Stories by Adewale Sanyaolu
Except the federal, state, local governments, residential, commercial and industrial users take urgent steps to settle outstanding arrears owed electricity distribution companies (Discos), which presently is about N200 billion, the country may be thrown into total darkness.
The development would then mean that the essence and gain that ought to have been derived from the power sector privatisation would have been eroded, thus leading to massive job losses across the entire value chain.
The power sector is a tripod that needs the support of each leg to remain relevant if it must continue to survive. They are; generation, transmission and distribution. But, ironically, each leg of the tripod in the country’s power sector is not self-sustaining not to talk of providing support for one another.
On the other hand, electricity generation companies (Gencos) are being owed over N30 billion, according to the latest Nigerian Bulk Electricity Trading (NBET) Plc, September 2016, invoice cycle exclusively obtained by Daily Sun.
The issues
Executive Director, Research and Advocacy, Association of Electricity Distributors of Nigeria (ANED), Mr. Sunday Oduntan, said within the last four years the sector had been privatised, the Discos had been operating at a loss.
He said that due to the delay in the implementation of Multi Year Tariff Order (MYTO II) covering from December 2013 to February 2016, the Discos recorded a N12.8 billion shortfall.
The Executive Director said that government had not fulfilled its commitment to the agreement it signed with the investors during the privatisation of the sector in 2013.
According to him, government had promised the investors that there would be cost reflective tariffs from its inception as specified under the Performance Agreement.
“This never happened as customers were politically frozen and collection losses removed in 2015. Sculpting or under-recovery of cost will result in N164 billion revenue shortfall, for the period of 2016 through 2018 and delay in reflecting costs means a growing increase in deficits.
“Government promised increased access to gas supply but presently, there is little or no improvement in gas supply due to pipeline vandalism resulting in an average of 50 per cent reduction in generation.
“It also promised that full loses would be recognised in tariffs but presently real loses are higher than what is contained in tariffs due to non-payment of electricity bills by Ministries, Departments and Agencies (MDAs).
Discos hemorrhaging
The disclosure by Oduntan that MDAs, including federal, state and local governments owe EDAN members about N93 billion in electricity debts is mind boggling.
To make matters worse for the sector in 2017, aside its inability to borrow from banks, the ANED Chairman had disclosed in November 2016 that revenue shortfall in the sector due to non-cost recovery nature of the tariff system may hit N809 billion in December 2016.
Beyond the N93 billion power debt, Oduntan equally told Daily Sun in a recent telephone discussion that over N100 billion is being owed EDAN by residential and industrial consumers, bringing the accumulated debt profile to N193 billion.
Based on the foregoing, he said the Discos have recorded an additional N300 billion in revenue shortfall, and that is still growing.
Oduntan expressed concern that the N300 billion industry shortfall is massive and growing, arguing that the development poses severe liquidity crisis.
‘‘This is a cash liquidity crisis that threatens to completely undermine the electricity value chain and its ability to continue to serve its consumers,’’ he said.
Specifically, the Eko Electricity Distribution Company (EKDC) put the MDAs indebtedness to the company at N10.7 billion as at July 2016.
Oduntan disclosed further that the revenue shortfalls adversely impact the ability of the Discos to make capital investments in metering, network expansion, equipment rehabilitation and replacement, critical for efficient service delivery.
He regretted that the challenge of energy theft remained responsible for the huge industry shortfall, a development, he said, has forced many of the Discos to think out of the box by installing smart meters capable of detecting households and firms engaged in power theft.
Gencos too
According to NBET, invoices from the 22 power generation plants for September 2016, was N36.49 billion while payment to them based on receipt from the Discos was N8.99 billion, representing 24.64 per cent.
NBET further explained that total energy sent out in September 2016, was 1.97GWh, while the 11 Discos consumed 92.49 per cent of the total energy sent out in September, as international customers and other off-takers consumed 7.50 per cent.
Managing Director and Chief Executive Officer, Egbin Power Plc, Mr. Dallas Peavey Jr., had said last September that the owners of the plant considered shutting it down if the challenges remain unresolved.
Asked if the company had any challenge in paying gas suppliers, he said, “we do because we are owed N86 billion and we in turn owe the gas suppliers approximately N30 billion. We are working on payment plans.”
Peavey equally said the company owed banks $325 million as it had to borrow to overhaul the plant after it was acquired to enable it to operate at its installed capacity of 1,320 megawatts.
FG’s stance
Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola, had said that the Federal Government would not succumb to blackmail by ANED, but would only pay verified debt claims.
Fashola also advised the Discos to pursue the debt issue in their capacities as Discos and not under the aegis of any association.
He said that although the constitution guaranteed freedom of association, the privatisation that resulted in the transfer of the distribution assets of power was not held between the Federal Government and any association. According to the Minister, the Discos have so far failed to provide details of such debts for verification.
