Nigeria to Privatise 10 Power Plants

* Nigeria is privatising mismanaged state assets
* Ten state power plants to be sold in 2014 - adviser
* Electricity shortages are huge brake on economy

By Joe Brock

ABUJA - Nigeria will privatise 10 more state power plants by mid-2014, advisers to the government said on Monday, as part of plans to overhaul the country's feeble electricity sector.
President Goodluck Jonathan pledged nearly three years ago to privatise the bulk of Nigeria's electricity sector, in an effort to end chronic power shortages that are the biggest brake on growth in Africa's second largest economy.


Although Jonathan's roadmap is more than a year behind schedule, the government accepted deposits in April for 10 generation and five distribution companies that were created by unbundling the defunct state electricity firm.

Private firms will take control of these companies by the end of this year, the government says. The sell-off of the state power firm is expected to raise around $2.5 billion.

Nigeria now plans to sell 10 more power plants, all of them gas fired. Private investors must submit their interest in buying the plants on July 19 and preferred bidders will be announced in January next year, before handing over the power plants, advisers on the transaction CPCS told Reuters.

"We expect all the plants to be commissioned before June next year when private bidders should take over," Arif Mohiuddin, a partner at CPCS said.

The 10 plants will have combined electricity generation output of 5,000 megawatts, Mohiuddin said, which would double Nigeria's current capacity.

These power plants make up the National Integrated Power Project (NIPP), a plan set up in 2004 by then President Olusegun Obasanjo as a 'fast-track' solution to electricity shortages.
The fact that only six of these plants have been completed, nine years after the NIPP was formed, is a sign of how slowly electricity reforms are moving, industry experts say.

Nigeria has so far spent $15-$20 billion on the mismanaged NIPP, industry experts say. It is unlikely the sale of the plants will come close to recouping these funds, which could prompt wrangling between disgruntled politicians.

Mohiuddin declined to give valuations for NIPP plants.

A lack of investment in the transmission network, which remains in public hands, poor gas supply and labour disputes threaten to delay progress in boosting power output further.
Despite being the continent's top oil producer and holding the world's ninth largest gas reserves, Nigeria's power output is a tenth of South Africa's for a population three times the size. Sorting it out could seal Jonathan's legacy.

It would also cut business costs by up to 40 percent, add 3 percent to GDP and ease mass unemployment that fuels unrest seen in rampant oil theft in the south and a bloody Islamist insurgency in the north, economists say.

Though government plans to boost power output tenfold by 2020 will not come close to being met, a significant improvement could be felt in 2-3 years, industry experts say.

Source: Reuters

Aggreko in $250 mln Electric Power deal in Africa

JOHANNESBURG - Brtiain's Aggreko and its local joint-venture partner Shanduka Group will supply 107 megawatts of gas-fired power to Mozambique and South Africa, the company said on Wednesday, helping to plug electricity shortages in the region.

Countries in southern Africa have been struggling to meet fast-rising demand for power, with the next two years seen as particularly tight until new power plants start coming online.

South Africa's national grid nearly collapsed in 2008, forcing mines and smelters to shut for days. The crisis cost Africa's biggest economy billions of dollars in lost output and hit its neighbours who depend on South Africa for power supply.

Aggreko, the world's biggest temporary power provider, has signed power purchase deals with South African power utility Eskom and Mozambique's Electricidade de Mocambique (EDM) to supply electricity from the third quarter of this year until July 2014. Eskom will buy 92 MW and EDM the remaining 15 MW.

Rupert Soames, Aggreko's chief executive, said he saw opportunities to replicate the project in the region.

Aggreko could sell power to utilities or directly to private customers, including mines.

As part of the Eskom/EDM deal, valued at $250 million over two years, Aggreko will build gas interconnections, a substation and a 275 kV transmission line. Part of the infrastructure will go to EDM at the end of the contract.

