Rossikk:

ekt bear said:

That's ridiculous. Those 23 power plants are goldmines for any company in possession of them. The govt know that. The firm knows that. They are literally handed a monopoly on power generation, with a $100 billion investment which, if recouped at a profit rate of just $5 billion per annum, reaches maturity in 20 years, with the rest, pure profit from thereon! No govt, knowing that, will agree to sell all the plants for $10 billion. Your analysis fails to include projected earnings to the firm issuing from ownership in the long term, which will definitely be a factor in any value  attached to the plants, and not just the monetary worth of actual physical assets.

Nigeria's power generation capacity is well under 10 GW. A lot of it older and dilapidated.

Here is somebody paying under $700 million for brand new 445 MW power plant: http://www.powergenworldwide.com/index/display/articledisplay/9018079890/articles/powergenworldwide/gas-generation/new-projects/2011/03/german-utility_mainova.html

Do the math.

As per transmission, what makes sense is to have state wide grids with connection to the national one, when you have excess (when demand is low) you should be able to push it to the national grid but because of federal character and all what nots, nobody will allow that. The Generating companies should have a presence at the downstream level or how are they going to be guaranteed their money at the end of the month.

I don't support selling all the power plant to one firm. Otherwise, Nigerians would drown in the resulting monopoly. Don't be deceived by the $100bn, selling the power plants is like selling the power sector. take this scenario for instance

If 50million household pay a bill of ₦2000(ridiculous init) each month, the firm would be grossing about ₦100bn monthly.

And for a year, would be ₦100bn x 12months = ₦1.2tr approx $80bn (Gross)

With a concession of about 50 years , this firm would relegate MTN to the background while more graduate would be smiling to the bank

Think of all the options, the worst one is what will be saddled with, God bless our leaders, we need a strong government that is ready to regulate this industry.

ekt_bear:

Nigeria's power generation capacity is well under 10 GW. A lot of it older and dilapidated.

Here is somebody paying under $700 million for brand new 445 MW power plant: http://www.powergenworldwide.com/index/display/articledisplay/9018079890/articles/powergenworldwide/gas-generation/new-projects/2011/03/german-utility_mainova.html

Do the math.

Perhaps that's why the figure is so high. If they are offering that amount for all the stations they must realise they must be chasing a monopoly and considering most of these so called assets have all but reached zero, replacing them, upgrading the sickly ones and adding capacity to meet set targets for stable power probably accounts for the loss. Like MTN coming in to replace NITEL way back in 2001. If they had desired a monopoly then the 60 to 100 million lines required to stabilised the telecomms market will have demanded an unbelievable sum.

ekt_bear:

@kalokalo: Your premise is that transmission losses are very high.

That isn't true, at least in the Westhttp://en.wikipedia.org/wiki/Electric_power_transmission#Losses

@ ekt-bear, transmission losses in Nigeria range from 30 - 40 %

ekt_bear:

Furthermore, if I own a likely very profitable business like the two Lagos power discos, I'd much rather spend my cash wiring everyone, maintaining my infrastructure than investing too much in power generation myself.  

No sound distribution company will want to sign a long term power supply agreement with a government owned asset (transmission grid). They will not only prove to be unreliable but are also not credit worthy. Nigerian govts don't respect agreements especially with a change in govt. Examples abound!! Discos in Nigeria will prefer to generate and transmit themselves (albeit on a micro scale) so as provide certainty on their business model and financial projections.

hercules07:

Think of all the options, the worst one is what will be saddled with, God bless our leaders, we need a strong government that is ready to regulate this industry.

That's why I don't feel comfortable with Hayatudeen moving to the other end of the park at such short notice. I just sigh honestly every time the interests are always personal. Where are those who just want to see these things work and not just how much of the pie they can take. I'm sure when he was appointed he must have though, 'oh, another civil service job, chop in the shop' but now some 'expert' has enlightened him and crunched the numbers, the grass is suddenly looking greener on the other side. Unfortunately he will have left behind a lot of loyal staff who will ensure his company is well represented no matter the cost to us.

