‘We are determined to improve electricity infrastructure in Nigeria’
Niger Delta Power Holding Company (NDPHC) is the federal government agency responsible for the building and supervision of the National Integrated Power Pro oject (NIPP). The project is a fast-track government funded power intervention initiative involving the construction of ten medium –sized gas-fired power plants, associated gas infrastructure, the critical transmission infrastructure and the distribution component. Supervision of this gigantic project is the responsibility of Chiedu Ugbo and his management team. He was first appointed Managing Director/chief Executive Officer by President Muhammadu Buhari in August 2016 and reappointed last month for a second term. Before his appointment in 2016, he was the Senior Special Assistant to the President in the Office of the Vice President fr om October 2015 – June 2016, Advisor (Legal) to the Nigerian Bulk Electricity Trading Plc (NBET) from July 2013 – October 2015, Legal adviser on electric power purchase and resale contracts and Partner in the law firm of Benchmac & Inc, Electric Power and Infrastructure Development Consultants from May 2003 to October 2015 where he was in charge of Energy and Infrastructure Practice. He also played key role in the power sector reform programme. In this interview with Busineesday Editors, JOHN OSADOLOR and OBINNA F. NWACHUKUWU, Ugbo, a lawyer and business turn-around expert, explained the role and contributions of NDPHC to the development and growth of the power sector in Nigeria with a firm assurance to do more.
Sir, congratulations on your re-appointment for a second term which was announced by the Presidency. How do you feel about this development?
I’m excited that His Excellency, the President and the Board of NDPHC still considered me useful and worthy of this position. I know that to whom much is given, much is expected and I know that much is expected of me and I’m assuring the president, the vice-president and the governors of the states who are major stakeholders of the company, Board, Management and staff of our company that my Executive Directors and I will do our best to meet our mandate. We shall work seriously to ensure that we bridge the gap in electricity infrastructure which is part of our mandate; ensuring that the power plants operate and run perfectly. The broad objective being that we want Nigerians to have electricity always and we believe God to help us achieve that.
How would you assess the past four years and what are the things you would want to improve upon in the next four years?
It was excitingly challenging, doing what you like doing but there were challenges along the way. In NDPHC we did our best to manage the situation despite challenges, so it was exciting as well as challenging. So I can say it was a mix. Our broad mandate is; we have 10 power plants, so we have to complete the plants that have not been completed and run those that have been completed, and actually we are not meant to run but privatize, and then intervene in transmission and distribution, and this we took on when we came in because the company already existed. In 2016, the challenges then were different from 2017 and 2018. In 2016 I was coming from the presidency and I knew the major challenge was how to improve generation which was hampered by gas supply. There was a lot of vandalism in the region, and the Vice President went round the communities in the Niger Delta. I can remember the vocado export line was attacked and was out for several months which led to shortage of gas supply. When the crude line was affected the gas productions were not ongoing and associated gas which could have been used for power could not be produced. So the Vice president got the issues resolved, when I came in my focus was to look at how to improve generation, gas and transmission. The five power plants in the west of the region did not have gas because of the issue, so that was resolved between end of 2016 and early 2017. The three operational power plants in the eastern delta, riverine in Bayelsa, halogen in Abia state and Calabar, they all had more than enough gas, again, gas network issue, you can’t flow gas from east to west. The challenge then was the transmission and there was a network that connect them that is the Ikot-ekpene network transmission service, so we focused on that, my predecessor had done a great job bringing network to them, so as we came in we focused and put all our energy in it, there is what we call twelve circuit station, twelve lines coming out of one station so it is a huge one and the lines from calabar to Ikot-ekpene, the lines from halogen to Ikot-ekpene we completed those ones. Again in Calabar, we had the lines dedicated. In Akwa Ibom state, they were doing the pipelines crossing many rivers up to five rivers. We completed all that just to make sure that we have connection to Calabar. Government has resolved the gas challenge in the west so we are also working to resolve the challenges in the east including transmission. At a time it was no more transmission issues but gas issues, we commissioned the Ikot-ekpene substation in November 2016 with the minister of Power, Works and Housing, Babatunde Fashola, doing the commissioning. The moment I got the issues resolved in 2017, the government has resolved the issue in the west, I have full gas in Calabar, I have full gas from halogen, we will resolve the gas challenge, which is, I have gas but the challenge is transmission. It is not just evacuation from the power plant because we have done that, transmission is on the highway and if there is congestion on the highway, like our own high way that can take traffic, we have traffic but transmission does not use traffic, electricity travel on less resistance. So electricity, if it does not see anywhere to go, it can break the system down. That is why we have system operator just to ensure reliability and safety of the grid, it operates from
