Forty-Five Power Sector Prophecies In 2017, By Odion Omonfoman

It’s the start of another new year. And as usual, “prophets” are dishing out all sorts of prophecies – from the mundane to the ridiculous, in very, very vague language. Luckily for me, I’ve seen a niche area. None of the prophets have seen what would happen in the power sector in 2017, thus I have chosen to look at my crystal ball and dish out top prophecies in the sector for 2017. In keeping to the format of Nigerian prophecies, mine will also be vague, leaving the reader to decipher its meaning or interpretation. You are pardoned if these prophecies seem more like predictions, projections and/or a wish list in the power sector.

To make for an easier understanding, the prophecies are categorised into the following:

1. DISCOs
2. Transmission Company
3. GENCOs
4. Government/Regulatory Authorities
5. Electricity Consumers

Prophecies for DISCOs:

1. Several DISCOs will have cause to rejoice this year, as most MDA debts will be settled by the government. But it will not be a smooth process, as DISCOs may have to go through a verification process to confirm the MDAs that are their customers and how much each MDA owes them based on metered electricity;

2. The Ministry of Finance will create a direct funding mechanism for paying the electricity bills of the MDAs directly to the DISCOs for electricity supplied to them;

3. The N213 billion power sector intervention facility by the CBN will be fully disbursed this year. The CBN will further provide another intervention facility to the power sector;

4. The various court cases filed by DISCOs against NERC and NBET will be suspended this year. Some of the cases may eventually be settled out of court. However, some DISCOs may have cause to file new cases against NERC and NBET;

5. Several DISCOs will seek to raise financing outside of market revenues (collections). However, only two or three DISCOs will succeed in their capital raising plans;

6. The Nigerian Banking sector will remain skeptical of lending to the power sector this year, unless the CBN prevails on the banks to lend by incentivising those that lend to the sector;

7. Many DISCOs will face financial difficulties and may have to downsize their workforces, further worsening the quality of service to their customers;

8. Some core investors in DISCOs will face a dilution of their 60 percent shareholding. Some may be taken over by their Lenders as they may continue to default in meeting their acquisition financing obligations (interest payment and principal repayment) to these Lenders;

9. Estimated billing practices will continue, as DISCOs will struggle to meter their customers. However, to address the huge metering gap, NERC may roll out regulations that may empower third party investors to invest in financing, procuring, installing and managing electricity meters on behalf of the DISCOs. Several DISCOs would attempt to frustrate the implementation of such regulation;

10. DISCOs, TCN and GENCOs to continue to blame each other for the problems in the power sector;

11. There will be further incidences of load rejection by DISCOs;

12. Serious DISCOs will make necessary investments in customer audit/enumeration and better tariff class segmentation, which would see their revenues improve dramatically.

Prophecies for the Transmission Company of Nigeria (TCN)

13. There will be further grid instability and grid collapses this year. TCN should brace up to face these challenges;

14. TCN’s operations will continue to be hamstrung by poor funding and the management will resort to more government funding from budgetary allocations. However, there will be a push to design and implement PPP funding structure(s) to finance key transmission projects – outright concessioning of transmission lines. The push for PPP funding will unfortunately not yield fruit in 2017;

15. Several on-going critical transmission projects, particularly the transmission projects by the NDPHC, will be completed;

16. TCN may suffer damages in some of its Injection sub-stations. TCN must work to avert fire disaster in a sub-station somewhere in Nigeria that will worsen power supply;

17. There may be changes in the management of TCN. Some management staff may either be removed or redeployed. Some management staff will retire, having attained the retirement age.