The gas used in the plant, to be based at the Ressano Garcia border between South Africa and Mozambique, is part of gas given to Mozambique as a royalty by petrochemicals group Sasol, which is operating the onshore Pande/Temane gas fields.

Soames said the gas-fired power was more expensive than electricity generated by Eskom's own coal-fired power plants, but declined to give details.

Source: Reuters

GE signs $10 bln power plants MoU with Nigeria

Electric pylons

ABUJA  - General Electric Co has signed a memorandum of understanding with Nigeria to invest $10 billion in new power plants for Nigeria in which it will take a 10-15 percent equity stakes, a power ministry spokesman told Reuters on Monday.

The spokesman said GE would be "partnering with the government and the power sector partners," in a deal that will go ahead after privatisation of Nigeria's dilapidated and woefully inadequate power sector goes ahead.

Source: Reuters

Gambling with Gas

Ghana Oil and Gas Field Map

Ghana has this month reverted to electricity rationing, thanks to unreliable Nigerian gas supplies. But petty bickering over the location of Ghana’s unduly delayed gas infrastructure to harness local gas will cost the country in many more ways than meets the eye.

The delay is already estimated to cost the country and the Jubilee partners several hundred million dollars in unrealised potential revenue from oil production.

And now the decision to relocate the US$1.2billion facility from Bonyere to Atuabo is undermining social stability in two coastal Nzema communities in the Western Region.

Indigenes of Bonyere in the Jomoro District are fingering Deputy Energy Minister, Mr. Emmanuel Armah Kofi Buah and Ghana National Gas Company (GNGC) Head Dr. Sipa-Adjah Yankey, claiming that they have been scheming to have the facility sited at Atuabo in their rather flood-prone Ellembele District.

This new twist to the winding narrative means the nation is confronted with a perfect storm of factors that could undermine the peaceful and efficient exploitation of a resource now largely seen as the game-changer for its economic development.

The new development has at least three identifiable outcomes, each of which comes at costs of different magnitude and severity to the country.

For the purpose of analysis, let us start from the known to the unknown.

Firstly, the haggle over location risks further delays to the development of the gas infrastructure -- and that is set to further ruffle feathers of Jubilee oil field partners, who have said they cannot continue to produce oil and gas indefinitely without a pipeline to carry away the gas.

In conformity with government policy of zero gas-flaring from oil production, Jubilee partners have been re-injecting most of the associated gas back into the reservoir -- a practice which, the partners say, at higher rates of oil production would lead to compromising the integrity of the reservoir with adverse consequences.

Tullow Oil, the lead operator on the Jubilee Field, has intimated that full gas re-injection into the reservoir will no longer be an option by December 2012; and without a gas pipeline, they may shut-in some oil production.

Jubilee is currently pumping out an average 85,000bopd (barrels of oil per day) and Mr. Aidan Heavey, Tullow’s CEO, has lately not been mincing words about Jubilee’s future; “the earliest date for hitting 120,000bopd is first quarter, 2013. We will do everything not to destroy the world-class field.

“We are looking after the oil. The government is looking after the gas; and so what we’re looking at is how to manage the field.

“Jubilee is a credible, valuable asset for Ghana and has to be managed properly …to make sure nothing is done to damage the field in the long-term, because the important thing is the asset,” Heavey told B&FT.

Originally, plateau production of 120,000bopd was targeted to be attained by July 2011, which -- with the development of new wells -- would be sustained to about 2015, after which time production figures are expected to decline.

The inability of Tullow and other partners to produce at peak, translates into loss of potential revenue on approximately 35,000bopd at a conservative price of US$85 per barrel for the almost-two years of delay.

Secondly, the delay in getting the gas infrastructure in place undermines the country’s aspirations for high efficiency in electric power generation and supplies -- to both meet growing domestic demand and consolidate Ghana’s electricity leadership and dreams of becoming the de facto energy-hub in the West African sub-region.

