Private firm tackling Nigeria’s power problems head on
Nigeria’s power supply problems are having a detrimental effect on the country’s economy. A local company, Geometric Power Ltd, has taken the bull by the horns and is currently developing its own independent power project (IPP) in the southern city of Aba, Abia State. Jaco Maritz asked Oseloka Zikora, senior manager, public affairs at Geometric Power, about the status of the project and Nigeria’s power sector in general.
How far has work progressed on the Aba power project?
Geometric Power is the developer of the Aba Integrated Power Utility Project which includes a 188 megawatts power plant, the construction of over 100 kilometres new overhead lines, construction of five new substations and rehabilitation of three existing Power Holding Company of Nigeria (PHCN) substations and distribution infrastructure as well as the construction of a 27 kilometre gas pipeline in Aba.
Geometric Power Aba Ltd (GPAL), the special purpose vehicle for power generation, was licensed by the Nigerian Electricity Regulatory Commission (NERC) to generate power in an embedded form to the Aba ring-fenced area while Aba Power Ltd (APL) was also licensed to distribute electricity within the area. The different contracts are at various stages of completion, for instance the power plant is about 80% completed, the substations almost 90% completed, while significant progress has been made on others. Being a ring-fenced project, the Aba IPP will domicile the power generated from the power plant within the ring-fence. However, any excess energy generated can be supplied to the national grid through a power interchange agreement.
Why did Geometric Power decide to establish the project in Aba specifically?
Aba is one of Nigeria’s major industrial clusters with a diverse mix of customers (industrial, commercial, and residential). The industries in Aba include tissue manufacturing, food processing, cosmetics, leather works and general manufacturing. Local supply of electricity by the government-owned PHCN is subject to daily interruptions, poor voltage and frequency control. There is therefore a huge gap between demand and current supply. All industries have “back-up” power plants and some have disconnected permanently from the public power lines and operate their generating plants on a 24/7 basis. The cost of such self generation is highly prohibitive.
We believe that reliable power supply will bring about high socio-economic impact and give greater verve to the entrepreneurial spirit of the people. The Aba power plant therefore represents our drive to bring a permanent solution to the perennial electricity crisis in the area.
What have been the main challenges that Geometric Power faced with the project up to now?
Unfortunately despite the huge successes that we have recorded as a pioneer indigenous company in the area of private power provision, we’ve not been able to commission and commence operations as we had envisaged due to several reasons, one of which is the government’s near suspension of the power sector reforms that made foreign investors wary. Another is the global financial meltdown that has had an adverse effect on sources of fund.
The current electricity tariff structure has been blamed as a major deterrent for private sector investment in the power sector. Will the Aba power plant sell its electricity for the same amount as the national rates? What must be done to get electricity pricing right in Nigeria?
The principle behind the multi-year tariff order (MYTO) is commendable as a necessary component of the reform process. However, we the independent power providers believe that MYTO rates are still lower than the rate that would attract investors. No investor would want to put his money in any project that would not guarantee a reasonable rate of return on investment. Recently NERC commenced a review of MYTO. While this initiative is welcome, we sincerely hope that the review would be robust enough to accommodate the dynamic nature of features that underpin the MYTO framework such as the inflation rate, gas/fuel availability and pricing.
We will operate both within the MYTO structure and also charge commercial rates to industrials and other commercial outfits based on bilateral power purchase agreements.
Inadequate gas supply has been blamed as one of the major reasons for Nigeria’s electricity crisis. How will Geometric Power ensure a steady supply of gas to the Aba power plant?
First of all the plant is located at an area with close proximity to the required fuel source (natural gas gathering field). To take full advantage of this and ensure that we have steady supply, we have signed a gas supply agreement at near commercial rate with Shell, the operators of the gas gathering field. We are also constructing a 27 kilometre dedicated gas pipeline from the Shell field to the plant.
Do you foresee an increase in the construction of independent power plants in the future?
First and foremost, the government will need to fast track the reform process and make the environment for private sector participation more enabling and attractive. For more independent power plants to come on stream, there would be need to create credible power off-taker(s) and to do that we should think about privatising, or at least concessioning, the PHCN successor companies.
We should also constructively address the issue of fuel supply for power plants, especially for the gas-fired plants. For gas-fired plants for instance, you need to make domestic gas pricing realistic to incentivise gas producers to guarantee supply to domestic off-takers and invest in the development of gas supply infrastructure for local use. Also the cost of funds such as high interest rates and short or inappropriate tenors should be addressed. We are happy that the Central Bank of Nigeria governor is addressing the issue and his actions in that direction are quite laudable.