Kola Adesina is a man of many parts who believes nothing is impossible if you believe. He is the group managing director of Sahara Power Group and the chairman of Ikeja Electric. Sahara Group’s affiliates include Ikeja Electric, the largest privately-owned power distribution business in Sub Saharan Africa (SSA), Egbin Power Plc – the largest privately run thermal power plant in SSA and First Independent Power Limited. Adesina chairs the Board of Ikeja Electric. In this interview with NATIONAL ECONOMY, he explains the importance of an integrated solution for the nation’s power sector. He also advocates support by electricity consumers for appropriate pricing of electricity which he believes could lead to improved services.
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What can be the common ground for stakeholders in the power sector
The common ground is simply this: When you call something a value chain, what it simply means is that it starts with the customer, the person that is consuming the electricity, what level of power does he need to function as a human being? What quality of power does he need to exist in a manner that makes sense? That is the issue here. That’s the first place to start. Now, having dimension your residential customers’ requirement for a good life, for healthy living and for a productive life, then you take the next set of customers into consideration as well; that is, the commercial and industrial users. How do you make a nation great? It is through your productivity level and the level of your economic activities that can truly propel the nation. Now, in Nigeria, for everybody to have electricity in a stable, regular and productive manner, we require to generate, transmit and distribute 26,000 megawatts of electricity. Now, you go into the different alternatives of generating electricity, it is either you want to use renewables e.g. the hydros, solar, wind or to use the thermal sources. These different sources are readily available to you as options. So, in that dimension, the level of hydro you have, what quantum of energy can that hydro generate? What can the thermal plant generate? How many thermal units do you have presently in the nation? What is inhibiting them from generating their full capacity? How can you fix those things that need to be fixed in order for them to generate that 26,000 megawatts that you require? If our current capacity isn’t up to 26,000MW, how do we intend to expand capacity by adding more units to existing power plants or building new plants to augment the gap. Then you move to transmission, do you have a transmission infrastructure to evacuate 26,000 megawatts? Today, the answer, of course, is no. So, the question is how do you rapidly build transmission infrastructure to be able to take 26,000 megawatts from the various generating plants and ultimately take it to the distribution companies? And once you get it to the distribution company, what is it that they require to take it to our various customers some of these are feeder lines and transformers? From the above, you can see the systematic and concentric nature of the requirement for success in the sector. It starts with the customers and ends with the customers. The lubricant that oils the chain from gas to distribution is tariff; appropriate tariff. The customer must pay for services charged for that chain to continue to work in an unbroken manner. That is the way it works anywhere else in the world. So, there is a need for an integrated solution where everybody in the value chain truly comes up with their own revenue requirement for success in order to make it work. Government role really for us should just be, to be a facilitator and an enabler, that is all.
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Does Nigeria need 26,000MW to enjoy a 24/7 supply?
Let me take a step backward, for any nation that truly has the desire to generate, transmit and distribute 26,000 megawatts, what you should actually be producing is about 30,000 megawatts. The global best practice is to build redundancies into your plan. That is to build more than the required capacity to cater for breakdown, repairs, exigencies of gas infrastructure, turbines, lines, breakers, substations, feeders, and transformers.
Any alternative for those who can’t pay the existing charges?
The key question that needs answers is whether the cost of services in the value chain is captured by the set tariff in the regulated model. As we speak today, the answer is no. One logical consequence of inappropriate pricing of any commodity is the low quality of service production.
In order to deal with the issue relating to the ability/capacity to pay, the regulator crafted a model, which has different tariffs for different categories of customers classified, lightening, residential and industrial. The cornerstone of this model is that large end-users pays more by cross-subsidizing for those in other categories.
Unfortunately, despite their noble intentions, the tariff aimed at neither sufficient, to meet the cost of energy, is neither sufficient hospital cost of energy/service change. Investment required to secure cure the defects in the network. The net of electricity (value chain) is not working because the revenue required can’t be met by the current tariff.
Because of social and public interest, it was deemed necessary that a Consumer Protection fund of N100bn be set aside to cater to end-users. The customer with low per capita income where consumption is basic. Sadly, the sector didn’t access the fund in 2013 to the best of my knowledge.
Also, let me quickly share with you some facts that may be eluding the public in this debate. Have we ever calculated the cost of self-generation? Using candles for a month is more expensive than the DisCo bills. A stick of candle is N50. Assuming you use two sticks a day, it will cost you N3,100. For a household with the cost of a minimum of N2,000 a month, DisCos bill is still cheaper, more efficient and environmentally
Because we hardly compute the cost of self-generation, this readily doesn’t get the virus on us.
