N190bn Debt, Other Systematic Challenges Impacting NDPHC Cashflow, Says Ugbo
The Chief Executive Officer, Niger Delta Power Holding Company Limited (NDPHC), Chiedu Ugbo on Monday disclosed that N190 billion debt, and transmission constraints, among other systematic challenges are affecting the company’s cash flow.
Speaking to journalists at NDPHC’s promotion of the ‘Light Up Nigeria’ initiative event in Lagos, expressed optimism amid these challenges, stressing that the power-generating company is focused on its businesses to grow and light up Nigeria.
According to him, “Despite the foregoing achievements, NDPHC’s operations are hampered by a number of systemic challenges (discussed in the next slides) which have significantly affected its cash flow but which present good private investment opportunities.”
He disclosed that huge indebtedness by the market to NDPHC in the tune of N190 billion for unpaid invoices since 2015 when TEM was declared has affected the company’s operations.
Other challenges he highlighted include, “inadequate transmission and distribution (T & D) grid capacity to evacuate energy generated from the power plants.”
He disclosed that in 2022 T & D available capacity is estimated at about 5,500MW, stressing that NDPHC is currently allocated a maximum dispatch space of 975MW (peak period) and 757MW at off-peak (despite often being substantially mechanically available).
He stated that evacuation limitations are further exacerbated by SO’s frequent start-up & shut-down instructions to the plants ostensibly for frequency and load control to ensure system safety and reliability but resulting in increased turbine stress, more unscheduled outages and significant maintenance costs.
On gas supply and transportation constraints, Ugbo said, “unavailability of sufficient volumes of gas to guarantee generation up to TCN-allocated evacuation capacity of 975MW let alone the full capacity of its power plants. Calabar is the only plant with full gas supply.
Plants in the the western axis require about 150MMSCF/day to meet TCN-allocated evacuation capacity of 535MW (Peak). Gas supply to western axis power plants is further challenged by low pressure on NGIC gas pipelines –ELPS & Oben-Ajaokuta.
“Gas suppliers want a higher gas tariff beyond the industry approved gas tariff ($2.50 vs. $2.18).”
He disclosed that most of the risks in the value chain are warehoused and forgotten with generation, stressing that non-FM Market/demand risks outside the fences of Gencos are left with Gencos including availability risks and gas offtake risks.
“Payment risks – in addition to lack of full payment of generation invoices, no availability and Gas ToP payments properly so called though some attempt in the contract activation of 2022.
“Also no payment for reduction in declared capacity due to transmission limitations and for several starts and stops in a day due to SO’s instructions. Typically free starts for baseload plants are limited to not exceeding 12 in a year (see NBET standard PPA).”
“Molecules should flow in equal velocity with risks (properly allocated across the chain) with liquidity flowing in opposite directions.”
He noted that macroeconomic challenges’ impact on foreign exchange-denominated costs has led to increasing costs of gas and spares.
In resolving these challenges, he said “It is obvious that a lot more investment is required in transmission and the government alone cannot do this.”
He said there is an urgent need for private capital mobilisation; explore Independent Transmission Projects (ITP) starting with Gencos as investors.
“With NDPHC’s track record, this is possible and doable in the short term and intensifies bilateral contracts/franchising with last mile solutions,” he said.
He added further that implementing a programme to leverage its generation assets to deliver reliable supply to eligible (maximum demand) Customers, Discos and 3rd party project developers that aggregate load and provide reliable supply to bulk customers.
“To underscore the importance of this programme, it is directly led by NDPHC’s Chairman, Vice President, Sen. Kashim Shettima.
“Approach is to focus more on sale to bulk purchasers and developers that aggregate load because of the volume of power that can be sold on each such project (subject to the proper payment security being in place)
“The initiative offers a sure path to being able to sell a significant part of NDPHC’s commercially stranded capacity to light up businesses and homes. The goal is to have more than 97 percent availability,” he added.
He concluded that “To reasonably resolve the challenges to power plants’ operations and increase electricity supply to homes and businesses, NDPHC’s Light-up Nigeria initiative is to explore not only the opportunities under the Eligible Customer Regulations and Electricity Act 2023 but also bilateral power sales in collaboration with Discos and other bulk purchasers under trading arrangements that will ensure that investment is mobilized for end-to-end solutions that will guarantee that electricity is delivered to customers and NDPHC is paid for the electricity generated.”
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