DISCOS’ are slowing down operations of generating companies, says energy expert

October 2nd, 2018

Engineer Lamu Audu, is the Managing Director/Chief Executive Officer, Mainstream Energy Solutions Limited, the operators and managers of Kainji and Jebba Hydro Power Plants (HPP). At the end of the company’s Annual General Meeting held in Abuja, Audu told MIKE UBANI, that while generating companies are willing to put more energy into the market, distribution companies are not able to collect and remit the cost of energy sent to them.

What has your company done to restore the installed capacity of Kainji and Jebba Hydro Power Plants since it took over the two power plants in November 2013?

First of all, I am proud to say that today as we speak, we are the first and the highest in terms of energy output onto the grid in the nation. Over 20% of the energy into the grid comes from Mainstreams Energy Solutions power plants. We took over Kainji five years ago with zero mega watts, but today we have 440MW from Kainji. The total between the two power plants is 922 MW, and still counting. We are still counting because we have instituted in place a robust capacity recovery plan which will enable us recover the installed capacity of the two power plants. Right now as we speak, General Electric (GE) is on sight at Kainji recovering or rehabilitating an 80MW capacity power plant. The procurement process has been concluded also to award contract for the recovery of 96.4MW capacity generating unit at Jebba which will be awarded to Marubeni of Japan. So, we have a capacity recovery plan in place until we recover everything. We have a plan to expand the capacity at Kainji. Right now, the installed capacity is 760MW. I told you we have 440MW; that means we still have more to recover the capacity, but we are also putting in place expansion plan to add 220MW, bringing the installed capacity of Kainji to 960MW This is what we are doing to be able to actually increase our capacity and energy delivery to the grid for the benefit of Nigerians. And it will interest you to know that being a hydro plant, our energy is the cheapest because we don’t pay for gas, and the running cost is usually on the low side. So, by increasing our capacity, we are actually reducing the cost of energy to Nigerian consumers. So, we encourage the government actually to as much as possible encourage hydro potential to develop across the nation. We have huge potentials to generate enormous amount of hydro power in Nigeria which have not been tapped. Yes, the government is trying – Mambilla will soon come on – Zungeru with 600 mega watts – I think is more than 70% completion. But we still have huge potentials, not necessarily big hydro power plants, but the medium and small hydro plants will add a lot to reducing the energy deficiency in Nigeria.

What do you think has been the drawback to increasing the energy generation and consumption level in the country with the presence of these huge potentials you talked about?

You know the power sector is just evolving because it was privatized just five years ago. Before then, it has all being government business. And I can tell you as a player in the industry, almost all my life has been in the power sector, government has little or no business in power generation. The government only need to put in place an enabling environment; policies that will encourage people to come and invest in the sector. You can’t run a power plant through budgetary or appropriation system that we have in this country. That is why most of the power plants went aground. So, now that the sector has been opened up, especially with the policy of allowing generating companies to sell directly to consumers through the bilateral agreement, it will encourage more investment, and I believe very soon, you will see more investment in the sector. Again, the other factor actually is the market.

What is wrong with the energy market?

The market has not been encouraging. Some of us that took the risk to buy into these assets have gone through a lot of challenges at getting back our invoices paid because the distribution companies are not able to collect and remit the cost of energy that has been sent to them. And that is a serious draw back. The government really needs to come in to see how they can solve this problem. The distribution end in the value chain in the sector is the weakest today. I have just told you what we have done, but we are not getting commensurate or equal investment at the distribution end. The generating companies are doing quite a lot, but in fact the narrative has changed to the extent that we have stranded power.

What do you mean by stranded power?

The meaning of stranded power is that what we are capable of generating is not being taken. While Nigerians are crying for low electricity supply, we are being asked to shut down our units because the distribution companies don’t have the capacity or are not willing to take the energy and sell to the consumers.

Why do you think the distribution companies are behaving that way?

I can’t speak for them, but I think we are not getting the expected investment at the distribution end. The agreement with the government, I believe just like us, we had an agreement in taking over these facilities. In their own case, they are supposed to reduce loses, expand the network, and improve on efficiency of their operations, which I think is not the case while the generating companies are working in line with the service level agreement we have reached with the government. So, there is a huge gap between what we are able to generate, and what the distribution companies are able to take and give to the consumers. It is really unfortunate because that is also reducing the appetite of investors. If what we have is not being taken and utilized, tell me why I should put in money to add capacity. So, it is really a difficult situation. We believe that the government is willing to change the situation, and that is why we are going ahead with all the investments I mentioned earlier – to add capacity – recover capacity – and expand – because the situation cannot continue as it is if Nigeria must develop economically and socially. We need to increase our generating capacity for generation and distribution as well as transmission of electricity.

Why do you think your chairman – Col. Sani Bello (rtd), described your company as leader in the energy market? What made you so?

Yes. We are the leader in the market. It is not just because he is the chairman of Mainstream. We have it on record. From January till date, we are the highest in terms of energy output to the grid. It is a fact, and anyone in the energy sector can tell you that.

What is your take away from the AGM?

My take away as the MD/CEO of this company is that we are proud to be the managers of this company because today if you look at our annual report, it tells you that we have a very responsive and hard-working management, backed by very experienced board to the extent that within these few years of our operation, we are able to pay dividends to our shareholders. We also paid the acquisition loan that we took. All these have been done through our cash inflow despite all the challenges we have been getting in the market such as our invoices not being paid, but because of prudent management of our income, we are able to pay dividends and pay our loans completely. Of course, a company as big as this cannot survive without taking loans for one reason or another like the expansion programme we are talking about – we’ll need support financially, but I can tell you that I am very proud to be the head of the management of this company considering our performance, as shown today. Our shareholders are very happy for us to be paying dividends since last year. And we believe that with the repayment of the acquisition loans, the situation can only get better. We have done quite a lot, and the acquisition loan was in dollars, – just imagine how volatile it has been, and yet we survived. And that tells you the kind of management we have on the board.

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