Tariff increase will enable us unlock stranded power into national grid  — Ugbo, NDPHC MD

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Mr Chiedu Ugbo

The Managing Director, Niger Delta Power Holding Company  (NDPHC), Mr. Chiedu Ugbo in this interview with the Publisher Nigerian NewsDirect Dr. Samuel Ibiyemi speaks on the achievements of the company and agenda for the second term. Excerpts

There is ongoing outcry over increase in electricity tariff. At the NDPHC level, what is your own reaction to this outcry by Nigerians about electricity tariff?

Let me start by saying that the industry since the privatization has faced several challenges. There has been an infrastructural gap and tariff gap.

The infrastructural gap, that is where Niger Delta Power Holding Company (NDPHC) comes in under the National Integrated Power Projects (NIPP) we are currently doing across all the value chain. This covers from the generation which is our main business through interventions in numerous transmission and distribution projects across the Country.

Under the Administration of President Muhammadu Buhari, we had about 80 major distribution projects completed. I am not talking about transformers dropped on the streets, rather about several kilometers of 33KV lines, 11KV lines and 7.5MVAs distribution substations in several locations.

In terms of tariff, from NDPHC perspective; we do not sell electricity to end users until now  that we are trying to  sell as a result of the “eligible customer regulation” by Nigerian Electricity Regulatory Commission (NERC), which is based on the declaration made by the Honourable Minister of Power Engr Saleh Mamman. That was why we  want to be  selling power directly to customers.

So, the NDPHC before now has been selling to Nigeria Bulk Electricity Trading (NBET) company and then sell to the Distribution Companies (DisCos).

The DisCos serve the last man, and they had always argued that the Tariff provided to them by the regulator is not cost reflective.

That also had a direct impact on us owing to the fact that we sell electricity in Bulk to NBET, then NBET to DisCos. When the money is coming back, it is always seriously below the amount invoiced.

In order to make sure the DisCos  are able to cover the cost, the cost here includes everybody that have provided services across the value chain. There was need for that Tariff increase, which the government has now done.

With the tariff increase now, excuses will be eliminated. We are expecting at NDPHC that the excuses or a situation where we are being paid less than 30 per cent of the annual average of our invoices which was the case before the Tariff increase, will become a thing of the past; We are expecting that our invoices will be substantially fully paid.

Of course, we are expecting our invoices to be fully paid because for every invoice we send out, gas cost is about 65-70 per cent and these are new power plants running efficiently with huge gas cost. When you are paying me 20-30 per cent,that means I cannot pay my gas suppliers and that means by implication gas suppliers sooner or later will shut us out.

So, we are hoping that with the increase in tariff, there will be more efficiency in the system and of course we will be able to supply electricity effectively to Nigerians; we have the capacity in terms of installed capacity to supply electricity reasonably to Nigerians except for this challenge over tariff increase. So, the government has been very responsive.

NDPHC has been doing well to close the electricity gap in Nigeria. Can you actually tell us how you wanted to fully bridge the gap in your second term?

To fully bridge the gap, we need tons and tons of money to do that. We are doing our best in our own little corner. As you know the sector is substantially private sector driven, so the responsibility of government is actually to make the sector bankable. That is to give the enabling environment for business to strive, attract investors to make necessary investments. While that is being done,  the government through us is trying to help. So, we are just doing intervention, our main focus is generation of electricity.

NDPHC has eight power plants connected to the national grid right now, with about 4059 installed ISO capacity.

As I speak now, 126 megawatt(MW) is coming in the next one or two months at Gbarain power station we are commissioning in Bayelsa state. This is part of our efforts in bridging the gap.

As you are aware, where we have a challenge of the electricity supply market industry  is the infrastructural interface between transmission and distribution. We have worked closely with the Transmission Company and they have ascribed the reasons for this to be massive load rejection by the DisCos.

We have also worked with the DisCos who have also complained of ‘dumping’ perhaps due to network issues that  the Transmission Company takes the available load and dumps where it is not needed. These have been the arguments back and front. Now that we have come in, let us see what we can do so that the infrastructural interface between transmission Company and DisCos will become a thing of the past.

The Federal government has carefully studied the challenges of the power sector and that is why the president came up with the Presidential Power Initiative (PPI) that is the Siemen’s Project.

The Siemen project is a holistic approach to this challenge. We will do ours. Hopefully the Siemen’s project by 2021, would have cleaned up the network so that we will be able to also absolve the 7,000 megawatts capacity and then by 2023 that will go up to about 11,000 megawatts. The NPDHC would continue on its own efforts.

