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Nairaland Forum / Nairaland / General / Business / It Is Difficult Investing In Nigeria's Unpredictable Power Sector (132 Views)
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It Is Difficult Investing In Nigeria's Unpredictable Power Sector by peterobosa: 3:35pm On Aug 10, 2020 |
The problem in Nigeria’s power sector is not rocket science, and if it’s rocket science, you have rocket scientists that are able to deal with it. There’s no reason why we shouldn’t get it right. Well, there are several factors that I think a lot of folks don’t understand about our sector. You know, there’s a lot of conversation in the sector where we will say, yes, we’re willing to pay more money for electricity as long as we are sure we’ll get power 24/7 coming into our homes, our offices, our factories and whatever you have. However, it’s a little bit of a chicken and egg situation; if you don’t pay enough, the power sector doesn’t get fixed. If the power sector gets fixed and you don’t pay enough, it can’t be sustained. So there’s a little bit of dance to do around there. We have a value chain that we speak of and the value chain, if we focus right now only on gas-fired power plants, we’re talking about gas production, gas transportation through pipelines or whatever means you have and the power generation companies (GENCOS), and then you transmit the power through transmission lines and finally get to distribution networks. The distributors now take power and distribute it to their customers’ homes, factories, and offices. This is the entire value chain. So, gas flows from one site, all the way to the GENCOs to generate the power, and then it flows all the way to the customers. Then the money flows from the customers all the way back to pay everyone along the value chain. If any of these pieces is broken, the power sector doesn’t work. And it sounds very simple. However, the amount of investment needed to make this value chain work is humongous. If you want to produce enough gas to fire a 495-megawatt power plant, you need to invest at least $250 million for a brand-new processing plant. Now, I’m not even talking about the investment that the gas producer makes to drill in his fields to bring out the gas. This is just the processing facility, and then you need to run pipelines, depending on where the plant is situated. If it is situated right next to the gas processing plant, it could cost anywhere from a couple of million dollars to get the gas to the GENCOs or hundreds of millions of dollars to build a long pipeline to get it where it’s going. Currently, the AKK pipeline is about to be built. The AKK pipeline is over 600 kilometres long, and it costs several billion to build a pipeline. Someone is making that investment. Beyond that, someone is also going to make the investments to upgrade our transmission lines in the country. That’s a whole lot of money. We’re talking about hundreds of millions of dollars to build. And then finally, we get to the DISCOs. The DISCOs, when they were sold; what we were told was that the Discos have ATCL losses of around 45 per cent. That is the Aggregated Technical Commercial Collection (ATCL) losses. Now, what we’re finding is that those DISCOs, some of them have ATCL losses above 60 per cent. What that means is, for example, if you give them 10 megawatts of power, and they sell, they are able to collect only 40 per cent money for the power that they’ve given. Everything else is gone and lost. How can the DISCO survive? You can’t run a business this way. Source and full content here - https://nestoilgroup.com/media-centre/it-is-difficult-investing-in-an-unpredictable-power-sector-environment/ |
Re: It Is Difficult Investing In Nigeria's Unpredictable Power Sector by emillysmigael(f): 4:29pm On Aug 10, 2020 |
Why Nigeria exports electricity on credit which her citizens would easily have paid for if made available to them still baffles me |
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