The Ghana National Petroleum Corporation (GNPC), the country’s primary repository of knowledge and expertise in the hydrocarbons industry, notes that for the country to derive full value from oil production, associated gas will have to be utilised in the generation of electricity to help meet the rapidly-growing demand estimated at about 10 percent annually.

Ghana’s increasing domestic demand for electric energy has outstripped the total output of both its existing and potential hydroelectric generation sources.

So, in order to meet the growing domestic demand and also with an eye to consolidating its position as electric energy leader in the West African sub region, Ghana is increasing investments in thermal generation which currently contributes about 40 percent of total electricity generation to meet total peak demand of approximately 2,000MW.

The thermal plants are largely fired by crude oil, but are configured to be able to use less expensive natural-gas as feedstock.

A major development in the gas sector has come via the West African Gas Pipeline (WAGP), a multi-million dollar international project that is to deliver gas from Nigeria’s Niger Delta to Benin, Togo and Ghana, with Ghana receiving over 90 percent of the total delivery to fire thermal plants in Takoradi and Tema.

The WAGP is expected to be delivering 134,000m British thermal units (btu) daily, with maximum capacity of 474,000m btu/day; but currently the highest deliveries have not exceeded 90,000m btu/day to Ghana, thereby greatly hampering electricity generation in the country.

Increasingly, erratic gas deliveries through the WAGP is lending credence to a conspiracy theory here that Nigeria, for geopolitical reasons, is deliberately manipulating gas-flow through the WAGP.

A couple of weeks ago, GRIDCo, Ghana’s electricity transmission monopoly, announced it was resorting to power-rationing due to non-delivery of gas from Nigeria -- which has stalled generation from thermal sources.

Obviously, gas from the WAGP is the Achilles heel of Ghana’s electric energy sector; and much as it is easy to compute its costs on the investments of the 200MW Sunon-Asogli thermal plant -- which currently entirely utilises the gas from Nigeria -- its adverse impact on whatever geopolitical advantage Ghana could obtain by consolidating and stretching its status as regional power hub is incalculable.

It is now imperative that Ghana speeds up the development of its domestic gas resources to address the challenge posed by the Nigerian situation, even if it cannot entirely divorce itself from that inconvenient arrangement.

But thirdly, what could, and indeed should, be the most worrying outcome of the squabbling over the location of the gas, is the growing mistrust of people in the oil host-communities of their elected politicians -- as they are perceived to be biased in the allocation of benefits from the industry.

This has the potential to undermine social cohesion and social stability in the oil host-communities of the Western Region.

And for examples, one need not look far.

The Niger Delta of Nigeria is replete with ghost-communities: testimonies to inter-communal violence. Under a Revenue Watch International-sponsored programme that took a group of Ghanaian journalists to the Niger Delta for a first time experience in 2011, a handful of returnees to one such ghost-town in the Ogbia Kingdom explained that their two neighbouring communities ravaged each other because one side was perceived to be benefitting from too many of projects, while requests by the other went unheeded simply because they did not have political representation at even the local level.

These were thriving neighbouring communities of over 10,000 inhabitants that had lived peacefully together for decades, perhaps centuries.

The conflict raged on from 2004 for five years; and when the burning and looting intensified, inhabitants of both communities fled leaving behind charred buildings, not counting the dead, that are presently overgrown with weeds two long years after the last gunshot.

Over here, the raucous noises about seceding to Ivory Coast by indigenes of Bonyere over the re-location of the gas plant from their community should immediately strike a chord in the mind. Needless to be reminded that Ghana’s Western Region is not really too far from the Niger Delta and the people here cannot be any different from those in the Niger Delta.

Even more ominous is the proximity of Bonyere to Ivory Coast, a country that for all intents and purposes is still in a state of conflict…and worse, is laying spurious claims to Ghana’s offshore oil and gas wealth.

In a region where conflict is sparked by the flimsiest of excuses, Ghana cannot afford to be arbitrary in its decisions over its oil and gas resources.

Source: Business & Financial Times

Could 2012 be Nigeria’s year of real reform?