Rather than do sporadic jobs left and right, the NDPHC has become more focused in its interventions. So, a lot of work is being done. Let me add here carefully and quickly. So, we take a city, cluster and an area by working directly with the DisCos, or if it falls directly within the definition of “eligible customers regulation” made by the Nigerian Electricity Regulatory Commission (NERC), we will work directly with the DisCos and transmission company to serve those  industries, clusters and cities.

Let me give you an example. We just signed a Power Purchase Agreement(PPA), with the Port Harcourt DisCo where our main target is Calabar town from our Calabar power plant.

So, you see, we have the power plant here, we take part of the capacity that is not being  taken from the grid right now and then serve that area. So, we will work with them, clean up the network up to the end-user and then will serve them electricity.

We are going into similar agreement from our Bayelsa Power plant  in Yenagoa with the Port Harcourt DisCo. We are discussing with Port Harcourt DisCo and the state government. So, we have a power plant in Gbarain with idle power capacity. We are working on that. We have also signed for 200-250MW with Enugu DisCo in a space of two years to clean up the network and take about 200mw.

Few days ago, we were in a meeting with Kaduna DisCo. To show the importance they place on it, the chairman/Managing Director was in the meeting to work with them. The whole focus is to ensure that we have 24/7 power supply for those areas; So, we will clean-up the network for them so that it can absolve. We will sell electricity from our power plant that are literally stranded now to those areas. So, basically it is end-to-end, do not worry, it does not matter where our power plants are located, the Transmission company is able to transport bulk power from our power plant to whereever location it is needed. Our responsibility now is working with them to identify the bottlenecks and clear it.

What additional capacity are you looking out for in terms of generation with the projection of FG’s 11,000mw by 2023?

In terms of generation, we have about 380MW which will come up towards the end of next year from Egbema power plant and we have another 250MW there about that will come up from the Omoku power plant.

These were the plans we have under construction and we have a renewed focus now, we have new contractors coming to site on this power plant.

They have a new commitment to finish those power plants in 15-18 Months. We have about 500-600 Megawatts to add to that. We have 126MW coming in this year from Gbarain power plant near Yenagoa, Bayelsa State into the grid.

If you add that, we will be having about 800MW coming in. We are also trying to unlock all our 4,000MW. So, you can imagine the grid, at the best of time the grid takes about 5,000MW right? We have an installed capacity of about 13,000MW, not only NDPHC, all the power plants out of which NDPHC capacity is about 4,000MW. What the NDPHC have can actually serve the whole grid. So, you see that we have competition to get into the grid which is now based on the regulator.

But we have over 4,000MW but what we are trying to do now is to unlock that stranded 4,000MW. The grid at the best of time takes about 700OMW, we still have over 2,000MW constrained by gas. That is one of the good things the increase in tariff has done. Because if there is money, the gas producers will want to supply  gas but if there is no money, they see  power generation companies as debtors. Nobody will supply us  gas, that is one good thing the increase in Electricity tariff has done.  You can sign gas sales agreement. So, there are efforts  from different angles to bridge the gap.  We will bridge the gap by unlocking what we have, the 4,000MW to serve Nigerians and bringing  close to 800MW new generation to the grid in the next one and the half year.

What is the update on the debt figure and  your solar project?

We have done 20,000 units of solar products deployed across 12 states in the Northern Nigeria. Starting from Wuna village near Gwagwalada where we deployed 200 units’ of the solar home systems. The Government in its economic sustainability plan is to deploy another five million and this will be implemented by the NDPHC and Rural Electrification Agency (REA).

So, we are working to deploy more of the solar home systems. You know this solar home system will serve the homes that have not been hitherto connected or have never seen electricity before, because every  Nigerian deserves a chance and an opportunity to have electricity either through hydro, solar, power plants or fossil fuel.

What is debt figure of NDPHC?

We are being owed over N160billion by the market substantially through the NBET. Some of it were from the legacy  debt Power Holding Company of Nigeria(PHCN) which was inherited by Nigeria Electricity Liability Management Company(NELMCO). The PAF ended in June but we have not being paid up to June. We are hoping that Payment Assurance Facility (PAF) in the second phase will reduce that debt substantially. We are also hoping that with the increase in tariff, we will reduce the rate of accumulation of this debt. Otherwise, it becomes almost impossible for that kind of load of debt to survive as a growing concern, but the government has been so magnanimous to intervene and we are hoping that once the PAF is paid, part of the debt will be liquidated.

