Isaac Anumihe, Abuja
Since July 22, 2019 when the Federal Government entered into a contract with Siemens AG to upgrade Nigeria’s electricity generation to 7,000 megawatts, 11,000 megawatts and 25,000 megawatts in 2021, 2023 and 2025 respectively, there have been series of comments and reactions from stakeholders in the power sector on how these targets can be achieved in the face of mounting gaps.
For instance, the Generation Companies of Nigeria (gencos) have accused the German firm of intellectual property theft. The Gencos explained that the document which Siemens presented to the Federal Government to negotiate the contract was actually what they earlier sent to Siemens to help them finance the power project in Nigeria.
In this interview, the Executive Secretary of the Association of Power Generation Companies (APGC) and legal practitioner, Dr Joy Ogaji, doubted whether the 7,000mw is for installed, available or is the actual?
Her questions were later answered in this chat with Daily Sun.
Siemens contract document
It will interest you to know that 85 per cent of what is in the Siemens document is actually something that Nigerians developed and sent to Siemens to come and provide finance for us. Everything in that document Siemens took ownership of was actually developed by Nigerians———-in fact, among the generation companies. And if Siemens has evidence to disprove what I said, they should provide it.
I challenge Siemens that the document they presented is 85 per cent Nigerian content developed. So, there is no 100 per cent intellectual content from Siemens. It is about 85 per cent to 90 per cent intellectual content from Nigerians. I have looked at the document. I don’t know if that is the only document the government signed with Siemens. Even this particular one I saw is by chance because it is not in the public domain. So, if you ask me to analyse the import of the contract Siemens signed with Nigeria, how do we review, analyse or critique it when we don’t have the full details of what was signed. That is one question. The second question is, in terms of implementation, I looked at the one I was able to see which is called the Nigerian Electrification Roadmap. That is the one I managed to see. It is not in public domain. I was able to access it anyhow. It does not have the implementation agency that would be monitoring because our problem is not how to do but who is in charge of it? Nigerians don’t lack how to put those things down. Who will be the police officer that will be monitoring these things has always been our problem. I have done my research, we have the best policies, the best document, the best regulation but who is the body in charge of monitoring, evaluating and enforcing what that document says has always been our problem. And if the current administration can do that then we would have solved 50 per cent of our problems in Nigeria.
The Siemens document is about 111-page document and it is broken into three phases. Phase one talks about what and what would be done to get to 7,000 mw focusing on transmission and distribution. In the 7,000 mw, are we talking about installed? Are we talking about available? Are we talking about actual? Because in the generation terminology, each of these three things I mentioned means different things. An install capacity means the machine capability. As I speak to you right now we are above 13,000 machine capability. Baring all the constraints in terms of gas constraint, transmission, temperature (and due to lack of funds to keep those machines running which is mechanical capability) we have 7,500mw and above. The ‘actual’ means what the distribution is requesting to take. On average, that stands at 3,500mw. So, if the government in that Siemens document is talking about 7,000 megawatts, the question as a Nigerian and also a sector player, is, are we referring to the installed capacity? Are we talking about the available capacity? Are we talking about the actual? Are they increasing from the actual which is the 3,500 mw to 7,000 mw or are we talking from the available which is waiting to be taken? So, it is not clear and the document did not actually explain. So, if you ask me what is 7,000mw? That is the answer I will give to you? Seven thousand megawatts is shortchanging us by 500 and above. If we are to start on the actual then 7,000 in 2021 is already constraining the gencos the more. The power sector is like a teenager who is trying to break free from parental hold. Consumers are yearning for more power. The power sector is expanding so much but then we are still compressing it. We are 7,500 mw and you are projecting 7,000 mw by 2021.
Siemens 11,000MW and 25,000MW target.
Again I ask my question. Are we starting from the actual, the available or from the installed?