There are many reasons to be negative about Nigeria’s business environment. Issues such religious conflict, corruption, an inconsistent regulatory environment and poor infrastructure could push any investor to rather look at opportunities in other African countries.

Charles Robertson

Charles Robertson, global chief economist at Renaissance Capital is, however, more upbeat about Nigeria’s future. In a recent note to investors, Robertson posed the question whether 2012 could be the start of a radical transformation for Nigeria? “Is this the year when investors should be taking long-term bullish positions in the market? It is beginning to look to us like the answer to both these questions is yes.”

He highlighted three key reform areas for Nigeria: the fuel subsidy, the electricity sector and oil production. “Progress in any one of these areas would justify a more positive approach to the market – while progress on all three would be extremely positive. To our surprise, the latter is happening.”

Robertson offered the following commentary on each of these three areas:

Fuel subsidy: “The reduction of the fuel subsidy has been widely covered in international media. This was costing [the government] perhaps US$7 billion to $8 billion [every year], more than the combined budgets for education, health and agriculture. The compromise, which has seen the retail price of a litre of petrol rise from NGN65 (USc40) to NGN97 (USc60) instead of the targeted NGN140-145 (USc90), will be politically acceptable, we hope, while cutting the scope for corruption and allowing a redirection of funds that should benefit all Nigerians and reduce long-term fiscal risk. We may see further rises in fuel prices in 2013.”

Electricity sector: “The government has just abolished the electricity Power Holding Company of Nigeria (PHCN), which had been a major factor preventing reform of the electricity generation sector, in our view. Nigeria remains woefully underpowered in contrast to other sub-Saharan African countries, as any back-to-back visit to Ghana and Nigeria will demonstrate. The lack of officially generated power means that Nigerian businesses rely on expensive electricity from imported small generators, reducing the efficiency of all sectors of the economy. Note also the possibility of an electricity price hike (with widespread media reports suggesting a rise of 50-100%). We believe any push back on this move by Nigerians is likely to be significantly moderated by the prolonged pain of higher costs associated with generating power from inefficient alternative sources, such as generators.”

Oil production: “The third area of reform progress is the Petroleum Industry Bill (PIB). Over the past few decades, investment throughout the Nigerian oil sector has been governed by a mish-mash of legislation. The PIB aims to unify all the necessary legislation in one bill, providing a clear framework for investment in the energy sector. In January the government promised to put the PIB to parliament by the end of the first quarter of 2012, and a bi-partisan Special PIB Task Force was established on 19 January to help drive this process. The Task Force has been given 30 days from the date of its inauguration to produce a new, harmonised copy of the bill for consideration by the legislature. To some extent, progress is being made in some areas even without the PIB, but its approval would nonetheless improve the energy investment climate.”

In addition, Robertson has high hopes that Nigeria’s new agriculture minister, Akinwunmi Adesina, will boost private sector investment in the sector. He added that a constitutional review might cut down government bureaucracy.

Need for caution?

However, Robertson warned there are risks. “Obviously there is the chance that reform could stall, that the PIB could get stuck in parliament again and that electricity reform could also be delayed. This has happened before.”

According to Robertson there is no guarantee that Nigerians will support all these reforms. “It is sensible for the government to be doing this when oil prices are above $100/barrel, as it can draw on the windfall to ease the pain of reform, but a fall in the oil price would make reform harder to achieve.”

He added that tension between the Muslim north and Christian south could also pose a risk to investors. “We cannot provide a strong conclusion on where Nigeria will head, but we note that the Muslim north is unlikely to want to lose access to the energy resources of the south, and therefore there are strong interests in working to address the country’s challenges on this front.”

Source: How We Made It in Africa

Zambia sees big Electricity Surplus, could export

LUSAKA - Zambia expects to have a power surplus of about 600 megawatts (MW) by 2016, which should help ease the electricity deficit facing southern Africa, an industry official said on Wednesday.

Electricity pylons in Soweto.

