Developments and Opportunities in

the Nigerian Electricity Industry

By

Uzoma. D. AchinanyaSenior Special Assistant to the President of Nigeria on

Electricity Distribution and Market Operations

Outline

• Nigeria in perspectives

• What are the issues?

• Recent Developments

• Current Challenges

• Investment opportunities in the Nigerian Power Sector

• Comforts to the investors

• Summary

Nigeria in Perspective I

• Power Supply– Generation

• About 6,000MW capacity from 15 grid connected generating plants.

• The mix is twelve (12) thermal and three (3) hydros

• Ten (10) state owned, supplying 70%, and five (5) IPPs supplying30% of the power

• Hydro : thermal ratio (capacity) is 25:75

– Transmission• Transmit at 330KV and 132kv

• Transformation capacity = 6,500MW at 330KV and 7,500MW at 132KV

• About 5,500Km of 330KV lines and 7,000Km of 132KV lines

• Average transmission loss factor = 9%

Nigeria in Perspective II

• Power Supply– Distribution

• Transformation capacity = 16,000MW

• Average distribution loss factor = 26%

– Commercial• No. of connections = 4.9million

• Average end-user tariff = 12.0/KWh ($cent 8/KWh)

• Average tariff paid by consumers = N8.5/KWh ($cent 5.7/KWh)

• Average subsidy provided by Govt. = N3.5/KWh ($cent2.3/KWh)

• Average monthly revenue collection = 11.5bn NGN ($77m)

Nigeria In Perspective III

• The Population

– Population is about 150 million – the largest in Africa and seventh largest in the world. For every 5 black people in the world, there is one Nigerian

– The population is not just large, it is also growing at a fast rate

– More than 50% of Nigeria’s population is below age 20 years

– Population’s access to electricity is about 40%

– Nigeria has enormous appetite and capacity for energy

6

Nigeria Vs the Rest of the World on power Supply

Country *

Generation Capacity

(GW) Watts per capita

S. Africa 40.498 826

Egypt 20.46 259

Nigeria 5.96 40 (25 available)

Ghana 1.49 62

USA 977.06 3,180

Germany 120.83 1,468

UK 80.42 1,316

Brazil 96.64 486

China 623.56 466

India 143.77 124

Indonesia 24.62 102

Sources:•World Fact book - http://www.cia.gov/library/publications/the-world-factbook/index.html

* Energy Information Administration – www.eia.doe.gov

Nigeria Vs the Rest of the World II

• Nigeria’s population is nearly 3 times that of

South Africa, but South Africa’s Power Supply

Capability is about 10 times that of Nigeria

• Electricity is the key driver of economic

development world-wide. Lack of it is

strangulating growth and development in

Nigeria

What are the Issues?

• Lack of investments in electricity generation, transmission and distribution

• High technical and non-technical losses

• Low customer satisfaction and poor revenue collection

• With poor revenue collection, there has been little or no investment feedback in the industry. Due to lack of investments, generation capability reduced from 6,200MW to about 2,000MW between 1990 and 1999

• Overbearing government influences in the management of the electricity industry

Funding To The Nigerian Power Industry

0

100

200

300

400

500

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Investment ('US$millions)

Source: Presidential Retreat On Power

9

Investments in the Nigerian Power Industry (1974 – 2006)

Recent Developments I

• The FG, in response to the people’s demand for real and immediate improvement in supply set up the Presidential Action Committee on Power (PACP), chaired by the President, and with most decision makers in the economy as members

• Simultaneously, a Presidential Task Force on Power (PTFP), was set up to carry out the day to day responsibilities of the PACP. The Task Force is made up of technocrats and Industry Experts

• The PTFP developed a Roadmap (launched in August 2010) which outlines the plans to – Determine the status quo and update the actual supply needs of the

Country

– Improve service delivery in the short run

– Set medium to long term supply targets for the country

– Fast track the power sector reform programme to meet the supply needs

Recent Development II

• Through the Task Force

– The actual status of Power Supply in the country

was determined

– Strategies developed for improving service

delivery in the short term

• Projects to close short term gaps identified, most are

currently under construction, to be delivered before

June 2011

– Medium to long term supply targets set

Short-to-Medium Term Targets

July 2010 Dec. 2010 April 2011 Dec. 2011 Dec. 2012 Dec. 2013

Fuel to

power

capacity

(MWE)

4,558 5,627 7,711 9,184 11,701 11,780

Generation

capacity

(MW)

4,612 5,379 7,033 9,767 11,879 14,218

Transmissio

n capability

(MW)

5,155 5,515 5,995 6,555 7,866 8,653

Distribution

capability

(MW)

5,758 6,334 6,900 7,485 8,061 9,057

Projected Demand to be met by 2020 = 20,000MW

Current Challenges

• Fund, for investments in the industry

• Adequate management expertise, without government interferences

• Government alone cannot provide the needed investment, and is not in the position to provide the necessary expertise

• Incentivize the private sector to make the investment and provide the expertise– The need to pursue and conclude the fundamental

changes to the ownership, control and regulation of the power sector as outlined in the NEPP(2001) and EPSR Act 2005 - A lot has already happened in this regard

The Most Frequently Asked Questions

• What are the real opportunities for investments in the Nigerian Power Sector?

