FG reduces 2014 power supply target to 5,000MW

By IAfrica
In Nigeria
Aug 2nd, 2014
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•CBN to pay 25b owed to gas suppliers

THE federal government yesterday reduced its power supply target for 2014 to 5,000Mega Watts (MW) in the next four to five months.

There had been a pending target of 4,500MW for June this year which never came to fruition and a projection to supply 6,000MW by December 2014.

But speaking in an inter-ministerial press briefing in Abuja the Minister of Petroleum Resources, Mrs. Diezani Madueke, noted that “had there been sufficient gas supply, the current generation capacity would have crossed the 6,000mega watts target today.”

Also at the briefing were the Minister of Power, Prof. Chinedu Nebo; Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emiefele; Chairman, Nigeria Electricity Regulatory Commission (NERC), Dr. Sam Amadi.

She explained that collectively the ministries and agencies were working to find a lasting solution to the challenge.

The minister announced that NERC has approved a new benchmark price of $2.50/mcf of gas supply, and $0. 80/mcf as transportation costs for new capacity, from 2014.

“This benchmark will rise with US inflation annually,” she added.

This increase will be captured in the next Multi Year Tariff Order (MYTO), which is due in December this year.

Madueke, however, explained that the federal government has developed additional interventions that will address outstanding issues around gas supply pricing, fast-track additional gas supply development, particularly in the short term.

“It is expected that barring unforeseen developments these interventions will add at least 370mmcf/d of gas and assure a generation capacity of at least 5,000MW within 4-5 months,” she assured.

Highlighting the interventions which the ministries and agencies jointly planned, she said that a review of gas pricing is now being implemented to further reflect market value.

Madueke pointed out that in addition to the new price, NERC will require firm commitments from gas suppliers on the agreed quantities of gas to generation companies as long as payment terms are met.

The NERC, said the minister, is presently concluding the review of the Aggregate Technical Commercial and Collection (ATC&C) losses studies submitted by the distribution companies.

She said that the review will be followed by a review of the revenue requirement for the power sector that is to be covered by a revised Multi-Year Tariff Order (MYTO) path.

Madueke said to inspire confidence in the gas sector, regarding the willingness of the power sector to settle its outstanding debts for gas, “the CBN will support initiatives to clear up the most recent gas related debts of the power sector.

“Specifically, the CBN is looking at banking sector led measures to pay off N25billion of debts owed to gas suppliers.

“The Central Bank will also play a key role in financial arrangements that guarantee payment for gas supply by the power sector.”

Emiefele noted that the Bankers’ Committee had some engagements where the CBN governor was asked to liaise with the ministries.

According to the apex bank boss, it was agreed at the meeting that there is an outstanding legacy debt of N25 billion that the existing gas supplier should be given some confidence by ensuring that the debt is paid off.

He added: “CBN and deposit money banks have been seeking ways to set up an SPV where this N25billion will be paid to the gas suppliers giving them confidence to continue to produce gas which is badly needed to continue to power  generators plants.”

The present initiative, according to the governor, is to unlock the potentials of the Nigerian economy by considering the bottleneck militating against power production.

Explaining how the change in gas price affects the MYTO, Sam Amadi said: “Both the new price for gas and the support that the CBN is going to make are part of the cost that the new review of the existing MYTO will address.”

Nebo said following plans from the sector, the federal government will ensure that it hits 20,000MW by year 2020.

He also said that Nigeria is expecting to generate 10,000MW from coal.

Nebo revealed that the ministry is seeking the Nigerian National Petroleum Corporation (NNPC) support to carry out the survey to ascertain the quantity of coal deposit in the country.


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