@Reference: Even if they drastically overpaid for Nigeria's existing power infrastructure (paying $100 billion for something that costs under $20 billion to build from scratch), they have no ability to enforce a monopoly, since the transmission network will be kept separate. Meaning anybody can start up a power plant and start selling to the national grid.

Heck, if you have a stream near your house or live near a windy hill, maybe you'd sell to the national grid too 

Anyway, I still don't think it is a good idea to sell to one guy.

kalokalo:

@ ekt-bear, transmission losses in Nigeria range from 30 - 40 %

I didn't realize it was that high (do you have a reference for that, btw?). Still, are you assuming that it will never be reduced to something more reasonable? Under that assumption, then yes. . . no point having a national grid. But if under 10%, have one.

No sound distribution company will want to sign a long term power supply agreement with a government owned asset (transmission grid). They will not only prove to be unreliable but are also not credit worthy. Nigerian govts don't respect agreements especially with a change in govt. Examples abound!! Discos in Nigeria will prefer to generate and transmit themselves (albeit on a micro scale) so as provide certainty on their business model and financial projections.

GEJ's power sector reform plan addresses that issue. See page 27 of this: http://www.nigeriapowerreform.org/rokdownloads/Roadmap%20for%20Power%20Sector%20Reform%20Full%20Version.pdf


Anyway, I agree, in certain places, you cut out the middle man. If I'm an investor, I buy both Lagos discos, and buy power plants nearby (or find someone trustworthy to partner with.) That way, no reason to deal with the FG.

ekt

You must deal with government o, Federal Character applies to non humans too, the problem Shell dem had was payment guarantees, they wanted to be paid in barrels of oil (our people no gree), the generating guys need to participate in the downstream part of the business, almost the same way Shell behaves in the oil sector.

@Kalokalo: Thinking about it more, you are kind of right. What reason does the FG have not to sell the national grid off? What do we lose by doing that?

I think GEJ says something about national security, natural monopoly, blahblah for not selling it off. But I don't really buy those reasons.

Basically, if the government screws up its end (the national grid) as they've screwed up so many other things, naija will suffer.

Especially if you live in the middle of nowhere, or a place that isn't very densely populated like Northern Nigeria.

I'm starting to wonder how it is done elsewhere in the world.


@herculed07: What do you mean by federal character? I don't get it. Who suffers if there is no federal character. . .?

ekt

If the Generating guys are allowed to build a self contained system (generate, transmit and distribute), they will concentrate on the commercial places only, government can not allow that to happen as they will always say there is a need for federal character (poor areas must be covered as well).

I don't think federal character will hurt too much in this case. Most of the discos should be profitable.

My guess is that the weakest link would be the Yola one. But fortunately, that part of the country doesn't really have too many people, and thus won't use too much electricity:
http://i55.tinypic.com/2czjlx.png

So the amount which we'd have to subsidize them shouldn't be too much.

Federal character sucks, but hopefully won't hurt the rest of us badly.

ekt_bear:

@Reference: Even if they drastically overpaid for Nigeria's existing power infrastructure (paying $100 billion for something that costs under $20 billion to build from scratch), they have no ability to enforce a monopoly, since the transmission network will be kept separate. Meaning anybody can start up a power plant and start selling to the national grid.

Heck, if you have a stream near your house or live near a windy hill, maybe you'd sell to the national grid too 

Anyway, I still don't think it is a good idea to sell to one guy.
I didn't realize it was that high (do you have a reference for that, btw?). Still, are you assuming that it will never be reduced to something more reasonable? Under that assumption, then yes. . . no point having a national grid. But if under 10%, have one.
GEJ's power sector reform plan addresses that issue. See page 27 of this: http://www.nigeriapowerreform.org/rokdownloads/Roadmap%20for%20Power%20Sector%20Reform%20Full%20Version.pdf


Anyway, I agree, in certain places, you cut out the middle man. If I'm an investor, I buy both Lagos discos, and buy power plants nearby (or find someone trustworthy to partner with.) That way, no reason to deal with the FG.

