In pursuit of its Economic Recovery and Growth Plan (ERGP), the Federal Government (FG) is determined to increase the scale of investment in the power sector in an unprecedented manner by launching a series of programmes aimed at repositioning the power sector for private sector investment. One such program is the Power Sector Recovery Plan (PSRP) which aims to provide deliberate financial, technical, operational, governance, and institutional interventions in the Nigerian Electricity Supply Industry (NESI). Also, the FG previously secured loans for the Transmission Rehabilitation and Expansion Programme(TREP) which the Transmission Company of Nigeria (TCN) is currently implementing using in-house expertise. In the same vein, there is the 72billion Naira facility approved by the FG for the Distribution Expansion Programme (DEP) to ensure a match between transmission and distribution capacities of the power grid. On the generation front, there was a Payment Assurance Guarantee (PAG) of 701billion Naira provided to ease the impact of illiquidity in the power sector on the survival of generation companies (GenCos) and to pay gas suppliers for historical debts incurred due to payment shortfall by distribution companies (DisCos) for electricity supplied under vestige contracts with the Nigerian Bulk Electricity Trader(NBET).
While commending the effort to invest in the power network, to ensure value for money in the implementation of projects. Thus, it is in order to examine the strengths, weaknesses, opportunities and threats presented by this deal with Siemens towards revitalizing the power sector.
STRENGTHS
The deal aims to create an attractive business environment in the NESI by combining measures of loss reduction with increase in power generation capacity. This is expected to attract private sector investment in the NESI and unleash the full economic potential of the nation. The proper way to develop a power system is to carry out power system studies. This deal not only does that but aims to institutionalize it. Using a technically competent and reputable company in the industry adds credibility and reliability to the process. While there may be threatening factors to the realization of the desired intention, it breathes fresh hope in the minds of major stakeholders, especially investors, that the NESI is about to witness a positive trajectory. Siemens is an internationally recognised company with significant experience in large scale projects of this nature cutting across the generation, transmission, and distribution segments of the electricity value chain.
Bailing out the power sector in this way is more pragmatic and convenient for the FG especially with effective project management. It saves time and resources required to put a proper contract in place, advertise, and carry out of the tendering process for prequalification and selection of the most technically and commercially viable offer(s). Also, it can protect previous and future investments in the NESI while optimizing and advancing current business processes with minimum time and effort.
WEAKNESSES
In contract management, this deal is an example of single-sourcing. This is fraught with obvious disadvantages including the absence of competition, possibility of price monopoly in the face of poor performing sub-contractors that can prevent the intended cost-savings and or value-for-money from being realized. It may serve the NESI better if the same project scope is offered to three industry giants including ABB, GE and Tata to submit quotations to serve as benchmarks to offer the most technically and commercially viable bid. If not, it may be very difficult to create a sense of competition in the award of new services in the future. In addition, there is the future risk of the lack of available component spares especially when there is a failure of a batch of equipment installed throughout the network. We can soon run into a situation where a specific firmware on a protection relay installed all over the country mal-functions and the system goes in disarray. Also, it is possible for the manufacturer to cease production of a network component which forces a total replacement nationwide. These things take time!
On a more technical front, it must be highlighted that the deal in the first phase does not include the construction of overhead lines and the power factor used in the design calculations is 0.93. This needs to be increased to at least 0.97 while introducing penalties for poor power factor consumption to reduce network losses. On metering, the dire need of the NESI is a national electricity metering infrastructure which provides meters for all consumers in such a way that data from consumer consumption and payments made is transparently available to relevant stakeholders. This deal with Siemens is however limited to the back-end which escrows payments by consumers to ensure transparency throughout the NESI and does not help with the slow pace of deployment of meters by MAPs.
The best way to develop the Nigerian Power System is to decentralize the grid into regions, encourage the connection of distributed generation from renewable and non-renewable systems. This is the fastest route to ensure the security and stability of power supply in Nigeria. It is also the most technical, logical and economical.
.….to be concluded
