NIPP phase II to guarantee 16,000mw of electricity

By Adewale San­yaolu

THE recent declaration by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, that Nigeria lost over N7 billion to strike in the elec­tricity sector in the last two years remained worrisome.

Fashola said the amount, which could have contributed to the growth of the sector was lost due to the strike embarked upon by the unions in the sec­tor between April 2014 and March 2016.

The N7 billion loss is com­ing on the heels of fresh threat by labour to bring activities in the power sector to a halt over the recent increase in electric­ity tariff, which the Nigeria Labour Congress (NLC) ar­gued will further impoverish Nigerians.

Labour had argued that past increment in electric­ity tariff has not translated to improved power generation as the country was still strug­gling to wheel out less than 4,000 megawatts for a country with a population of over 170 million people.

But in the face of the fresh threats by labour to disrupt activities in the electricity sec­tor, stakeholders have called on the Ministry of Power to diversify the energy mix of the country from largely gas fired plants to solar, wind and hydro.

Specifically, they contend­ed that the implementation of the second phase of the Na­tional Integrated Power Proj­ect (NIPP), which would cov­er the construction of 11 hydro dams in Northern Nigeria was capable of providing the needed leap for the country’s power sector to generate about 16,000 mega watts (MW).

Background to NIPP

The National Integrated Power Project (NIPP) is an integral part of Federal Gov­ernment’s efforts to combat power shortages in the coun­try. It was conceived in 2004 as a fast-track public sector funded initiative to add signif­icant new generation capacity to Nigeria’s electricity supply system along with the electric­ity transmission and distribu­tion and natural gas supply infrastructure required to de­liver the additional capacity to consumers throughout the country.

In 2005, the Federal Gov­ernment incorporated Niger Delta Power Holding Compa­ny Limited (NDPHC) to serve as the legal vehicle to contract for, hold, manage and operate the assets developed and built under the NIPP using private sector best practices.

The NIPP is being imple­mented jointly by the federal, state and local governments through the corporate vehicle of the NDPHC, a government agency owned by the three tiers of government but which operates strictly on the private sector business model. The NDPHC Equity Structure are as follows: Federal Govern­ment 47 per cent; 36 states, 35 percent; 774 local govern­ments, 18 per cent.

The scope of the NIPP covers the entire value chain in the power sector, namely generation, transmission and distribution, including build­ing from the scratch a national gas infrastructure to power 10 gas-fired power plants across the country.

Expectations from NIPP Phase II

The second phase of the NIPP aims to change the country’s power infrastructure in other locations not fully captured under the first phase of the NIPP, especially in the northern region.

Selling off government’s 80 per cent equity in the NIPP generation assets only has ploughed back $7.1 billion – out of the country’s $8.46 bil­lion investment in NIPP Phase I – into the joint coffers of the federal, state and local govern­ments. Rather than squander the $7.1 billion on other gov­ernment projects in other sec­tors, the three tiers of govern­ment agreed under the power sector reforms programme to reinvest this huge sum in ex­panding the country’s power infrastructure under NIPP Phase II.

Candidate projects under NIPP Phase II are as follows: 43 critical transmission proj­ects to resolve transmission bottlenecks; 51 transmission projects to improve wheeling capacity to 12,000MW; 31 other transmission projects as foundation for increase of capacity to 16,000MW plus communication and national control centre, among others; large hydropower – Mambilla, Gurara, Itisi – with total ca­pacity to generate 3,450MW; small hydropower at 10 sites in the North to gener­ate 83.25MW. Already, the NDPHC has received pro­posals from the state grid of China, AK-AY and other in­terested foreign investors for partnership and financing of the NIPP Phase II projects.

NIPP/NDPHC: Issues, challenges

The achievements re­corded under the NIPP by the NDPHC were attained de­spite the infamous “Nigerian Factor”, which raised its ugly head all the way and continues to assail the process 10 years on. However, the NIPP gains are also testaments to the of­ten maligned “can do” spirit of Nigerians, including those driving the NIPP process, es­pecially at the Presidency, the Senate, state and local govern­ments, the Ministry of Power, the NDPHC and the Bureau for Public Enterprises (BPE).

This momentum must be sustained despite the change of personnel at the federal lev­el, many states and in the Min­istry of Power and the BPE.

Currently, the NIPP/ NDPHC is grappling with a number of challenges, which all three tiers of government and other stakeholders should close ranks to solve to move the power sector forward for the betterment of the country.

These challenges include inadequate gas for full com­mercial operations; inability to execute long-term GSAs and PPAs; partial payment of energy invoices leading to the NDPHC alone being owed over N77 billion as at the end of November 2015; litigation in respect of bids for Alaoji, Gbarain and Omoku power plants, and NNPC/NGC plans to divert gas on the western axis and 240mmscf to Omoto­sho and Geregu.

There are also investors’ concern in the sector border­ing on credit enhancement for NBET; put call option agree­ment with party acceptable to lenders; 100 per cent divest­ment of NDPHC equity (rfp is for 80 per cent); misalignment between term of PPA and GSA; possible review of bid to reflect delays in acquisition, and impact of regulatory risks and naira devaluation.

Others are policy incon­sistency, which has been the bane of the NESI for far too long; Gencos and the indus­try in general are concerned about capacity for transmis­sion and distribution, whereas the investment opportunity presented on the platform of the NDPHC are good options for resolving these infrastruc­ture deficit, and the monthly revenue gap of N20 billion needs to be closed irreversibly as a matter of urgency since efficiency and revenues drive the power industry; increasing acts of vandalism on NIPP/ NDPHC facilities, especially bombing of gas pipelines and other power infrastructure in the Niger Delta.

Gains of NIPP/NDPHC

Before 2005 and the ad­vent of the NIPP/NDPHC, Nigeria had transmission capacity of 4,495 Kilome­tre (km) on its 330KV lines. The country’s transformer capacity on the 132/33KV band was 5,700MVA and on the 330/132KV trans­former capacity, Nigeria had 5,300MVA.

In terms of distribution projects before the NIPP/ NDPHC came on stream, Nigeria, for instance, had 33/11KV sub-stations of 8,148MVA and 33KV and 11/0.41KV substation with 32,000MVA capacity.

And before the NIPP/ NDPHC, Nigeria could barely generate 2,000MW of elec­tricity. The country neither had any gas-fired power station nor even the gas infrastructure to generate electricity.

However, with the for­mulation of the NIPP and its implementation by the NDPHC over a mere 10-year period, Nigeria’s transmission capacity on its 330KV lines increased to 6,932Km or 46 per cent. In the same period, the NDPHC increased the country’s transformer capac­ity on the 132/33KV band to 11,118MVA or by 42 per cent and today Nigeria’s transform­er capacity on the 330/132KV band is 11,590MVA, an incre­ment of 93 per cent.

The NIPP/NDPHC also have huge impact on Nigeria’s distribution infrastructure in the period under review. To­day, Nigeria’s 33/11KV sub-stations of 11,649MVA, up by 43 per cent and 33KV and 11/0.41KV substation with 84,170MVA capacity, a mam­moth 163 per cent increment.

Under the NIPP and in only 10 years, the NDPHC has built 10 gas-fired power stations, an average of one power station per year, with a combined installed capacity of 4,528.5MW. These are Alaoji, Benin, Calabar, Egbema, Gbarain, Geregu II, Ogorode, Olorunsogo II, Omoku II and Omotosho II power plants.