Well maybe it goes beyond the 23 plants then. Say 100 bill for the lot, scratch cards to drops calls, take or leave. If I had the cash that's what I'll do.

The more I think of it the more I'm convinced we should take it if it's real. The so called PHCN infrastructure we have today can be likened to what NITEL had in 2001. Great at that time but pretty archaic going forward. Anybody buying wholesale into this has a head-start alright but its not that great. Most people in the engineering business will tell you that from a technical stand point a fresh start is always easier. Before Abuja became crowded distribution infrastructure was excellent. Can't say the same if you have to upgrade say Ikeja business district. It will be hell. PHCN indeed has equipment from all over the place. Everyone from Siemens through Mitsubishi Heavy to GE have all licked the crockpot. That is also the reason the government has to come up with a better exit plan for PHCN.

The more they try to paper the power cracks the worse its bound to get for any potential investor. Create an enabling environment and leave the bloody thing to fail. This kernel of wheat has to fall to the ground and die. Messing it up further only makes recovery more expensive in the long run.

turboman:

I don't support selling all the power plant to one firm. Otherwise, Nigerians would drown in the resulting monopoly. Don't be deceived by the $100bn, selling the power plants is like selling the power sector. take this scenario for instance

If 50million household pay a bill of ₦2000(ridiculous init) each month, the firm would be grossing about ₦100bn monthly.

And for a year, would be ₦100bn x 12months = ₦1.2tr approx $80bn (Gross)

With a concession of about 50 years , this firm would relegate MTN to the background while more graduate would be smiling to the bank

i agreed wt u on this

ekt_bear:

@Kalokalo: Thinking about it more, you are kind of right. What reason does the FG have not to sell the national grid off? What do we lose by doing that?

I think GEJ says something about national security, natural monopoly, blahblah for not selling it off. But I don't really buy those reasons.

Basically, if the government screws up its end (the national grid) as they've screwed up so many other things, naija will suffer.

Especially if you live in the middle of nowhere, or a place that isn't very densely populated like Northern Nigeria.

I'm starting to wonder how it is done elsewhere in the world.


@herculed07: What do you mean by federal character? I don't get it. Who suffers if there is no federal character. . .?

All I know is that if the Nigerian govt is the middleman between me and my suppliers in a business I want to go into,  I will NOT go into that business. It is strictly because of uncertainty and political instability.  Investors are not fools. If the same scenario involves the Western or Asian govts, then I will do it. Why? because of political stability and the predictabilty of their governments.

Nations like Germany and the US do not have a national grid. Theirs is a decentralized ring based power system that is carved out by cities/states/regions with interconnections to different regions in case they need to import power in times of high demand e.g summer.  Of course you pay higher rates due to that added expense.

kalokalo:

All I know is that if the Nigerian govt is the middleman between me and my suppliers in a business I want to go into,  I will NOT go into that business. It is strictly because of uncertainty and political instability.  Investors are not fools. If the same scenario involves the Western or Asian govts, then I will do it. Why? because of political stability and the predictabilty of their governments.

Nations like Germany and the US do not have a national grid. Theirs is a decentralized ring based power system that is carved out by cities/states/regions with interconnections to different regions in case they need to import power in times of high demand e.g summer.  Of course you pay higher rates due to that added expense.

Yeah, just like the inter-connectivity between mobile network carriers. I think that is all you need. Imagine the Nigerian government controlling calls between your MTN line and your Airtel line. You will definitely see pepper. At election times like these only PDP stalwarts will have their calls going through all in the name of some faceless security measure. See the mess they made of the SIM registration process that incompetent and corrupt lot. I tell you government has no business in business in any form or under any guise be it security or equality. All they need is a virile regulatory body but when it comes to issues of handling money viz corporate responsibility government spells disaster. I personally advice all potential power companies to insist for the lot - generation, transmission and distribution. If the government baulks, build your own network and let theirs rot like NITEL/MTEL.

