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Liberalised electricity market can create stable supply for consumers – MD, MESL

Mainstream Energy Solutions Limited (MESL) won the concession of the Kainji and Jebba Hydro Power plants, Niger State, in 2013 during the power sector privatization. In this interview, the Managing Director/CEO, Engr. Lamu Audu, spoke about how Nigerians can get more power with direct access to GenCos.

 

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When were Kainji and Jebba plants built on the River Niger?

Kainji is the first hydropower plant in Nigeria. It was commissioned in 1968 with an installed capacity of 760MW. It was actually designed for 960MW but only 760MW was installed. Jebba was commissioned in 1985 by, coincidentally, President Muhammadu Buhari (then General Buhari) but the commercial operation started in 1983, it has 578.4MW capacity.

What have been the achievements of the firm so far?

It has been a very interesting journey for us since we took over in November 2013. It was very challenging especially when we came in; Kainji had zero megawatts as no single unit was operating. It was only Jebba that was in operation but as we speak, Kainji has available capacity of 440MW, combined with the available capacity in Jebba, MESL has available capacity of 922MW. This is as a result of the robust capacity recovery programme we have pursued vigorously. It is ongoing especially at Kainji.

The strategy we deployed initially was that we focused on sustaining availability at Jebba because five of the units were operating while Unit2G6 went out in 2009. So we focused on recovering capacity at Kainji to enable the water pass through to Jebba downstream because both plants cascade apart at 100 kilometres on the River Niger.

We also ensured that all the auxiliaries were fixed because at takeover, the standard was completely down and things were littered all over, with water and grease everywhere. So we brought up the standard of the plant to the global level with zero water and oil leakages at present.

You acquired the inflow forecast system in 2017 to monitor water level. What impact has it on operations?

We installed the inflow forecast system on our reservoir so that we can be able to see ahead what is likely going to happen in terms of water level. What we are requesting the National Control Centre (NCC) of the Transmission Company of Nigeria (TCN) to allow us to do is to create space for the incoming flood.

We are just coming into the rainy season and we normally pick the white flood (from tributaries) around September. If we don’t create space now, we won’t have space for the incoming flood. It has all the consequences: apart from the loss of energy, environmental, communities (flooding). Unfortunately we are not given cooperation yet. We are the first power plant to have the inflow forecast system yet and it forecasts water level increase on the River Niger.

What are the ongoing capacity recovery efforts?

In Jebba, the rehabilitation of Unit 2G6 has been completed. When we took over Jebba, none of the units had a statutory overhaul and they have been running for over 30 years, it’s the same thing at Kainji but Jebba’s five of the six units were in operation. What we want to do is to take them out and do the statutory overhaul without waiting for them to go down on forced outage. We are going to do them in stages.

In Kainji, we want to expand on the four open pits which should make it 960MW capacity. We want to take it in two stages comprising 100MW each but we need funding to get this done. We have to take loan but nobody will give us loan without an off taker. Look at the market situation we are in where our invoices are paid at about 18 per cent.

We are now looking beyond the borders through the West African Power Pool (WAPP) which we are a member. There is this North Core Transmission Project of WAPP to have a line from Kainji to Birnin Kebbi and Niger Republic. The project will put in place another line from Kainji to Niamey to Ouagadougou and then tee-off to Benin Republic. This is an opportunity for us to actually export power. Burkina Faso is very much interested, including Niger Republic.

How have you managed labour issues after taking over the plants?

When we took over, we looked at the new role we are playing as a private operator. We realised that there are some functions that are not actually related to power generation which were there in PHCN. We took over about 900 staff strength for both plants, now we are left with 240 staff but the interesting thing is that we did not sack those people.

We outsourced the businesses that are not directly related to power generation. We had hospitals, schools and we believe we don’t have any business running them but we need the hospitals to be able to take care of our staff. So we brought people that can manage the hospitals, school, and security.

The bulk of the engineers, almost 100 per cent from PHCN, are still with us but we went through a change management process to transform from a public to private firm. Some of the finest engineers we have in Nigeria were in NEPA/PHCN but there were administrative issues that hindered them from performing. I was one of those lucky ones that were given an opportunity to do what is supposed to be done by working under a board that is business oriented.

I had to go through some process of change management as well; it was not that difficult for me as much as those in the lower level to become business oriented but we all had to go through the process.

 What challenges does MESL face in running the plants?

Under the current situation, our invoices are paid late and below 20 per cent. We committed ourselves to rehabilitating the plants without external loans as we were getting 80 per cent of our invoices then. That is what we are using now to rehabilitate and recover the power plants. But now we are back to square one.

We have key challenges before us, one of these is the issue of frequent ramp down; our invoices are not paid and we could deliver power that is not taken, these discourage further investments. We received our payment for April invoice and it was 18 per cent from the Nigerian Bulk Electricity Trading Plc (NBET). How do you attract more investment with this? This has been the same thing over the years and we are assured something will be done but we have not seen any.

People are willing to invest in the power sector, but after seeing our books and hearing this kind of story, nobody wants to come in. Something has to be done because without power, this country is not getting anywhere.

MESL presently has an accumulated invoice of about N65 billion; and there is non-payment of available capacity because we have been made to ramp down our available capacity but with no compensation even when there is capacity charge entrenched in a Power Purchase Agreement (PPA). A GenCo came on board and was given guarantee last year, but we have been in the sector and that is not done.

We are also appealing that government makes it possible for us to access foreign exchange. Without power there won’t be development, so we are critical to the economy.

We pay our concession fee in dollars and we have made the case to the Bureau of Public Enterprises (BPE) since the agreement we have is with BPE. We earn naira and you don’t expect us to continually pay you in dollars, it does not make sense. Of course we have been paying our royalties but we want the concession fee to be acceptable in naira.

We are also advocating for the liberalisation of the market because we have stranded power. If it cannot be pushed through NBET, we should be allowed to sell our power to willing buyers through the Eligible Customer Regulation. With that, we can expand the business and operate efficiently.

What should be done to reset the power sector?

We are appealing to the government to allow free enterprise law to take its effect in the sector so that it may attract more investors. The Distribution Companies (DisCos) should be made to capitalise because there is little investment and the electricity sector is a value chain. If one end is not doing well, it will affect the others.

We should also be allowed to fully operate the eligible customer where customers can buy directly from GenCos. We have stranded power, we should be allowed to sell to people that are willing to buy and pay out of our stranded energy. Unfortunately, due to bureaucracy, the regulation has not worked.

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