Michael Tarney, managing director for corporate development at Zambia's Copperbelt Energy Corporation (CEC), said although the power situation would be tight for the next four years, Zambia was likely to have a large surplus after that.

"I think Zambia is well placed to export power because there are a lot of generation projects taking off," Tarney said.

About 600 MW of electricity is enough to power around a million homes in an industrialised country like Britain.

Electricity is a major issue in Zambia as the mining sector in Africa's top copper producer is power hungry and growth over the next few years could be constrained by available supply.

Tarney said Zambia would get out of the deficit relatively quickly and become an exporter of power because its generation projects were far ahead of those in the rest of the region.

"It will be very tight maybe to 2015 but I think after that things should improve very fast," he said.

Zambia was this year expected to agree the financing terms for the bulk of the funding for a $2 billion power project which will add 750 MW to the country's generation by 2017, he said.

The Kariba North Bank Extension project which will add 360 MW to the national grid was due to start producing electricity way ahead of the November 2012 target, he said.

Tarney said a 120 MW power station being developed by the Itezhi Tezhi Power Corporation, a company jointly owned by Zambian state power company, Zesco and TATA Africa of South Africa, would start production by 2015.

"We can have a surplus of around 600 MW available by 2016 for export, particularly for hydro power," Tarney said.

Zambia also planned to build two new hydro power plants that are expected to add a total of 247 MW to the national grid and boost regional supply by 2016, Tarney said.

Source: Reuters

South Africa seeks Partners for Renewable Energy Fund

JOHANNESBURG - South Africa has made available 800 million rand for renewable energy projects and is seeking private partners to manage the fund, Finance Minister Pravin Gordhan said on Monday.

"This is government's effort to firstly establish its own renewables fund if you like, and ensure that across government we have a more a coordinated approach towards funding."

"We've advertised for entities to indicate their interest in managing such a fund. It's important that we build partnerships with the private sector, with multilateral organizations, with NGOs as well who have the capacity to contribute to projects of this sort," Gordhan added.

He was speaking at a signing ceremony for a $250 million World Bank loan to electricity utility Eskom to develop wind and solar plants in a push to boost sources of clean energy and increase energy production in South Africa.

Public Enterprises Minister Malusi Gigaba said the loan showed great investor confidence in South Africa and Eskom.

The loan was approved last month before ratings firm Moody's downgraded the outlook on Eskom's BAA2 rating to negative from stable, in line with a similar appraisal for the sovereign rating.

Source: Reuters

Turning Rwanda's rivers into renewable energy

One of the business ventures that African entrepreneurs tend to avoid - perhaps in order to avoid a shock - is electricity.

It can be a highly capital-intensive enterprise, very risky, and the returns may not be felt for a long while. 

But Rwanda's Gregory Tayi saw that as an opportunity.

Gregory Tayi

Having supplied medical equipment, vegetable products and chemicals for many years, he decided it was about time to start providing electricity.

His country, like most African nations, struggles to meet its energy demands, and he realised that he could make a difference - and a profit - by putting up mini hydro-electric stations in some of its numerous rivers. 

"We went to the government. The government had a fund that would subsidise the people who do go into this business. So all these factors helped us to enter into energy," he told the BBC's African Dream series.

"There was this subsidy but the bank also gave me the credit. They looked back at my history of business, at what I was doing before," added Mr Tayi, now the proud general director of Renewable Energy Promotion (Repro).

Starting from zero

According to him, for even the smallest hydro-electric station in Rwanda, one would need an initial investment of around $500,000 (£312,000).

But he says that having the capital is not the main point. He believes that it is much more important to be clear about where one wants to go.

"When you start from zero, you learn what you wouldn't have learned in school. And I think that's the most important capital that one can get."

He said he did not have an easy start. When he was a student, his family could not even afford to help him with his school fees.

He remembers that when he finished university, with a master's degree in chemistry, he was "as broke as anybody". 

"I couldn't count on anybody. As I didn't get a job, I couldn't even sustain myself," he said.