• Will the investments be secure in Nigeria?

• Will there be adequate returns on any investments in the Nigerian Electricity Industry?

Investments Opportunities in the

Nigeria’s Power Sector

• Generation – Gas to power development: Nigeria has massive gas

reserves yet to be explored and exploited for power generation (source, transport, reliability issues). MWE of current Gas to Power supply capability is about 8,000MW

– Large scale Hydro generation capability: Mambilla (2,600MW), Zungeru (700MW), over 300 small and medium hydro power sites

– Coal to power development: the Nigerian Coal Belt is vast. There is on-going consultancy to determine the type, actual quantity and the overall bankability of coal to power projects in Nigeria

Investments Opportunities II

• Generation

– Developments in Renewables: Nigeria will like to join the rest of the world in the race for green energy, but it needs sufficient generation capability from other sources and a robust grid to be able to tap the available solar and wind resources, due to reliability issues and intermittency

– Most of the existing power plants are over 40 years old and have suffered large scale degradation. A good number of them require refurbishment and replacements

Investments Opportunities III

• Transmission – Development of a Super Grid (700KV): The Transmission

grid is far from robust. Super grid is needed to be able to move power over long distances from point of generation to major load centres

– Stranded generation: mainly in the South Eastern part of the country, due to inadequate transmission infrastructure to evacuate the power, even for local consumption

– Grid security: transmission grid is currently redial and fragile. The grid should be looped, and greater part of the network need rehabilitation and replacement

– Serious low voltage problems in the Northern part of the country due to very long lines at low transmission voltages

Map 4: Existing NEPA Transmission Line System

ONITSHA

KAINJI

JEBBA/GS

JEBBA/TS

SHIRORO

AJAOKUTA

Abeokuta

Ikeja

Akure

Benin City

Asaba

PortHarcourt

Owerri

Uyo

ALAGBADO

BirninKebbi

Minna

Kaduna

Abuja

Jos

Bauchi

Gombe

Damaturu

MaiduguriKano

IIorin

AdoEkiti

Lokoja

Lafia

Makurdi

MAKURDI

EnuguAkwa

Umuahia

Ibadan

AFAMPOWER ST.

Sokoto

Gusau

Katsina

Hadejia

Jalingo

Yola

Abakaliki

Calabar

JIGAWA

KANO

KATSINA

SOKOTO

ZAMFARA

KEBBI

KWARA

KADUNA

ABUJA

NIGER

NASSARAWA

TARABA

YOBE

PLATEAU

BENUE

EBONYI

CROSSRIVER

AN AMBRA

OSUN

BAYELSA

KOGI

EDO

ABIA

RIVERS

DELTA

ONDO

OYO

ENUGU

IMO

ADAMAWA

BORNO

GOMBE

BAUCHI

EKITI

LAGOS

AKWAIBOM

ATLANTIC OCEAN

NIGER

REPUBLICOF BENIN

REPUBLICOF CAMEROON

REPUBLICOFCHAD

TRANSMISSION LINE LEGEND132KVLINES - EXISTING

132KV LINES - AWARDED

132KV LINES - APPROVED

132KV LINES - UNDER CONSTRUCTION

330KV LINES - EXISTING

330KV LINES - AWARDED

330KV LINES - APPROVED

330KV LINES - UNDER CONSTRUCTION

BULK SUPPLY - EXISTING

BULK SUPPLY - UNDER CONSTRUCTION

BULK SUPPLY - APPROVED / AWARDED

HYDROELECTRIC POWER SUPPLY

THERMAL POWER STATIONS

132 KV 330 KV

H

SAPELEP/ST.

DELTAPOWER ST.

2 Circuits

OGUN

Osogbo

2 Circuits

3 Circuits

Notes:1. Multi-circuits are not indicated for the 132KV system.

2 Circuits

2 Circuits

2 Circuits

EGBINP/ST.