Mind you, the generation companies already have expansion capacities. Egbi currently has 1,320mw and they are trying to expand it to 5,000 mw. Did you take into cognisance the gencos expansion capacity plans before you came up with this projection? The answer I will give you is No. You can verify it on the Siemens Electrification Roadmap. If you check the document, you will see how many companies they have consulted and you will not see a generation company. It is like you have signed agreement to sell 100 eggs by the end of July but you did not access how many hens that can produce those eggs. The assumption is that we have enough generation companies to produce that power. So, the government signing a contract on our behalf for 7,000mw, 11,000mw, 25,000mw in different phases without checking the challenges of the gencos, for us we do not understand. So, we are hoping that there is another document that captures the gencos which is yet to be released to us to review and see if it fits the bill. If you want me to produce more gas for a thermal plant, I need to pay my suppliers. Currently, we are being owed about a trillion naira and most of it will go to the gas suppliers that we are owing and who have refused to give us gas on credit. So, if you are projecting 7,000mw, I would expect Siemens to sit down with the gencos and the gas suppliers bearing in mind that over 80 per cent of power generated in Nigeria comes through gas sources. So, the Ministry of Petroleum – the gas suppliers – are the critical stakeholders you can’t overlook.
Do they want to discard the gencos and generate their own power?
This is my candid opinion and not the gencos opinion. Before such an Electrification Roadmap is launched and the president signs off on it, there should have been a stakeholders’ meeting where the gencos, gascos, the distribution, the consumer group are in the house and then Siemens will now present it to everybody and we now start asking questions. It is after every gap has been fill that the president will now sign. But like I said, it is possible that that has been done without consulting everybody. Maybe, government has all the information that the operators need to submit. But it would have been nice to carry all the operators along. They carried along the distribution and transmission. But the gas suppliers, the generation companies, the consumer groups (from that document) were not consulted. I am not saying that the presidency has not done it. I am talking based on the document. The document did not show that they consulted those people. Without consulting those people, mind you except government has earmarked on big budgetary allocation to pay for this power to 7,000mw, 11,000mw and 25,000mw, there are tariff implications of that 7,000mw, 11,000mw and 25,000mw. If consumers are not part of it then we have a problem of consumer pushback of ‘we are not going to pay this’. But if they are carried along they will know that we are all working together.
FG spent N900bn on power since 2015
For the GenCos, that was the money government paid for power already generated and consumed. The portion of this N900 billion that came to GenCos was like paying your debt to the GenCos and the gas suppliers. It was not like a handout or an intervention fund. You bought provisions from me last year and this year you now borrowed money to pay me that money. Is that a handout? You are paying back your debt. For the GenCos, it was the money that was paid for what government has used. The reason government owed the GenCos is because between them and the DisCos there is a middleman called the Nigerian Bulk Electricity Traders (NBET) who is the government obligor. As you generate power, whatever you generate I will pay for it and if I delay to pay, there is an interest component I will pay on that debt. Now, that promise was not kept. On a monthly basis, the invoice of a GenCo is N55 billion to the market. Out of the N55 billion the DisCos pay only 25 per cent of the N55 billion. So, you know how much is left.
What then is the role of NBET?
The role of NBET is to make sure that the GenCos are perform efficiently. But NBET complains of inadequate funds to perform its role. So, this N900 billion is government’s way of intervening to help NBET defray part of its obligation.
Is the fund not loan?
Well, it may be a loan to the discos and NBET but to the gencos, it is not a loan because you are paying part of your debt which is not even fully paid.
Out of this N900bn how much is for Gencos?
I cannot really tell because these figures were calculated from Central Bank of Nigeria (CBN) because the loan comes from CBN. So, what happens is that the gencos are entitled to be paid both energy and capacity. This money only captures energy component. The capacity is not even paid. The capacity is like the fixed cost of providing that energy. The contract the gencos signed with NBET which is representing Federal Government is, if you have 7,500mw, we will pay for the 7,500 mw because it is available. We will not just pay it, it has to be tested by the system operator, NBET and Nigerian Electricity Regulatory Commission (NERC) to be sure that that 7500mw actually exists. The truth is that the person who ensures this thing is a government agency called Transmission Company of Nigeria (TCN). So, this figure is not produced by the gencos. It is a market data. So, once it is verified, government owes the gencos for this money.
Since 2015 it’s been an average of 3,500mw. It is the 3,500mw that the government is paying and not the 7,500mw.