BY WILLIAMS ORJI
The country’s gigantic power sector reforms which were launched 2001 by the then President Olusegun Obasanjo programmes, that saw to the unbundling and privatization of electricity generation and distribution companies in 2013, is still going through metamorphoses of sort that are geared to achieving a steady power supply to a teeming population that has turned its eyes to a project they believe to be a hoax and unending, with more agonizing negative results that have continued to gulp billions of the country’s hard eared money. .
Having gone through decades of inadequate power supply that has negatively affected the socio-economic growth of the country, the power sector reforms as championed by several administrations, seem to be a mirage, due largely to glaring maladministration that had plagued the country.
Prior to the reform programme, Nigerians had witnessed a comatose sector that was infested with high level of corruption, ineptitude, deep-rooted inefficiency that was necessitated by maladministration, which gulped billions of tax payers’ money ostensibly hiding under power sector reforms.
But many years after, and through three succeeding administrations, not much success would be said to have been achieved in the sector, even as more billions of naira are still being poured to give Nigerians the much-needed stable power in their homes and work places.
It is believed that Nigeria has about 13,400MW of installed power generation capacity of which 8,000MW is mechanically available. But less than 4,000 MW of this installed capacity has been dispatched on average over the last years because of obvious hiccups mainly noticeable in epileptic gas supply, electricity transmission, generation and distribution.
To come up with an everlasting solution to glaring setbacks that had hitherto be a stumbling blocks to achieving the 13, 400 installed capacity and make the county enjoy a steady power sector, regulatory and intervention agencies were established by different administrations aimed to propel and formulate policies and action plans, that will guide in achieving the much needed stable power.
One of such intervention agencies is the Nigeria Bulk Electricity Trading PLC, NBET; a manager and administrator of the electricity pool in the Nigerian electricity supply industry.
NBET was established in 2010 by the administration of Dr Goodluck Jonathan, to among other things create a financially viable electricity market through a mission statement that was anchored on efficient and effective catalyst for investment into the Nigerian electricity market by ensuring transparency and guaranteeing payment.
Therefore to achieve a stable power supply through equitable power generation, transmission, purchase and distribution, NBET has continued to discharged set obligations through the statutory assigned mandates which include but not limited to, contributing to the formulation, implementation and evaluation of policies for the efficient system settlement administration of pool and other policies that may have implications for the efficient economic regulation and risk management of the industry by managing and administering the electricity pool – this entails processing the monthly settlement of the physical trades that occurs across the integrated grid, worth approximately between N50billion to N55bilion.
Others include, crafting and managing transaction agreements for the effectiveness of the sale and purchase of electricity energy that is traded across the integrated grid, namely:
A- Power Purchase Agreement (PPA) – this involves 15 of the on-grid generation companies.
B- Interim Agreements – this involves 10 of the on-grid generation companies.
C- Vesting Contracts (VC) – this involves 11 distribution companies.
D- Power Sales Agreement (PSA) – this is interconnector Customers agreement (CEB and NIGERLEC).
The mandates also include, managing suit of guarantees for the effectiveness of the transaction agreements that involves:
a- Bank guarantees (Letter of Credit); a counter party to the Vesting Contract (VC) issues to NBET.
b- Bank guarantee(Letter of Credit) NBET issues to a counter party to the PPA(Security Trust Deed)
c- Sovereign guarantee of the Federal Government due to the electricity sector, usually in the form of a Partial Risk Guarantees (PRG) that can be issued by a first class international or local bank or Development Finance Institution (DFI) such as World Bank or African Development Bank (AfDB).
It is also worth noting that NBET also manages credit facilities of the Federal Government which involves:
a- Contingent liabilities due to the electricity sector, which amount to over 3billion US dollars.
b- Shareholder loan involving 350million US dollars EuroBond(of which the principal amount has been successfully repaid to the Debt Management Office (DMO) in 2018, under the administration of the outgoing Managing Director and Chief Executive Officer of NBET, Dr. Marilyn Amobi.
c- Payment Assurance Facility (PAF) – this augments markets proceeds; in this, N701billion Payment Assurance Facility (PAF) covered invoices from January 2017 to December 2018.
It is equally noteworthy to state that, as part of its mandate, NBET manages the N57.6illion proceeds that were realized in the sale of some generating plants namely:
a- Egbin Power Plant which sale amounted to N50 billion.
b- Olorunsogo Power Plant raked in 1.6 billion.
c- Omotosho Power Plant raked in N2billion.
In tandem with the above mentioned mandates, NBET under the leadership of the outgoing Mnaging Director and Chief Executive, Dr Marilyn Amobi was successfully repositioned to a level where it has become a major player that earned and merited the confidence of the power industry players in the generation, transmission and distribution sectors.