NIGERIA

Report Maps 7-24-00

Existing Transmission Network

18

19

TRANSMISSION GRID STRUCTURE WITH THE SUPER GRID IN PLACE

ONITSHA

KAINJI

JEBBA/GS

JEBBA/TS

SHIRORO

AJAOKUTA

Abeokuta

Ikeja

Akure

Benin

Asaba

PortHarcourt

Owerri

Uyo

ALAGBADO

BirninKebbi

Minna

Kaduna

Abuja

Jos

Bauchi

Gombe

Damaturu

MaiduguriKano

IIorin

AdoEkiti

Lokoja

Lafia

Makurdi

MAKURDI

EnuguAkwa

Umuahia

Ibadan

Sokoto

Gusau

Katsina

Hadejia

Jalingo

Yola

Abakaliki

Calabar

JIGAWA

KANO

KATSINA

SOKOTO

ZAMFARA

KEBBI

KWARA

KADUNA

ABUJA

NIGER

NASSARAWA

TARABA

YOBE

PLATEAU

BENUE

EBONYI

CROSSRIVER

AN AMBRA

OSUN

BAYELSA

KOGI

EDO

ABIA

RIVERSDELTA

ONDO

OYO

ENUGU

IMO

ADAMAWA

BORNO

GOMBE

BAUCHI

EKITI

LAGOS

AKWAIBOM

ATLANTIC OCEAN

NIGER

REPUBLICOF BENIN

REPUBLICOF CAMEROON

REPUBLICOFCHAD

TRANSMISSION LINE LEGEND

BULK SUPPLY POINT

HYDROELECTRIC POWER STATION

THERMAL POWER STATIONS

330 KV

H

SAPELEP/ST.

DELTAPOWER ST.

OGUN

Osogbo

EGBINP/ST.

NIGERIA

Potiskum

Niamey

132 kV

2

3

2

3

4

2

2

Aliade

Mambila

Bali

2

AFAMPOWER ST.

2

2

330KV LINES – MULTIPLE CIRCUITS

330KV LINES - EXISTING

2

2

2005 : new

2

2015 : new

2015 : new

2015 : new

2015 :

3rd Circuit

2010 : new

2015 : new

2010: new

2

2

42015 : new

SAPELE

P/ST.

Okitipupa

Geregu

2015 : 2nd Circuit

Agip

Zaria

2015 : new

2015 : new

2015 : new

2015 : new

700KV LINES – SUPER GRID

700 / 330KV SUBSTATION

Mambila Hydro

Some 330kV lines especially in Lagos and Delta areas could not be indicated on this geographicalMap.See attached single diagram for Details.

NOTE:

PROPOSED SUPERGRID NETWORK

Investment Opportunities IV

• Distribution – Legacy distribution infrastructure. The Electricity

Corporation of Nigeria (ECN) was set up in 1951 to oversee the business of electricity distribution in Nigeria. Some parts of the network are more than 50 years old and need urgent replacement and upgrade.

– Distribution network should grow at about 20% pa to cope with the requirement by 2020. Current growth rate is about 1% pa, due to limited investments, and the fact that available investments go into replacements

– Metered consumers constitute about 50% of total population. About 25% don’t have meters while 25% have bad or obsolete meters

Investment Opportunities V

• Distribution – Out of 2million Pre-payment to be implemented under the

National Pre-payment metering programme, only 500,000 meters were installed. About 1.5 is still outstanding

– Billing and collection infrastructure need to be upgraded to meet current international standards

– Demand Side Management – for virtual generation

• General– Demand for power has continued to grow in excess of supply

– Economies are based on human activities. The six most populous countries in the world are either economically developed or are making serious advances towards development. There are Potentials for growth in Nigeria

Comforts to the Investors I

• A lot has happened and a lot more is still happening to give comfort to the prospective investors in the Nigerian Power Sector

• Supportive Energy Policy – when Nigeria woke up to its energy problems, it developed a Power Policy which was approved in 2001. Actions of successive govts have been very consistent with the Policy. There is a sustained political will to progress power sector reform.

• Legal Framework exists: Power Sector Reform Act was passed in March 2005 to give legal backing to the reform initiative

• The people’s need for power is real and urgent. Consumers are willing to pay for reliable power. They are paying more for lack of it. The demand for the reform of the Power Sector is universal.

Comforts to the investors II

• Existence of a Sector Regulator- Following the Power Sector Reform Act of March 2005, the Nigerian Electricity Regulatory Commission was set up in Oct 2005 to drive the electricity Market development and promote competition

• Favourable Tariff Structure – the Multi-year Tariff Order (MYTO) has been developed by the Regulator as a transparent methodology for tariff determination. MYTO is currently undergoing a major review to ensure prices are adequately aligned to cost

Comfort to the Investors III

• Robust Gas Master Plan with appropriate pricing for gas

• Bulk Trader:Bulk Trader has been registered and licensed, credit enhancements being put in place to enable BT take off

• Electricity Liability Company exists: NELMCO already in place, currently being resourced for operations – take over legacy liabilities

• Nigeria is Very Accessible:- Can be reached by the rest of the world by sea, Apapa Port in Nigeria is one of the largest Sea Ports in Africa. Can be reached from anywhere in Africa by road

Summary

• Electricity problem is an African problem, but most acute in Nigeria.

• The need for power in Nigeria translates to huge opportunities for investors world-wide

• Solving the Nigerian power supply problem is solving the African problem

• It is not Sprint, but a Marathon. Nigeria, and indeed Africa, cannot do it alone

Thank You

Questions please!