Osogbo, that is the national control center, so the moment there is generation in the grid, and there is no instantaneous consumption at the other end of transmission, it cannot stay, so what they do is that they shut it down. The moment we resolved the gas and transmission lines challenge, we discovered another challenge and that is the off- take challenge, that was later referred to as load rejection by distribution companies. I know of the interface challenge between the DISCOS and TCN , so that is why you see that the total generation capacity and availability is about 8000 but we can only use 4000 that is because people are not taking it. So what that translates to is new challenge, how do I improve, because what we see is that I will have power stations, 6 units in Calabar, 4 units in Halogen, 1 in Igbaram full gas, no transmission and evacuation channel but you see them take two units in Calabar irrespective of the fact that I have a firm gas contract which I must pay. So you see the tight situation we are in. You have gas, power plant, grid connection but you can’t generate. So it means that you have to start looking for alternative ways and when you generate, you get paid not more than 30 percent annually of your invoice. In fact you may be receiving 15 or 20 percent in between. So that was the position in 2016, so in 2017 we worked hard and resolved the gas challenge, so having resolved the issue a new one came. So we sat back and said what do we do, first we are faced with a huge financial challenge, thank God for the intervention of the government. That was how we came up with the N701 billion that is payment assurance facility. What that means for generation company is that our buyers are not the transmission company, the man who buys electricity from us is NBET, who is 100 percent owned by government, so NBET is the one that was owing 70 percent of the debt, so NBET has government to back them up to pay because as generators we are not paying for gas, so the N701billion was brought, and I think right now we are been owed like 80 percent of our invoice. So first we are not doing dispatch, the product is not being taken, second, even when it is taken it is not fully paid for, so with the N701 billion, they are meeting us halfway and then in 2018 the situation continued, our focus was, let us speed up effort in our network intervention, transmission and distribution so we can help resolve the interface challenge on our own way. This is a government intervention and government company, we did a lot of projects over 70 projects, so we did transmission project, we did a lot of injection of substations for distribution, we did quite a lot, again the problem persisted, more importantly the financial problem and government came up with N701 billion to keep us afloat and these monies they are giving is not a bail out for me, as the money is coming I make them know that they are paying my receivable. So the issue now is to pay us our evasive that has not been paid, to put that in perspective, as at May 31 or June ending 2020, we were been owed about N160 billion, which organization can survive with that? The good thing for us is that we are full equity funded, so we don’t have debt service. This problem persisted, so what we did was to design a “FARMA CITIES program, until the minister came up with a little consular declaration, we
were looking at can we serve them no matter where they are through the transmission and they pay directly, I don’t want to enter into the NBET and DISCO’S issues. Happily the minister came up with the consular declaration followed by the regulators, and then they started work on franchising, ours is a mix because we have franchising so we are working with discos, so we serve quite a number of customers but they are small, I think as at now we have like 39 to 91 megawatts we are signed on, we are also working with distribution companies to ensure that we have these franchise areas where we supply directly, so as pilot cases, we have signed up with Port Harcourt DISCO, finalizing with the Enugu DISCO, but that does not stop us from going as far as Kaduna, we are discussing with them as well as Kano. So we are working to get that resolved. In terms of our generation, my focus has always been to prioritize whatever we earn to ensure that we maintain the golden geese that lay the golden eggs, to maintain the power plants, so I have to ensure that the power plants run. Of course power plants operation and maintenance has two ways, it is either scheduled, or unscheduled so fault can come from anywhere. We try to do our best, so our power plants are all fully insured to ensure that whenever issues come, we are covered by insurance, so we try to operate and maintain the plants very well in accordance with international best practice, no cutting corners, because these are high net-worth assets. So in terms of insurance, operation and maintenance, we make sure that the service agreement we have with the OEN, I think 32 out of 35, all our fleets are made up of 35units, I think GE technology is about 32 of them, so we have long term service agreement for most if not all, so we make sure