The outgoing MD of NBET has ensured prompt and timely remittances from distribution (DISCOS) to generation companies (GENCOs). She has made it a point of duty to ensure that GENCOs do not have cause to complain of any untimely or material discrepancies in their market receipts from NBET. To drive home this point, NBET has, by January 2020, paid over N15billion to all the 24 generating companies representing 30.11 percent of the generated involve.
To drive home its seriousness in stabilizing electricity supply chain in the country, NBET leadership under the control of Dr Amobi also facilitated federal government disbursement of two tranches of the Payment Assurance Facility to augment payments to GENCOs and make payments to gas suppliers, thereby bringing stability to power supply across to the country. To conform to her transparency principle, the going NBET boss insisted that the Payment Assurance Facility be warehoused at the Central Bank of Nigeria, and made available to the draw-down on monthly basis rather than crediting NBET accounts with the whole N701bIllion and N600billion loan. This laudable action as exemplified by Dr Amobi, ensured that there was no room for misappropriation of the funds, which resulted in the N701billion loan being paid only to the GENCOs, to the last kobo, for power supplied to the country national grid.
While dealing with old players in the power industry by providing equitable playing field for them, NBET under Dr Amobi, engaged new entrant Independent Power Producers who have the intent of building power generation plants in the country, in a sustainable manner despite the liquidity crises in the power sector.
Material changes have occurred in the industry since the commencement of transitional electricity market in 2015, which had led to at least two key constraints which currently confront the country’s electricity market, which had in turn led the severe sub-optimal function of the market. These constraints include:
a- Physical infrastructure constraints, which deals with physical infrastructure for delivery from GENCOs to DISCOs, inclusive of physical installation of meters.
b- Market liquidity constraints, this comes in terms of the paucity of funds in the market, with abysmal remittance by DISCOs.
Under the above unfavourable market circumstances, Dr Amobi of NBET was saddled with the rather unpopular task of explaining this myriad of challenges to the thirteen Solar IPPs with executed Power Purchase Agreements (PPAs) with NBET and the eight Gas IPPs with initialed PPAs with NBET. She worked tirelessly with these IPPs to develop creative and innovative solutions which will, in the medium-term, lead to incremental power to the grid in sustainable manner, with the public interest at the core of all her engagements with these IPPs.
Dr. Amobi’s deep-rooted concern for the public interest is evidenced by her ingenuity in renegotiating the tariff for the executed fourteen solar PPAs down from US$11.5 cents/KWh, the tariff she inherited from her predecessor, to US$ 7.5 cents/KWh. This singular act saved the country about US$2.4 billion in payments that would have been made to these IPPs, when these projects commence delivery of power to the National Grid.
She granted five discretionary extensions to the long stop closing date of the executed Solar PPAs which has helped these projects to solder on in their fervent quest to invest in Nigeria, and contribute to the development of the electricity sector even whilst cognizant of the current liquidity and infrastructure challenges in the sector, which need to be addressed in order to have a financial viable electricity market.
NBET under her leadership developed an innovative Two-part PPA for new entrant IPPs (An Energy ONLY PPA which transitions into a take or Pay PPAs once measurable market conditions are attained), the first of its kind in the world, which promotes the procurement of incremental electric energy in a sustainable manner from all sources of fuel, ensures that NBET remains a going concern to meet its aggregated financial obligation to its clients, and complies with the directives NBET has received from both the Honourable Minister of Finance and sector regulator, the Nigerian Electricity Regulatory Commission (NERC).
It is equally important to note that Dr. Amobi did also introduced the idea of an ‘Energy Only PPA’ for developers such as National Agip Oil Company (NAOC)/AGIP who already have existing PPAs with NBET that contain clauses which allows them to collect payment from NBET for power that is not delivered to the national grid. The idea for an Energy Only PPA was conceived out of the need to curtail further payments to IPPs for undelivered capacity, at a time when liquidity situation in the market is worsening. The Energy Only PPA would save the country monies which can be channeled into other productive used in the Nigerian Economy.
Given the market conditions, Dr Amobi did not sign off on any new take or Pay PPAs which allows for payment for undelivered portions of the contracted capacities of the power plants, and provide all kinds of guarantees to new entrant IPPs I an almost illiquid electricity market. She has therefore remained resolute to ensure that NBET only enters into Agreements which would be mutually beneficial to the parties and ensure all power sector players are positively incentivized to act in sustainable manner.
NBET under Dr. Marilyn Amobi, a specialist on electricity markets and operations, with wide range experience in power sector reforms both in Nigeria and abroad, succeeded in bringing and introducing confidence and level-playing field among the industry players in the quest to restore stable power in the country’s households and offices.
Her exemplarily professional touch at NBET has become a reference point in other sectors of the flagging country’s economy, despite the opposition she encountered.
Therefore, as she takes her bow after on 24th of JULY 2020, four meritorious years of service at NBET, which were laced with transparency, hard work and reforms, Nigerians say thank you for standing tall in the murky corrupt-infested waters that the country’s power sector is swimming in.
Williams Orji, a journalists and power sector analyst, writes from Abuja.