over N8bn / US$53m), more than 80% goes into staff salaries and welfare.
• High energy losses (technical and non-technical losses)
• Inadequate expertise
• Distribution and Transmission network has to grow at the rate of at least 16% year on year to handle an equivalent of 13000MW by 2013
• Current average growth rate per annum is less than 1% due to:
• Limited investments
• Available investments go into replacements of damaged equipment (transformers, switchgear, etc), instead of going into new constructions for expansion and upgrades
5 Background: Current Status of Power Supply
6
Nigeria Before Power Sector Reform
Ø Vertically integrated government-owned monopoly that was not
commercially viable
Ø Significant managerial inefficiencies and leakages
Ø Lack of efficient investment in generation, distribution, and
transmission
Ø Continued increase in load demand vs. virtual static generation
level
Ø High suppressed demand throughout Nigeria
• Increasing Transmission capacity from 5800MW to over 13000MW by 2013 requires capital investments worth N200 Billion(US$1.4Bn) every year
• Increasing Generation capacity from 4200MW to 13000MW by 2013 requires capital investments worth N520 Billion(US$3.5Bn) every year
* 2008-2010 Figures taken from Budget Office of the Federation website * 2011 total capital expenditure numbers are estimated
7
Capital Investment Requirements
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2008 2009 2010 2011
Total Capital Expenditure (Billions of Naira)
Power Sector Capital Expenditure (Billions of Naira)
8
The new drive of the Government q Restructure the Industry
q Disaggregate the industry into functional autonomous
components of generation, transmission and distribution
q Market Development
q Cost Reflective Tariff
q Presence of a Strong Regulator
q Privatisation
q Active Participation of the Private Sector in the business of
the Industry
q Outright Transfer of Assets to the Private Sector where
applicable
9
New Framework and Renewed Priorities I
Restructuring of the power sector q Electric Power Sector Reform Act enacted in 2005 to drive
reform process
q Sector regulator (NERC) established October 2005
q Power Holding Company of Nigeria unbundled into
Transmission Company of Nigeria (TCN), 6 GenCos and 11
DisCos
q Private sector participation introduced with NERC licences
PHCN and IPPs
New Framework and Renewed Priorities II
q New Power Sector Roadmap officially launched by Mr. President on
26th August, 2010
q Outlines government’s plan to accelerate the pace of reforms and improve on short term service delivery
q Presidential Action Committee on Power (PACP) created to remove “red-tape, ” achieve policy consistency and cut-through bureaucracy in decision making by key stakeholders in power
q Presidential Task Force on Power (PTFP) created for day-to-day planning, developing and driving forward the Reform Plan for the Nigerian Power sector
10
New Framework and Renewed Priorities III
q The Reform of the Nigerian Electricity Supply Industry involves the
divestment of governments core interest ü Power Generation; the privatization of all government owned thermal power plants
ü Power Transmission; Government retains core ownership but private sector
management
ü Power Distribution; the transfer of ownership of the distribution companies to the
private sector
All these are in accordance with the Electricity Power Sector Reform Act
2005
11
Turning Words into Action I 12
q Strong, market-oriented Industry Regulator- NERC (constituted)
q Cost reflective tariff to be introduced by NERC
q Incentivizing tariff for gas introduced for 2010, 2011, 2012, and 2013 plus (now in place)
q Nigerian Electricity Liability Management Company (NELMCO) to
take over PHCN stranded assets and liabilities
q Bulk Trader (NBET) established as a broker between the power producers and DisCo’s. It is a creditworthy counterparty to execute PPAs for at least 5000MW, backed by World Bank PRGs
Reform and the Bulk Trader The sale of the Gencos and Discos is dependent on the operationalisation of the Bulk Trader. Investors will not sign a Sale and Purchase Agreement until they have a counterparty with whom they can contract. At this stage in the evolution of the electricity market, bilateral contracts between power producers and distribution companies are not possible. Only a bulk trader (with the ability to sign PPAs backed by bankable guarantees) can bridge this gap.