What of the debt figure of Gas Supplier?

As we get paid, whenever we are being owed it includes payment to gas suppliers. So, as we get paid, we pay directly to gas suppliers, we do not waste time. We do not appropriate money that should go to gas suppliers as a matter of practice in this company. In fact, at a given point, we were happy that the government was paid directly to gas suppliers. The NBET was paying directly to the gas suppliers. Even when they pay us before we touch the money, we set out the portion meant for gas suppliers. So, the debt includes payment for gas suppliers as well.  But as we get the payment, we in turn pay the gas suppliers.

Four years ago President Muhammadu Buhari appointed you as MD/CEO of NDPHC based on your satisfactory report of your stewardship he reappointed you on August, what does the next four years potend for you and the management of NDPHC?

We are grateful, myself and the management team for the reappointment by the president to ensure that there is continuity. The company faced certain challenges in the last four years. These challenges were not peculiar, they are sector-wide issues; one is electricity evacuation (Despatch) from the power plant. Second is the even payment for electricity generated and sold to the grid.

The first one, electricity evacuation, I just mentioned that we have 4,000MW. We are constrained by half of that by gas and  half by transmission. You will find out that when we are ready to go 2000 to 3000MW because Nigeria Gas Company (NGC) gives us gas and then the transmission corridor is not available, not because there is no infrastructure but  because of system reliability and safety.

Transmission Company will not allow you to come to the grid unless they are sure that there is someone at the other end to take up the electricity from them. The grid cannot hold electricity without it being  consumed. So, whatever you generate must be consumed instantaneously, if not it will cause serious problem for the grid; that is why you have system operators.

So, in a situation where you have 2000-3000MW ready to go, and we are only given 500MW. In fact today, we were given 300 to 400MW as we speak.That is a major challenge to us. As a manufacturer, you are having a product in your warehouse and nobody is taking the products, it is not good for the business.

Two, even when you sell electricity to NBET, 25 to 30 per cent payment does not come back on time, when it comes to it is short lands,. To be magnanimous to the Bulk traders you get 30 per cent of that payment. The government is  also trying at the same time to ensure that generation continues to run.

We already sort out the issue with the DisCos in that this NBET owns you, we will continue to pay, that is the Payment Assurance Facility (PAF). Now, the challenge has also cut out our work for us. So, with the support of the board in the last one year, we just strategized on how to resolve it. You heard me talk about end-to-end.

So, we have to take our own fate in our hands, we said okay, we now stepped out from our power stations, because all these issues are outside our power stations.  The units are there, they are ready to work except for these limitations. So, we now go beyond, we want to serve you, what can we do to serve you, let us clean up the lines so that electricity can get to the end users. What we do is to meter the customer. We are also working with  responsible DisCos that have responsibility for that area.

That is what we call bilateral. Our focus is on bilateral and then Eligible customers. We have signed a few that I have mentioned. The Portharcourt Distribution Company 100MW that have stranded in the plant; Enugu Disco-200mw, We are looking at another 50-100MW at PH DisCo in Yenagoa. We are looking at discussing with Kaduna and Kano DisCos seriously. As I leave here now, I am going to Ogun state to discuss with the Government and Ibadan DisCo because we have a 750MW power plant that is never dispatched. It is never called up to the grid by the transmission company. It is not the fault of transmission, it is a systemic issue.

So, we have to step out to resolve these issues. We have our work well cut out for us, I believe reasonably that is why the government decided to allow for continuity so we can ensure that substantially our units are absorbed and utilized to the business.

NDPHC was originally conceived in 2004, National integration power plant, the objective to stabilize government initiative in the Nigeria power sector, 16 years after how has the company fared?

I will say we have done excellently well within the environment we operate. The focus was actually on generation; in terms of generation, out of 10 power plants projects, eight have  been successfully completed, 80 per cent is excellent right on the national grid.We are working to generate 100 per cent in generation. In terms of transmission, we have completed several tons of transmission projects and these are high voltage projects. We have completed over 80 high voltage projects in transmission lines. We have a line going all the way through the transmission. Ikot Ekpene for instance, was completed under my watch.

We have intervened in several distribution projects  we have done very well in the power sector. There is hardly a local government that we don’t have a distribution project or a rehabilitation project.

