Sunday, 29 July 2012

Can Manitoba deliver on Nigeria’s electricity needs?


Canadian based Manitoba Hydro International (MHI) takes over the management of the Transmission Company of Nigeria (TCN) today and the question on the minds of most Nigerians is if the company can deliver on its promises.
President Goodluck Jonathan 

In a press release on its website, the company has already outlined its plans for the TCN. MHI says it would be targeting three functional areas in the management of TCN operations. The three key functions that MHI plans to reform in the operation of TCN are its Market Operator (MO), System Operator (SO), and Transmission Service Provider (TSP) functions.

During the term of the three year contract, which will cost the Nigerian government $23 million, a key objective for MHI will be to reorganize TCN such that the TSP becomes a separate entity from the MO and SO allowing it to become commercial company.

“MHI expects to turn TCN into a technically and financially efficient, stable, and sustainable company; a company that will be market-driven and capable of utilizing its maximum generation capacity and then distributing the energy throughout Nigeria 24 hours a day, 365 days a year,” states the press release from MHI.  

A big challenge with the Nigerian power system, say those familiar with the sector, is the inefficiency of the transmission system resulting in a good chunk of the electricity generated being wasted.

 To resolve Nigeria power transmission challenge, MHI says it will have to focus on developing the capability of local personnel.

Specifically, MHI states that during the term of its contract it would be hoping to ensure a reliable, efficient, and cost-effective network for the transmission of electrical energy and help facilitate the increased availability and reliability of high voltage electricity throughout Nigeria.
Develop TCN’s technical, financial, and managerial capability to build for its long-term future and sustainability.

Improve financial management and increase profitability in line with modern business practices, ensuring the commercial viability of TCN and creating an environment conducive to private sector investment.
Develop an organizational structure for TCN such that the electricity transmission business (i.e. the Transmission Service Provider) can be separated from the MO and SO activities and incorporated into a distinct commercial TSP company, capable of being privatised on a long-term concession. The reorganisation will enable the MO and SO activities to operate as separate entities or as an Independent Systems Operation (ISO) company with two distinct units.

 Introduce appropriate modern business practices and effective application of information and communications technology; improve the overall efficiency and skills of the local personnel so that they may fully contribute to the effective management, operation, and performance of the company.

MHI’s main challenge however will be in tackling Nigeria’s aged powered transmission lines. A 2009 paper by Sunday Onohaebi of the University of Benin discloses that the last transmission line was built in 1987. The paper reveals that there were about 4,144 power outages in 2005, with the most common cause of power outages being “transmission line constraints, shunt reactor problems, overloading of transformers and vandalisation of transmission lines”

The challenges are steep. Just about 5.4 million Nigerian households are said to have access to the current epileptic power supply according to the Nigeria Electricity Regulation Commission (NERC).

Figures from NERC shows that Nigeria has installed generation capacity of 8,663MW but with only about half of this (4,300MW) available. On the transmission side, the country has the capacity to transmit just 5,838MVA with a transmission backbone of just 4534km. The challenge faced by Nigeria becomes glaring when it is realized that South Africa with a population of 50 million has installed capacity of 40,000MW while Egypt with a population of 85 million has installed capacity of about 30,000MW. The NERC estimates that Nigeria should currently be generating 100GW of electricity which would require total investment of $300 billion.

At the current rate of Nigeria’s economic growth of about 7% per annum, Nigeria’s energy demand is estimated to hit 28,360MW in 2015 and over 50,000MW by 2020. Nigeria currently generates less than 5,000MW. The government hopes that the current effort at privatising the power sector will create the needed platform to attract the much needed private sector capital to drive growth in the power sector and meet Nigeria’s energy needs. It is estimated that country will need about $40 billion of investments in the power sector between now and 2020 to attain the desired target 28,000MW.

The technical capacity of MHI to deliver is not in doubt. Canada based MHI comes with a strong pedigree in the electricity sector. It is a wholly-owned subsidiary of one of the largest and longest-standing electric power utilities in Canada, Manitoba Hydro. Manitoba Hydro was established in 1880 and currently holds assets approaching $13 billion, with $2.4 billion in annual revenues, and over 6,200 employees.

It is a major power utility, involved in the planning, design, construction, operation, and maintenance of all elements of power infrastructure, according to the statement obtained from the company’s website.
 As a utility operator, Manitoba Hydro serves over 537,000 electricity customers and 265,000 natural gas customers. In addition, Manitoba Hydro exports up to 40% of its energy production to the North American marketplace, which includes over 35 utilities and marketers in the mid-western USA, Ontario, and Saskatchewan

 MHI has provided utility and asset management; consulting; and training solutions to over 70 countries worldwide.  In Africa, MHI has electricity projects in Ghana, Liberia, and Uganda among other countries.

The biggest challenge however for MHI in its Nigeria’s operation, would most likely be navigating Nigeria political minefield where entrenched selfish interests will be waiting to discredit its operations for purely selfish motives. It is also not clear how much support the company will get from the federal and state governments in making the required investment in the transmission network to make the desired impact. 

Hopefully, MHI’s entrance into the Nigerian electricity sector will not end like that of Pentascope or Virgin Nigeria. Both ended very badly.  Nigeria needs MHI to succeed more than they need the $23 million management fee they are getting. 

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