The current tariff structure is scaring away investors as the numbers don’t just add up. In the telecoms, the sim card was originally sold for as high as N30,000at inception, but today is it free. Some telecoms investors lost of a lot of money at inception but still found their way back into the market because the fundamentals of the sector are sound.
Nigeria has the largest power market in Africa with the largest potential and opportunities. Fix the fundamentals, the electron will flow ceaselessly, Investment follows certainty. The Magodo and Ikeja GRA examples demonstrate service improvements when the appropriate tariff is allowed.
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What exactly is fair to the man who does not have a meter?
This is a catch question. Do we enable a 24/7 electricity supply first then charge the right price later? Or we allow the right tariff to unlock the right investments that produce the right supply situation leading to happiness for all.
My take is as a nation like all other nations when electricity supply is stable, we should take the bull by the horn by reconstructing the tariff to stimulate investment.
Metering is a measuring device that is enshrined in the capital expenditure plan of all DisCos. When the appropriate tariff is allowed, necessary investments will be unlocked as return on investments is assured. A square of expectations, obligations, responsibility, and confidence is built when the input and output are directly correlated.
The government is keen on building this bridge of trust with aggressive metering programmes of different types being tuned and pushed.
I admonish our dissatisfied customers to kindly tilt towards supporting the appropriate pricing of electricity and see whether there wouldn’t be improved services.
Metering is a valuable tool in the hands of the DisCos for the purpose of energy accounting. We align with the need to meter all.
Intervention for the power sector by Siemen
We are very much aligned with the government in the Siemens intervention arrangement. The government is fully aware that there is a huge infrastructure gap and resources are required. Now, the government part-own all these assets because the government has a 40 percent stake in the DisCos. So, the solution government has come up with is a very fantastic one –Secondly, there has been ongoing conversation around it, the government signed a memorandum of understanding (MoU) and that MoU is what we are trying to activate. We were meant to be going for a meeting with the Germans on how to close the technical gap, the requirement for equipment and the total end-to-end solution they are offering. So, our own view is that an end-to-end solution makes sense. We are fully aligned with it, but the conversation is ongoing as we speak. The DisCos are engaged with the Government to dimension the critical success factors, cast the end to end solution Siemens are offering and ultimately agree to a financing plan.
To site a perfect DisCo example in terms of achievement; at Ikeja DisCo, we started our journey with Aggregate, Technical Commercial and Collection losses of 49.6% but today we have brought this as low to a historical record of 24.9%! This is the most aggressive reduction in Africa and probably beyond.
The government never said that the government of Nigeria is responsible, they know the implication of such a very strange decision. So, I can say without a doubt that government intention is for us to partner with Siemens in closing the technical gap in the system, it is not to hand over. Siemens doesn’t own, neither do they manage any generation, transmission, or distribution asset anywhere in the world. And it is not in their plan, we have had meetings with them. It is not in their plan either to come and take over.
Discos and readiness to the challenge given the population explosion
I will revert to my value chain comment earlier made. The performance of one is dependent on the performance of the other. The gas supplier can’t lay claim to success without the generation companies readily taking the has to convert to power which the Transmission company must evacuate to the DisCos. Should anyone drop the baton in this perpetual relay race, there would be light.
I will give you examples that will depict the daily realities of the sector. At Egbin, we met about 400MW to 450MW and available and operable capacity. We aggressively invested to recover the full capacity of 1,320MW. If you recall, at the outset of this administration, we were generating and supplying to the grid 1,100MW (which euphemistically was ascribed to the body language of HE President Buhari
When we took over this asset, what was the number of customers? What level of energy were we receiving as an organisation? How many meters did we inherit? What was the gap? What have we done to close the gap? Now, there is something I need to stress here, which I will want to resonate with everybody. Electricity supply is a value chain and that value chain is not just grammar, it is actually symbolic of what really happens in that chain. What is it I am speaking to here? If the gas man shuts his valve and he is supplying no gas, as I am currently experiencing in my generation side today in Port Harcourt; If the gas man says he is not going to give you gas today, everybody in the value chain, either as a Genco, as a transmission company, or Disco, can’t get power.
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The gap between power generation and transmissionÂ
Simply, why can’t we transmit the 13,000? Have you seen any electrical system in the world with 45% losses between generation and transmission before? My point is that we have fundamental challenges we are not addressing but continually looking for scapegoats to blame. The root cause analysis will have shown us the missing links rather than reducing the argument to numbers that don’t add up. As investors, we naturally will like to sell more to make more.
