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FG Pays ₦240 billion to TCN for Electricity that Was not Transmitted

Transmission Company of Nigeria
  • Gas shortage continues to slow supply

The federal government has paid over N240 billion between 2015 and December 2019 for power generated, but not transmitted through the national grid by the Transmission Company of Nigeria (TCN) for distribution, a senior government official stated.

The payment, however, is for five power plants: AGIP, Shell, Olorunsogo, Omotosho and Azura.

Also, contrary to claims last week by the TCN that the gas supply constraint, which generation companies (Gencos) recently experienced has subsided, power supply in Nigeria has continued to be negatively impacted by gas shortage.

The source said even though the plants generated reasonable amount of power, he put what was being evacuated into the national grid for distribution at about 30 per cent.

He attributed the challenges to lack of infrastructure, sustainment and expansion.

He also added that the power distribution companies were also hugely indebted to many banks, therefore, lacking the capacity to borrow more fund for sustainment and expansion.

Responding to a question on why the huge investment in the power sector has not yielded the desired dividends, the source stated: ‘’When you talk about the monies you have invested, I like to be evidence-based on my responses. I don’t have the total money spent in the sector or how they were spent; so I don’t give blanket responses. Because I hear this all the time and in some situations it becomes a challenge to respond.

“The question requires some facts to be able to say, okay, how have you spent the money? What we have in Nigeria is about 13,500 megawatt in existing power plants. We are talking about how much has been spent and why is there a problem.

“If you look at this, I just want to explain to us that the possible amount of electricity that you can move through this is 5,000 megawatt. If you put on the switch, you see the electricity; there’s no storage in appreciable quantity.’’
The government official explained that where the government had made investment was in transmission – that is fully owned by government.

He said: “It means that TCN should have the budget; the same thing with the distribution; we should be able to do the sustainment, and if you now have money you’re building additional lines, you’re expanding, it means that if I’m running a new line from here to Damaturu, along the line too, I may require some transformers; I may require at some point to create an injection substation, that’s expansion.

“For each of these, we must provide the funding. You know how budget is released, even if I have to do a project that is N100 billion and at the beginning of the budget I get N10 billion, it becomes a challenge, the same thing happens in distribution, now the same thing is happening in supply.

“When it comes to generation, a number of them have made a lot of investment, but even at that they need to ensure things are working. But do they have the money in each of these things they want to do?’’

According to him, the growth in demand for electricity is not at the same pace with the investment in the sector.

He added that the sector requires more funding for expansion and sustainment of infrastructure.

On the huge amount of money being paid for power generation not evacuated, the source blamed government officials who signed deals with power generating companies, without considering the enormous difficulty awaiting the government because of their ‘’vested personal and political interests.’’

For example, the source said in 2018, some senior federal government officials branded Azura power plant as the flagship of sovereign guarantees to private sector.

But THISDAY gathered that the deal has suffered setback because of the inability of TCN to dispatch about 70 per cent of power being generated from Azura.

That means while Azura is producing power, TCN does not have the capacity to dispatch; but the federal government still pays Azura for the power because of the nature of the agreement — paying for the gas to Azura under the “take-or-pay arrangement.”

The complaint is that those who executed the deals “knew the problems before signing the agreement with Azura,’’ that the national grid does not have the capacity to evacuate the power that is being generated by Azura.

Already, THISDAY gathered that the federal government is obligated to pay between $30 million and $33 million monthly to Azura for power generated, even if about 70 per cent of it is not transmitted through the national grid by TCN.

The interpretation is that the $33 million invoice that the federal government receives from Azura monthly, is about N8 to N9 billion, and now that dollar has appreciated, it will probably be close to N10 to N11 billion monthly.

“It means Azura will take up to what the federal government is receiving. Does it mean we won’t pay other power generation companies? That is the huge problem we are currently face.

“Nigeria also pays roughly N700 million monthly as the exchange rate differential in the deal with Azura and with the current high exchange rate, we will pay more.

“In addition to paying for power generated, the federal government is also footing a yearly N5 billion bill for gas supply to Azura — even though the cost of gas is already part of the tariff approved for the plant’’, the source stated.

Azura is said to have guaranteed the highest tariff of 10.1 cents/kWh in the power purchase agreement with the Nigerian Bulk Electricity Trading (NBET) Plc — the guarantor that buys electricity from generating companies (GenCos) and resells to distribution companies (DisCos).

And if the federal government fails or refuses to meet these monthly obligations, the World Bank partial risk guarantee (PRG) can be called by Azura’s creditors.

Source: THISDAY

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