The GE, the world’s premier industrial company, recently announced an intention to collaborate with NDPHC to develop an end-to-end power intervention solution, is the collaboration aimed at generating more power or support the only transmission company and compliments the distribution power in Nigeria?

Out of about 35 turbines across the power station, the GE Technology alone is about 32, so you can see that our fleet is literally from their stable. So, that said, they have long term service agreement with us for most of the units, and even the once not covered by the units. They also provide support because they are the makers of maker of this unit. They are also interested in their product performing, so we had some understanding some time ago to work end-to-end. So General Electric (GE) is one of those who have expressed interest on end-to- end basis. We are strong partners, because they are original equipment manufacturer for the turbines. They are to necessarily support the maintenance of the Turbines. As I speak with you, they have gone to do the maintenance in Calabar. So, all the 5 units of 625MW installed are clean and good in Calabar. They are Sapele now working and carrying out the maintenance. When they finish they sell to Benin and carrying out the maintenance. So, we constantly work with GE, so that they are our partners in that sense.

What are you doing in terms of capacity building as you are expanding?

Our power plant is being operated 100 per cent run by Nigerians and the GE staff I talked about are all Nigerian, that are doing the maintenance. So, capacity building, of course, is Engineering. So we have Top-to-bottom, so you learn on the job, have the basic training as Engineers, Electrical, Mechanical and all round phase of Engineering. Recently young men we employed, we moved all of them to the power plants, I said go and start your career there and then learn from those that are there. So we have older men who are retiring to hand over to them. Yes, we do capacity building, training which is very essential. We do periodic training, all over our units are fully insured.

So the insurance Engineer did insurance from London Market they are sending Engineers, we have seasoned Engineer to come also train our operator and Maintenance Engineers to take them through some legal training.

What about local sourcing of materials, local content?

Yes, we do local content as well. Of course local Content is the law. So, where the material is not available in the country of course they will get priority. Just that these are engineering materials, some of them may not be available because they are high tech materials. Of course the power plants in Warri, Port Harcourt and Aba  are using materials that can are fabricated locally. We have not had any issue with local materials, local staff and even up to the community where we have qualified hands we take staff from the community.

What is the hope for consumers? 

The government has laid out the plans and consumers might have seen it. The PPI said 7000MW by  2021, through the Siemen’s project. If you have 7,000mw 24/7, what we have now is the suppressed demand in Nigeria but before the order, demand will come in we would have gone up to 11,000MW by 2023 and we will start building on that. Let us first deal with our base load first before we will start talking about additional. So, there is strong hope for consumers.

Other than our fossil fuel; we have also setup renewable energy department, and we are embarking on mini grids, cost utility case solar. Solar serving the Mini grid in addition to the solar home systems. So, that is also part of what we are working on right now.  The Mini grid there are not usually large enough- 25MW but communities are served, we are working on that. We will partner with private sector, because we do not want to sit back and say we are constrained by funding. So, will package the projects provide all the enabling environment for the projects working as government partners private sector to get return on their investment and returns of their investments.

NDPHC is building strong synergy with the National Assembly towards a vibrant organisation, how is it important?

It is important, NDPHC is implementing the NIPP which is publicly funded. The said money is public money, whatsoever money it produces is also public fund and when you are investing public money you must follow processes, must be very transparent. The National Assembly is a critical part of government. So we must work with them. They are the representatives of the people; every state has three senatorial districts. We also have the representatives who are closer to the people, so it is extremely important we partner with the national assembly to make them know how government fund is been spent and, let them see what efforts the executive have made. We are part of the three tiers of government, as you would have noticed that since the governors coming in have become major stakeholders in the NDPHC.

Most agencies complain of incessant summons by the National Assembly, what is your experience?

I must say it clearly, it is not flattering. We have the support of the Senate power committee and the  House of Representatives. They have been extremely supportive because they see what we do. We let them see what we do, and the processes. Anytime they call me I will go and answer them, that is the work.

I will not tell them that I am busy, whose work are you doing? They have the right to call us, and we must answer, that is my view. I am a Lawyer by the way, so I know the rules of everybody. I have to go and answer them, if I have any excuses, I write them, and they have always understood me. They have never turned me down. The Legislators are matured, I think I will use this opportunity to commend them particularly the chairman of the Senate Committee on Power and Members and his team and House Committee on Power and its members. I am specific about these two because they have direct oversight on us, they have been very cooperative while they do their work.