Fashola said: “Let me say without any equivocation that government will not succumb to the blackmail, at least, not the Federal Government of Nigeria.”
He said that government had provided an online platform where it requested all the Discos to submit details of their debts to that platform for government to verify it.
EWT completes fabrication for $15bn Egina field
Energy Works Technology (EWT) Limited, a subsidiary of the Obijackson Group, has completed the fabrication of nine Oil Loading Terminal (OLT) buoy mooring piles for Total Upstream Nigeria Limited $15 billion Egina oil field.
Group Managing Director (GMD) of Obijackson Group, Dr. Ernest Azudialu-Obiejesi, stated this at the load-out and sail-away ceremony for the OLT piles held at the Nestoil Industrial Area, Abuloma, Port Harcourt, Rivers State, last week.
The GMD disclosed that the Nigerian Local Content Act is a success because Nigerian companies, technicians and engineers have acquired expertise and built capacity that has increased indigenous participation in the Nigerian oil and gas sector.
He explained that the fabrication workshop comprises of an open construction area and a quayside being developed to handle load-out of equipment in excess of 3,000 tonnes and water draft of up to 5 meters.
“This facility (Egina) is being operated by Total. What it means is that the offshore production in Nigeria is actually gathering momentum and the completion of this project will add 200,000 barrels per day (bpd) to the country’s oil production.
“The important thing is that as a company, we have been part of the fabrication to actualise this dream. What it now means is that future development will continue to grow capacity until Nigeria is able to build a complete floating production, storage and offloading system integrated fully in Nigeria, and that is our aspiration,” he said.
He noted that EWT took advantage of the opportunity created by the Local Content Act to nurture skills to the point they are today, adding that as an innovative company, EWT has become the signpost for world-class expertise in the Nigerian environment.
‘‘Over the years, our company has demonstrated its outstanding technical competence and resourcefulness in delivering complex fabrication works and projects for clients.
Just before fabricating these OLT piles for the Egina project, EWT had constructed and delivered LP Flare Knock-Out Drum (Flare KOD) of diameter 6.0m x 25.0m tan/tan x 182 tonnes to Samsung Egina FPSO project – one of the heaviest types fabricated locally and produced to specification that will remove liquid droplets carried over with gas relief sent to the flare.
Before that, the company had also delivered the Soku NAG 90mm thick clad separator vessel for Shell Petroleum Development Company (SPDC). These achievements are a clear testament to the maturity of indigenous players in the oil and gas sector and an overwhelming testimony about our capacity to execute and deliver best-in-class projects,’’ he maintained.
The Group Chief Operating Officer of EWT, Mr. Gabriel Oramasionwu, explained that the process of completing the nine OLT piles took the company about 21 months, with a record of 400,000 man hours of non-injury, accidents or incidents.
He said the company’s strict compliance to safety principles and the dedication of the entire workforce involved in the project was responsible for the achievements recorded.
He stated that one of the challenges encountered in the course of the project was the perception that the job could not be done. And to overcome that constraint, he said EWT embarked on aggressive training of its manpower, assessment and qualification criteria. Going forward, he said the target is to keep the workforce busy so as not to lose them, while striving to get more jobs in order to build capacity.
Also speaking, the Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB) Mr. Simbi Wabote, said the OLT was the second of the four scopes subcontracted to the EWT by Saipem Contracting Nigeria Limited, which is the main contractor for the engineering, procurement, construction and installation of the umbilicals, flow lines and risers scope of the Egina main field development.
He stated that EWT had earlier participated in the Egina FPSO scope and fabricated 11 pressure vessels for the FPSO topside and hull compartments through a subcontract from Samsung Heavy Industries Nigeria.
“The achievements of the EWT are similar to the performance of other Nigerian service companies on different scopes of the Egina deepwater project. It is heart-warming to note that Egina provided a good opportunity for Nigerian companies to demonstrate their capacity and maturity since the enactment of the Nigerian Oil and Gas Industry Content Development Act in 2010.
“The board is proud of the EWT, particularly for the giant strides it has made within six years of commencing operations. Today, the company can be counted among the heavy fabrication yards in Nigeria. In July 2015, officials of the board were here to inaugurate the first 90mm stainless steel clad vessel fabricated in Nigeria for the SPDC’s Soku Field Development plan,” he noted.
Obijackson Group is a business conglomerate with interests in oil and gas exploration and production, pipeline construction, pressure vessel fabrication, power generation, dredging and marine logistics, aviation, among others.
Other subsidiaries of the group are Nestoil Limited, Neconde Energy, Century Power Generation Limited, IMPaC Engineering Limited, Shipside Drydock Limited, Gobowen Exploration and Production Limited, Scorpio Drilling International, Hammakopp Consortium Limited, B&Q Drilling Limited and Nesthak HDD Services Limited.