that the long term service agreement we have is robust and user friendly, we also carry out a digitization of the power plant, so I can sit here and see what is happening and the operators, so we pre-warn them when something is about to happen, so that is it with running the power plants. In 2017, the president was concerned about the poorest of the poor, so this electricity that we are generating, what are we doing for those at the rural communities, to those that have not seen electricity before, so we started with solar home system for them until they get full connection, so we did solar home system, 20,000 units, deployed in 12 states across the north, and the plan is to take it across the country as seen in the economic sustainability plan, the government’s target is 5 million and we are part of those to implement because of our track record and it was well received, it created some level of employment as we engaged installers and people who would otherwise be idle. So I was actually very excited about that, with the kind of excitement that the villagers received, these people have never seen electricity before,
so the petty traders will now stay much later doing their business, children will have electricity to read and prepare for their exams, so the advantages are enormous. So that is on the solar home system. Then in terms of distribution, we did quite a lot in distribution project, since 2015 we probably have completed over 70 distribution projects, in terms of big substations, in terms of distribution lines, high and low voltage distribution lines, there are some communities I go to and I feel so excited because they are happy, so in those communities even if it is 500 kilowatts they are taking, they are enough. The whole of the senatorial district in Ondo state were out of electricity for over 10 years, but we connected them back to the grid, so it is left for the Benin Disco to provide the electrons, even to get the electron, we went to Ondo town to repair the transmission substation so that they will be able to serve them. In Lagos, some villages were out of electricity for 10 years, we went to the substation we built to get electricity from a green power plan to ikeja west, so we did a number of projects. Last year we commissioned the Abeokuta 2 by 60 substation, that can conveniently transmit 100 megawatts, we also have the expansion of the Ota substation by 60 MVA, Right now, we are still doing quite a number of such projects. Also, Lafia is another interesting one because the whole of Nasarawa state had problem. We did a transmission line all
the way from Ikot-ekpene through Enugu, through Makurdi, then overhead Nasarawa state to Jos. Nasarawa state electricity situation was like Kano. The governor made a request and we took it up, we are working on it and it’s almost completed. We are building a massive transmission substation in Lafia and that substation will ensure that the state is well served, we are at 95 percent completion, so what we do is we bring down the lines going to Jos, from our substation, we will be able to back-feed Abuja again, so Abuja has multiple supply. So it is exciting, but in all these, we still have a huge debt, which is a payment challenge, what transaction people call payment risk. NBET is owed a lot by distribution companies. Ours is huge because we have 8 plants operating in the grid, if it was just one company probably it would be less. But as I speak to you, we are being owed nothing less than N160 billion. Despite that we are still doing our best.
If you have eight operating plants, what happened to the remaining two?
The other two were part of the initial mandate we had to complete; in fact that was our mandate from the beginning. So we had this contractor, apparently overwhelmed, but i don’t know what the issues were because the contracts were awarded as far back as 2006 or thereabout, but he didn’t deliver fully on any of the projects. He had
Alaoji in Abia state, he had Igbaram in Bayelsa state; he had Omokun in river state and Egbema in Imo state. These plants were located in Niger delta states. In halogen, it was supposed to be combined circle, where we have the gas turbines and the steel turbines, the gas turbines boil the heat for the steel turbines to work. Unfortunately, he only erected the gas turbines, a store capacity of 500 watts. The steel turbine he didn’t do. We met him importing the equipment for the steel turbines, and this was a contract over ten years at that time, with Omokun half way completed, Egbema less than half way completed. The two were not completed. Of course we tried to work with him in 2017 to get this done, we got him to get the contracts done. Fortunately he also owed AMCON, so they took over the company under receivership. The company having gone under receivership and because AMCON was not an engineering company, they said we can take it over. So we terminated the contract with the board approval. AMCON took over in July 2018, we tried to see what we could do but Roxon Engineering had an international company that is not under AMCON. So when we assessed everything, we went to the board in 2019 and got the board approval, as I speak to you now, Covid-19 or no Covid-19, we have gotten BPP approval for the new board, because we have to
invite other international bidders, who are into power plant, and they have done their due diligence and they have approved. So in the next one year, we will focus on completing those projects, we have very serious-minded contractors now. So we have taken over and we have it under control.