13
Turning Words into Action II 14
q Presidential Will to progress Power Reform (samples): Ø President’s launch of Power Reform Roadmap with clear policy
Ø N57bn paid for monetized benefit arrears of PHCN workers – (Aug. 2010)
Ø Appropriation of further $900 million to pay severance upon privatisation
Ø Focused Weekly meeting on Tuesdays at 11am chaired by the President
Ø Empowerment of National Council on Privatisation to progress power sector reform
Ø Very successful Presidential Retreat for Power Sector Investors (Oct.2010) Ø Very successful power investor road show in selected cities of the world
Ø Strong interest from financiers and operators all around the world
Turning Words into Action III
15
q Privatisation of successor companies now underway : Procurement of Transaction Advisers completed, EOI’s have been received, evaluated and shortlisted.
q TCN to have management contract in place by end of Quarter 3, 2011
q And there’s more…. To further incentivize the private sector
Ø 700kV Super Grid given go ahead and will be implemented by the new TCN management
Ø Central Bank of Nigeria N300bn Aviation and Power Sector Fund
Ø Ministry of Finance is providing credit support through the World Bank’s PRG scheme to support Bulk Trader power purchase transactions
Partial Risk Guarantee Scheme across the Power Sector Value Chain
NERC
16
CONSUMERS
GAS PRODUCER
GENCO TRANSMISSION DISCO
Opportunities in Generation: • Opportunities for investment is gas production and transportation • Coal deposit development and mining opportunities • Ongoing privatisation of generation stations
• Core Investor Sale of Thermal (gas-fired) Power stations • Concessioning of Hydro Power Stations
• New Independent Power Producers • Gas fired plants • Coal fired plants (NERC has developed preliminary coal plant tariff)
• Renewable energy (Commission developing feed in tariff and regulation on renewable energy standards)
1
Map 4: Existing NEPA Transmission Line System
ONITSHA
KAINJI
JEBBA/GS
JEBBA/TS
SHIRORO
AJAOKUTA
Abeokuta
Ikeja
Akure
Benin City
Asaba
PortHarcourt
Owerri
Uyo
ALAGBADO
BirninKebbi
Minna
Kaduna
Abuja
Jos
Bauchi
Gombe
Damaturu
MaiduguriKano
IIorin
AdoEkiti
Lokoja
Lafia
Makurdi
MAKURDI
EnuguAkwa
Umuahia
Ibadan
AFAMPOWER ST.
Sokoto
Gusau
Katsina
Hadejia
Jalingo
Yola
Abakaliki
Calabar
JIGAWA
KANO
KATSINA
SOKOTO
ZAMFARA
KEBBI
KWARA
KADUNA
ABUJA
NIGER
NASSARAWA
TARABA
YOBE
PLATEAU
BENUE
EBONYI
CROSSRIVER
AN AMBRA
OSUN
BAYELSA
KOGI
EDO
ABIA
RIVERS
DELTA
ONDO
OYO
ENUGU
IMO
ADAMAWA
BORNO
GOMBE
BAUCHI
EKITI
LAGOS
AKWAIBOM
ATLANTIC OCEAN
NIGER
REPUBLICOF BENIN
REPUBLICOF CAMEROON
REPUBLICOFCHAD
TRANSMISSION LINE LEGEND132 KVLINES - EXISTING
132KV LINES - AWARDED132KV LINES - APPROVED
132KV LINES - UNDER CONSTRUCTION330KV LINES - EXISTING
330KV LINES - AWARDED330KV LINES - APPROVED
330KV LINES - UNDER CONSTRUCTION
BULK SUPPLY - EXISTING
BULK SUPPLY - UNDER CONSTRUCTION BULK SUPPLY - APPROVED / AWARDED
HYDROELECTRIC POWER SUPPLY
THERMAL POWER STATIONS
132 KV 330 KV
H
SAPELEP/ST.
DELTAPOWER ST.
2 Circuits
OGUN
Osogbo
2 Circuits
3 Circuits
Notes:1. Multi-circuits are not indicated for the 132KV system.
2 Circuits
2 Circuits
2 Circuits
EGBINP/ST.