Forced into business

 Mr Tayi pointed out that for him becoming a businessman was not a choice.

"I was forced into it but, luckily, I was forced into business because I struggled for the first years but other years, you know, things came much much easier."

Repro opened in 2007 and its main power site, at Murunda, in Rwanda's Western Province, started three years later. It currently generates around $10,000 per month.

And how would he describe a good business person?

"When people look at businessmen, they look at money, but I think money is not what makes the person," he said.

"A business, it's working with the people. It's making life easier for others. A good businessman is the one who looks at his neighbours, at his countrymen, at the world," he explained.

"It would be meaningless if I were rich and I'm surrounded by poor people. A good businessman is one who looks first on others before he looks after himself." 

Source: BBC

Egypt's Orascom to invest up to $130 mln in Rwanda

KIGALI - Egypt's Orascom Construction Industries plans to invest up to $130 million in Rwanda in the next three to four years to build a methane power plant to produce 50 megawatts, a company official said on Tuesday.

Only 14 percent of the Rwanda's population has access to electricity, according to the country's energy ministry.

The country had an installed capacity of only 69 MW in 2009, but plans to increase this to 130 MW by the end of 2012 through investments in small hydropower and methane gas plants.

On Tuesday Rwanda and Orascom Construction signed a deal to construct and maintain a methane gas plant at Lake Kivu.

"It's very early to talk in accurate numbers, but we think investing in the first 50 Megawatts will be in the range of between $100 to $130 million, but this is very rough," Mohamed Safeyeldin, Director Africa Operations for Orascom, told a news conference.

Coletha Ruhamya, minister of state in charge of energy, said they planned to ramp up production in the next few years and connect more people to the grid.

"We are targeting to have a thousand megawatts in seven years and connecting at least 50 percent of people to electricity," Ruhamya said.

"To get to the first megawatts can take or three or four years."

Rwanda is also looking at the possibility of harnessing geothermal power, produced by tapping the steam created by water trapped near hot rocks in the earth.

Source: Reuters

Reliable power supply boosts Kigali SMEs

A welder working in Kigali. ©The New Times

Small and Medium enterprises operating around Kigali City have, this year, seen their profits increase significantly due to steady power connection.

In an interview with The New Times, the chairman of Kigali Modern Furniture Cooperative in Gacinjiro, Denis Nsabimana, said that they have been able to increase their profits after government resolved the problem of power shortage, which previously hit various parts of the city.

“We used to sit idle most of day because there was no power. At times, we would go for two days without working because of load shedding,” Nsabimana said.

He said that power shortages greatly affected their activities. He cited that it would take around three weeks to make a bed which can now be completed within five to six days.

Nsabimana added that the constant availability of sufficient electricity has enabled them to meet their clients’ demands by making delivery of their products in time.

“In the previous years, people took us as liars because we could not finish work in time.”

He said that due to reliable power supply in the Gacinjiro area, more people especially the youth have joined carpentry business at their workshop, which he said, has helped reduce unemployment among the youth.

Nsabimana called for government support to build capacity among members of his cooperative which he said would equip them with skills to make better quality furniture to compete on the regional market.

Jean d’Armour Niyonsaba, another carpenter at Gisozi carpentry workshop in Gisozi Sector, Gasabo District said: “Reliable power has enabled us to improve our living standards and to meet our fiscal obligations.”

He also thanked government for constructing the road to Gisozi, which he said had increased the flow of clients.

Josephine Mukandoli, a milk vendor in Kinyinya Sector, said that it was routine for her merchandise to go bad because of the unstable power supply.

“We used to suffer a lot of financial losses due to power shortages especially dealers in livestock products like meat and milk but currently, we no longer face such challenges.”

Richard Rukundo, a barber in Gatsata Sector said: “Just last year, I received only 13 clients a day due to electricity problems but now I get over 25 and this has completely changed my financial status.”

Source: In2EastAfrica