It was the mobile carriers that drew the first true demographic map of Nigeria and proved just where the real resource consuming deserts in Nigeria were. Who in his right mind will pump his precious wattage into the wilderness at the expense of a power hungry inner city people. None. At least they come first. Then let Government in its philanthropy waste its resources like it does with the petroleum equalisation fund. Why on earth should a litre of petrol cost the same in Maiduguri as in Eleme. Does a bag of onions cost the same in Kebbi as it does in Lagos. Fellows, government is crazy.

EzeUche said:

GEJ is good for business and investment. Buhari will scare away investors.

You can say that again.

@kalokalo: Fair enough. I see your point.

Total monopoly in the hands of foreigners, is it good?. I think that the majority stakes in Nigeria’s electricity infrastructure should stay in the hand of Nigerians.

Nigeria is there to be raped economically.
Even with this so-called deal, i can assure you that no team would have looked
at anything in detail.

A number of generations have to f.u.ck off before nigeria will do anything with an iota of common sense.

Horus:

Total monopoly in the hands of foreigners, is it good?. I think that the majority stakes in Nigeria’s electricity infrastructure should stay in the hand of Nigerians.

80% of Nigeria's telecom industry is in the hands of Foreigners and we are 10 million times better off than when 100% of the industry was in the hands of Nigerians.

I would rather have the foreigners handle it and give us excellent service than leave it to incompetent Nigerians!!

PapaBrowne:

80% of Nigeria's telecom industry is in the hands of Foreigners and we are 10 million times better off than when 100% of the industry was in the hands of Nigerians.

I would rather have the foreigners handle it and give us excellent service than leave it to incompetent Nigerians!!

The telecoms industry is not in the hands of a single foreign company.

NEPA will now run on YAYO Money

But seriously, we shouldn't sell.
we have enough money to fix the power problem if we really wanted to. It's just that the monies raised for that usually just always get dispersed into various pockets and stays that way. . . all the time.

We don't need another druglord/mob-boss thinking they have claims to this country.

Even if the brazilian firm offered $500 billion, its not good to sell all the power systems to one company.

ITS NOT GOOD FOR NATIONAL SECURITY

Seun:

The telecoms industry is not in the hands of a single foreign company.

True!! I'm not a fan of total monopolies. My pitch however is against the idea that Nigerians should have maximum control of the industry!! If we don't have the discipline and expertise to run the power sector, I see nothing wrong with opening it up for 100% foreign domination. But monopolies, no!!

@Papa

We need to build the discipline, we will continue to be violated until we can build that discipline, we need to be able to run our private and public enterprises in an efficient manner, some of our industries were already dead before power became epileptic and this was due to maladministration, so many private firms are being run like fiefdoms.

hmmmmm we've heard of deals b4 jare

A good part of me don't believe this because in business there is something called Rate of Return and Payback Time. Countries characterised by instability like Nigeria will generally attract investors that want higher Rate of Return and faster Payback Time.

Taking into consideration that the $100 billion is only to buy our near if not total obsolete power plants, the investors will need at least another $15 - $30 billion to bring the power plants to 21st century. Furthermore the time the investors will be making money from the investments is still light years away when you consider what still need to be done in terms of refurbishments of the power plant before they start to generate electricity.

Another aspect is this deal is for power generation only, don't forget electricity sector is made up of Generation, Transmission and Distribution. what happens if Nigeria is unable to attract thesame level of investment to the transmission and distribution side of the sector.

I'm afraid from the above, I don't see how an investor will invest $100 billion in a business environment that goes against all business logic especially where the investors will have to depend on other companies for transmission and distribution. What happens if the investors are true to their words and paid $100 billion, refurbish the power plants, increase power generation to 25,000MW per day but we don't have the capacity to transmit and distribute what is generated. I don't understand how any investor will be willing to run this risk with $100 billion (no be small thing o)