NIGERIA
Report Maps 7-24-00
Opportunities in Transmission: Existing Transmission Network
18
19
TRANSMISSION GRID STRUCTURE WITH THE SUPER GRID IN PLACE
ONITSHA
KAINJI
JEBBA/GS
JEBBA/TS
SHIRORO
AJAOKUTA
Abeokuta
Ikeja
Akure
Benin
Asaba
Port Harcourt
Owerri
Uyo
ALAGBADO
Birnin Kebbi
Minna
Kaduna
Abuja
Jos
Bauchi
Gombe
Damaturu
Maiduguri Kano
IIorin
Ado Ekiti
Lokoja
Lafia
Makurdi
MAKURDI
Enugu Akwa
Umuahia
Ibadan
Sokoto
Gusau
Katsina
Hadejia
Jalingo
Yola
Abakaliki
Calabar
JIGAWA
KANO
KATSINA
SOKOTO
ZAMFARA
KEBBI
KWARA
KADUNA
ABUJA
NIGER
NASSARAWA
TARABA
YOBE
PLATEAU
BENUE
EBONYI
CROSS RIVER
AN AMBRA
OSUN
BAYELSA
KOGI
EDO
ABIA
RIVERS DELTA
ONDO
OYO
ENUGU
IMO
ADAMAWA
BORNO
GOMBE
BAUCHI
EKITI
LAGOS
AKWA IBOM
ATLANTIC OCEAN
NIGER
REPUBLIC OF BENIN
REPUBLIC OF CAMEROON
REPUBLIC OF
CHAD
TRANSMISSION LINE LEGEND
BULK SUPPLY POINT
HYDROELECTRIC POWER STATION
THERMAL POWER STATIONS
330 KV H
SAPELE P/ST.
DELTA POWER ST.
OGUN
Osogbo
EGBIN P/ST.
NIGERIA
Potiskum
Niamey
132 kV
2
3
2
3
4
2
2
Aliade
Mambila
Bali
2
AFAM POWER ST.
2
2
330KV LINES – MULTIPLE CIRCUITS
330KV LINES - EXISTING
2
2
2005 : new
2
2015 : new
2015 : new
2015 : new
2015 : 3rd Circuit
2010 : new
2015 : new
2010: new
2
2
4 2015 : new
SAPELE P/ST.
Okitipupa
Geregu
2015 : 2nd Circuit
Agip
Zaria
2015 : new
2015 : new
2015 : new
2015 : new
700KV LINES – SUPER GRID
700 / 330KV SUBSTATION
Mambila Hydro
Some 330kV lines especially in Lagos and Delta areas could not be indicated on this geographical Map. See attached single diagram for Details.
NOTE:
Opportunities in Transmission: Proposed SuperGrid Network
Opportunities in Distribution Companies: Market Statistics 20
BENIN_ZONE BENIN_DISCO
ABUJA_ZONE ABUJA_ DISCO
ENUGU_ZONE ENUGU_ DISCO
P/H_ZONE P/H_ DISCO
IKEJA_ DISCO
IBADAN_ZONE IBADAN_DISCO
JOS_ZONE JOS_ DISCO
KANO_ZONE KANO_ DISCO KADUNA_ZONE KADUNA_ DISCO
YOLA_ZONE YOLA_ DISCO
SOKOTO
KADUNA
KOGI
ANAMBRA EDO ENUGU
EKITI
F.C.T NASSARAWA
IMO ABIA
AKWA IBOM
CROSS RIVER
RIVERS DELTA
EBONYI
ADAMAWA
BENUE
NIGER
PLATEAU
ONDO
OSUN
LAGOS
OYO
OGUN
KWARA
JIGAWA
BAUCHI
KATSINA ZAMFARA
YOBE BORNO
KEBBI
RIVER SAKIN PAWA RIVER DUNIYA
KADUNA
KAFANCHA
LOKOJA EKPOMA
BENIN (UGBOWO / AKPAPAVA)
AWKA NNEWI EKWULOBIA ONITSHA
ORLU UYO
PORT HARCOURT (BORO KIRI / DIOUBO)
ABAKALIKI
YENOGOA
ASABA
MUBI MINNA
SULEJA ABUJA
IKORODU
IBADAN (DUGBE / MOLETE)
ISLANDS
OGBOMOSO
SAGAMU IKEJA
OSHODI
YAURI / YELWA
NASSARAWA / DALA (KANO TOWN)
KANO
TARABA
BAYELSA
GOMBE
MAIDUGURI
YOLA JALINGO
EKO_DISCO
LAGOS ALIMOSHO
OSHODI FESTAC IKORODU SHOMULU
IKEJA IJORA
ISLANDS
KOGI
Kaduna DISCO CP = 354,563 ALA = 185.3MW EPL = 520MW ARC = N.609bn DC = 344MW
BENIN DISCO CP = 509,129 ALA = 307.4MW EPL = 1000MW ARC = N1.1bn DC = 392MW
CP – Customer Population ALA – Average Load Allocated (For July & August) EPL – Estimated Peak Load ARC – Average Revenue Collected DC – Distribution Capability
Residential = 65% Commercial = 20% Industrial = 10% Expert = 5%