Is debt burden the only challenge? What of vandalism and host community issues?
There were major issues when the lines in Ikot-ekpene were not completed; we had issues with the communities. On vandalism, one of the lines that suffered most was the line from Afam to Ikot-ekpene, that line has been vandalized in and out; we even had a military man who was killed there. Until we got a transmission company that energized our work, when we build to a point, they will energize it but it was wasting energy, but we have security, armed Nigeria military to manage the whole situation. So at the end of the day, it amounts to a huge cost of doing these projects. On the other side going from Ikot-ekpene to Waji, it was one community in Abia State that was the issue. I had to go to the village , met with the people, gave them road, just to meet some agreements, pay compensation, so we engaged them and their king being understanding, the agreement worked, we played our part and they allowed our contractors to pass and it was not more than two weeks job. So that is what we do, we engage the communities, even the power plants communities, recently Sapele community came up with their needs, we just have to keep engaging them. For power plant communities we have a policy of ensuring that we do distribution and network projects for them, 5km radius for the power plants, however, they will have to be served by the distribution company responsible for their zones, because it will be complication, serving them from the power plants. In another community in Imo state, they vandalized the Egbema plant in Imo where we have our new power plant, we did the network, we did the substation, and we fixed it a year later. So those are the kind of price we pay. For Sapele, I had to go to the Orojie, and we were able to negotiate with the community leaders and the youths, but it keeps coming up, we promised this and that, it keeps coming up, it is not a one-time relationship, we just have to be sensitive to their needs like employment and electricity infrastructure, for them to assure us that we will have peace. So that is why we do not have issues with them. For Enugu, we are building a line from new heaven to Nsukka, that line again was vandalized, so
I went to the governor, Ifeanyi Ugwuanyi, who set up a committee headed by the Ohaneaze Ndi Igbo chairman. He helped us resolve the community challenges and of course we paid compensation. But another issue is when you pay to one set of people another set will come up to be compensated and we have to manage the situation.
Did you make any attempt to bring these vandalizes to book?
We have law enforcement agencies working with us. Just yesterday, I sent a letter to NSCDC to help us take over some of our sites. So agencies like the police, military arrest these people, we also engage the vigilantes in order to allow the communities take ownership of the program, and once they get them, they hand them over to the police for prosecution.
There have been calls from the House of Representatives that the privatization of the power sector should be upturned. As an operator in the system, what is your view?
I’m not just an operator; I was part of the power reform team. The truth is, the DG, BPE, Alex Okoh made a statement and I agreed with him entirely that the problem of privatization and post privatization have to be carefully managed. In terms of transaction structuring, and the transaction itself, it was acclaimed by the international community as one of the best you can find. So back to what the DG, BPE said, he said it is like taking a very sick person to the hospital, the person needs surgery to survive, you get the best surgeon to perform the surgery and after which he leaves, so the post operation care has to be done, if you leave the patient without care, no matter the expertise of the surgeon, the patient will die. That is exactly what happens, issues emanated, most of them not envisaged and that is why you see trading issues between Discos and Government. This cost reflective tariff started all the way from what was promised to them but they too have their own issues, it is both ways. Should it be reversed? I don’t think so. In my candid opinion, I’m not speaking for government. But the point is, there are consequences from bargains entered into. Everybody who is coming to Nigeria is looking at your disposition towards contracts, because as a sovereign nation are you going to use your sovereignty to act arbitrarily or do you respect bargains?. So if you respect bargain and if there is anything wrong with the bargain you have made, you follow due process to correct or follow it up. But to say revoke or terminate, you must follow due process to do all things. So I do not agree that privatization should be reversed because it has far reaching consequences, first, most of the agreements have international arbitration clause, so anything you do will be known in the international community, and you are not sure of what the outcome of the arbitration will be, if it is against you, again it will lead to another issue of enforcement. In short the trouble involved is too much, especially on issues concerning perception of the government. I think the best thing is to