One of Nigeria’s weakest links in electricity provision – transmission – is now being considered for private sector entry, months after distribution and generation were privatised.
The Federal Government is working on a legal framework that will allow private investors to come in and invest in transmission networks, Chinedu Nebo, minister of power, has said. Nebo added that government had secured appreciable funding to build a robust network.
The business of electricity transmission, which is in the hands of the Federal Government, is the biggest constraint facing new investors involved in generation and distribution of electricity in the country, with industry analysts saying that massive investment would be required to achieve rapid expansion and modernisation of the transmission infrastructure.
Nebo, who spoke on Thursday at the ongoing Power Investors Summit Nigeria in Lagos, organised by EnergyNet Limited in conjunction with Nextier Capital Limited, said that as soon as the legal framework was concluded, private investors would be able to invest in transmission.
“There has to be a model for this. If someone is going to invest in transmission infrastructure, he doesn’t generate or distribute. He is just the link between generation and distribution, and he has to get his money back. So proper wheeling charges have to be integrated, not the kind of wheeling charges that we have today, because there are a lot of losses encountered in the entire transmission network,” the power minister said.
“So, this has to be reduced substantially and then the charges for wheeling have to be put at a place where it is good enough for an investor to come and invest. So that’s what we are trying to develop,” he added.
The transmission network currently has the capacity to evacuate less than 6,000 megawatts (MW) of electricity, and about $3.7 billion is required by the government to increase transmission capacity to 20,000 MW by 2016, according to analysts.
Government has attracted all kinds of funding from various sources, such as the World Bank and the Africa Development Bank, to expand and strengthen transmission capacity, the minister said, adding that $1.7 billion from the proceeds of the sale of the National Integrated Power Project (NIPP) power assets would be committed to transmission network development.
“In addition to that, we also have proposals from private companies, international private companies, investors that are not only thinking of loaning us money, but also owning equity by being allowed to build the lines themselves and concessioning the lines to them. This is going to help us to go completely from a radial system to a full national grid,” he said.
Beks Dagogo-Jack, chairman, Presidential Task Force on Power (PTFP), said there could be a bilateral relationship between a distribution company (Disco) and a host transmission company, adding that the regulator has approved that model for increasing capacity.
“So, if a Disco feels that a particular investment will enable them capture a particular region that is not well-served, they can engage with the Transmission Company of Nigeria (TCN) and sign a relationship which the regulator will recognise because our industry is a regulated market, which means that every investment must be captured by the regulator for tariffing purposes,” added Dagogo-Jack.
Recalling that South Africa generates 40,000MW of electricity, the minister said Nigeria presents huge opportunities for investors, adding, “Even if Nigeria quadruples its generation and transmission capacities, it would not be enough to meet the demand in the country. Nigeria is an investor market.”
He said the country would, by year-end, be able not only to generate but also have the transmission capacity to wheel out 6,000MW. “That’s what we are projecting from a very technical, realistic point of view,” he said.
Electricity transmission, which links distribution and generation companies, is in the hands of the government-owned TCN, with management outsourced to Canada’s Manitoba Hydro International (MHI) in 2012 under a three-year management contract.
FEMI ASU