KEY LOAD DISTRIBUTION
Kano DISCO CP = 441,126 ALA = 121.7MW EPL = 590MW ARC = N.555bn DC = 365MW
Yola DISCO CP = 178,289 ALA = 51.4MW EPL = 176MW ARC = N.189bn DC = 138MW
JOS DISCO CP = 242,852 ALA = 125.3MW EPL = 507MW ARC = N.465bn DC = 378MW
ABUJA DISCO CP = 279,270
ALA = 279.5MW EPL = 835MW ARC = N1.2bn
DC = 515MW
ENUGU DISCO CP = 520,864 ALA = 270.7MW EPL = 1017MW ARC = N1.036bn DC = 612MW
P/H DISCO CP = 344,133 ALA = 155.3MW EPL = 773MW ARC = N .591bn DC = 486MW
EKO DISCO CP = 286,758 ALA = 253.8MW EPL;1105MW ARC;N1.6bn DC = 796MW
IKEJA DISCO CP = 658,701 ALA = 396.9MW EPL = 1335MW ARC = N2,1bn DC = 854MW
Ibadan DISCO CP = 787,899 ALA = 313.9MW EPL = 1193 ARC = N1.5bn DC = 878MW
Other Opportunities:
• Local manufacturing of power equipment: switch gears, transformers, cables, etc. • Technical services
1
Trajectories for FGN Capital Investments in the NESI over the next 5 years
q Generation: Significant reduction over the next 5 years:
Ø No more FGN only commitments to new gas-fired power plants;
Ø All new gas-fired power plants to be private sector driven;
Ø But possibility for continued FGN capital investments (via PPP participation) in coal and/or hydro power plants as well as renewable technologies
q Transmission: Hill-shaped over the next 5 years: Ø Increase in direct FGN investments over the next 2 years;
Ø Declining sharply thereafter through shift through funding from wheeling charge.
q Distribution: Sharp decline (to zero) over the next 2 years:
Ø Via divestment of all unbundled distribution companies.
22 22
Government Investment Trend: Generation
Government exits funding gas-fired plants by itself after completing current NIPP phase
Government continues PPP investment in Hydro, Coal and Renewables
Presidential Task Force on Power
23 23
Government Investment Trend: Transmission
Government initially increases investment in transmission but subsequently commercial wheeling charges will sustain increases under private sector management
Presidential Task Force on Power
24 24
Investment Trend: Distribution Government exits funding of the distribution sector after privatization of DisCos
Presidential Task Force on Power
25 25
Summary I
Government’s role in the process:
q Development and Deployment of Effective Policy
q Government is asserting its Will to carry-through government policy
Ø Effective Manager(s) of process implementation
Ø Backing managers in decisions that may be unpopular but good for the economy and the populace
Ø Educating the public about the benefits of the Policy
26
Summary II
Private Investors – Exciting opportunities for investment all the way along the value chain:
Ø gas production
Ø gas transportation
Ø power generation
Ø transmission sector
Ø Distribution Ø Support services throughout the value-chain
27
Thank You
Visit:
www.nigeriapowerreform.org
for further information.
28