manage it, sit them down. I also do not think the Discos will be unreasonable; nobody puts in $100 million, $200 million into a business and would want the business to fail. I think it is just having an understanding between both sides. In all I feel that private sectors is still the way to go because they will have to bring the capital, with the Discos, there are a lot of regulatory issues involved, the economic regulations were regulated in such a way that tariffs are affordable by consumers. So, they have a hybrid called incentive regulation and price cap. So when you invest, you get a percentage of what you invest as your return. But they also cap it so that you don’t over charge. So that hybrid regulation is such that they will monitor your investment every year, you don’t over invest or under invest. But if you make a lot of investment it will go into your tariff for recovery. That is part of the issues they are arguing about, you cap what you can do, and you say we are not doing enough, you want me to meter everybody meanwhile in the tariff you gave me, you said this is the level of investment, you must not exceed XYZ. So there are issues involved and both parties have to sit down and resolve them. Government cannot entirely hands off the sector now, until some of these sectors begin to go on auto drive and can manage on their own. The issue of low metering and shading is a big issue, perhaps it would have been a major requirement. The privatization is dealt with in what we call technical, commercial and collection which are the main investment you have to make in distribution business. It is technical in terms of your network, substations and all that. Commercial in terms of theft, making sure that you have full proof system that does not allow for theft and collection. You have to prove your collection efficiency by metering. Collection efficiency is a problem that is one area that the system failed. So you have not invested in meters, you are giving customers estimated bills, and consumers have the right to know what they consume and pay for it and it is a problem. But all that will soon be a thing of the past as the government is facing that squarely. The president has approved our counterpart funding, and once we do that, all the aggregate commercial, technical collection will be brought back, and then the sector will begin to grow comprehensively from generation, transmission and distribution. The government is tackling that and we hope that by next year all these issues would have been resolved.
Would it be an issue if government gets involved in meter manufacturing and distribution?
These are some of the issues in the Economic Sustainability Plan. Government is encouraging private sector investment in meter manufacturing and some of them have started doing that. The moment we have the meters, it will be easy. It would be a logistic nightmare to import the number of meters we need in the country and install them in a year, but if we have them in the country, it is just to go to the factory, take and install. So government is doing a lot to encourage local manufacturing of the meters and that will help extensively to resolve the metering, billing and collection issues which is a major problem, and that is what is affecting them, because the Discos are not collecting enough. Back to privatization, I believe that with the president’s initiative in the power sector and all the issues relating to privatization, the issue will be resolved and we will be happy for it. I don’t think we should rush to terminate it, let us see the outcome of the president’s intervention which I strongly believe will resolve the network challenges and improve power supply.
What is going to be your major focus in the second phase of your tenure?
My major focus is to improve electricity supply in Nigeria, improve the revenue base for the company so that we can continue to do more projects and add value to my shareholders who are also political leaders in the country both at the Federal and state levels, and how do I do it? I had only one buyer before which is NBET, but now working with consumers, through the Discos to market my products and that is what is called bilateral arrangement with the Discos. I have signed that with Port Harcourt Disco and we are looking at realizing it in the next 6 months but the one with Enugu Disco will take longer because it is a wider area. Port Harcourt is 100 megawatt Calabar, Enugu disco we are looking at between 200-250 megawatts from our halogen power plant, and we have other initiatives coming from other power plants, like the one along Osogbo in Osun state, and even Omotosho, we have signed with a few customers there. So that is what I’m doing, to get the output of the power plants out to end users, clean up the network, and meter the customers. For an area we are not reaching, I have upgraded my renewable unit to a department and we are focusing fully on renewable. We are going to be doing mini grids, we are going to be involved in clusters up not just solar home systems, so we are going beyond the north, I have said it all, supply them directly, clean up the network, supply electricity so in that way, I am serving my consumers and also improving my revenue.