Prophecies for GENCOs:

18. GENCOs may rejoice this year as they may get more money from the market due to a slightly improved payment level by NBET. The World Bank may also provide funding to the power sector to meet payment obligations to GENCOs;

19. Egbin GENCO should watch and pray;

20. Gas supply to GENCOs will improve in 2017. Infact, 2017 will record the highest volume of gas supply to them;

21. Peak available generation will surpass last year’s peak of 5,070 MW and will hit a new peak this year. It may cross the 5,500MW mark this year. However, GENCOs will be unable to sustain this peak generation capacity, as TCN will not be able to evacuate all the power due to inadequate/weak transmission infrastructure, as well as DISCOs’ inability to absorb the power generated;

22. Kainji and Shiroro GENCOs will rejoice this year;

23. The privatisation of the ten (10) NIPP GENCOs may not be concluded this year due to prevailing liquidity, foreign exchange challenges and increased payment risks in the power sector. NDPHC should pray against “external forces” that may want to destabilise the conclusion of the privatisation process;

24. I see Ughelli GENCOs working closely with its host communities;

25. GENCOs will be given special fx rates by the CBN to import capital spares and other machinery;

26. Shell Afam IPP, Agip Okpai IPP may face scrutiny on their PPAs grandfathered to NBET. NBET may call for capacity testing for these plants to ensure that they meet their minimum contract capacities;

27. The Ministry of Power will find funding for the proposed 240MW Afam fast power project. However, the project would encounter some political challenges, which would delay its execution;

28. No solar power plant, out of the 14 solar power projects with signed PPAs may be completed this year. However, a few of the projects will reach financial close;

29. Construction work will continue with the 450MW Azura IPP in Edo State. But the plant will not be commissioned this year;

30. NBET and NERC may call for a competitive procurement of more power this year, as it takes at least two years for power projects to reach financial close;

Prophecies for Government & Regulatory Agencies:

31. There will be a strong push for the merger of NBET and the Market Operator (MO) to resolve conflicts and/or duplication of market settlement roles by both organisations by creating a single market settlement organisation. Lawmakers may be lobbied intensely to amend the EPSRA (2005) to give force of law to the merger;

32. The National Assembly will approve for NBET to issue a bond to address the liquidity challenges in the power sector. However, NBET will need to resolve the structure and sizing of the bond issue;

33. The appointment of a new substantive chairman of NERC and commissioners may be further delayed into the second quarter of 2017;

34. There may be a re-organisation of NERC;

35. NERC will become more assertive in the regulation of the power sector in 2017;

36. The National Council on Privatisation (NCP) will be reconstituted this year. BPE is the secretariat of the NCP. Also, the Boards of federal parastatals and agencies in the power sector namely – NDPHC, NBET, TCN, Rural Electricity Authority and others will be constituted this year;

37. BPE will conduct more oversight monitoring of the power sector to ensure that core investors meet the terms of the performance agreements and share sale agreements signed with the BPE;

38. NERC will conduct a minor review of electricity tariffs. However, NERC may hesitate to conduct a major tariff review in 2017;

39. Fashola will retain his position as the Minister for Power, Works and Housing, despite intense pressures to remove the Power ministry from his portfolio. However, there was no “revelation” on the fate of the Minister for State for Power, Works and Housing;

40. The Ministry of Finance will become more active in the power sector by collaborating with the World Bank and Ministry of Power to find solutions to the liquidity challenges in the sector. However, intense prayers are required by all stakeholders to ensure that the Minister for Finance and the Federal Government do not waiver in providing the necessary support that may be demanded from the Ministry of Finance.

Prophesies for Power Consumers:

41. Electricity tariffs will increase in 2017, as NERC will adjust electricity tariffs to accommodate foreign exchange and inflation rates;

42. Some electricity customers will rejoice this year, as they will finally receive electricity meters;

43. Several commercial and industrial customers will seek alternative sources of power for their businesses;

44. Many customers stealing electricity, either through meter by-pass or outright theft will be discovered and prosecuted;

45. Electricity customers should pray against further devaluation of the naira. Customers should pray violently against the floating spirit of the naira.

While this piece is a satire, I would advise keen observers in the power sector to look out for the fulfillment of several of these “prophecies” in 2017.

Odion Omonfoman is an energy consultant and the CEO of New Hampshire Capital Ltd. He can be reached on orionomon@outlook.com.