All posts tagged power


Kenya’s “Excess” Power Generation Burdens the Country’s Electricity Distributor

Kenya’s Energy and Petroleum Regulatory Authority (Epra) reports that the country’s electricity generating firms have increased their output to such an extent that the nation has a problem of idle power.

With rising cost of fuel and reduced rate of increase in demand, a heavy financial burden now lies on Kenya Power, the country’s distribution utility.

KenGen, the top generating company, and other power producers increased their supply to Kenya Power to 1.058Billion kilowatt-hours (kWh) in March 2021, reports the Epra, a figure described by the, Business Daily Africa, the leading local financial newspaper, as an “all time high”.

“The March 2021 figure is an 11.8% rise from 946.09Million kWh that was supplied in the previous month and now jumps above the previous record supply that had been set last October”, the newspaper explains.

Business Daily Africa says that the spike in generation “exposedhomes and businesses to the burden of paying for idle electricity”amid depressed consumption. “Payments for idle electricity is a pass-on cost to consumers. The take-or-pay clause in contracts signed between government and power producers compels Kenya Power to buy the agreed amount of electricity regardless of whether or not the utility needs the energy”.

Kenya Power, the distribution company, has been struggling. In February 2021, it reported that revenue from the sale of electricity fell to $635Million (KSh69.014Billion) in the six months period that ended on December 31, 2020, compared to $641Million (KSh69.607 Billion) at the end of December 2019. Transmission and distribution costs dropped 19% to $17.2Million (KSh18.7Billion) from 212Million (KSh23Billion) in the corresponding half year period in 2019.

The March 2021 supply is for instance 41.5% higher than the 748.44Million kWh that Kenya Power sold to consumers in February 2021.

“The excess generation has been a major concern for Kenya Power, which has to pay for the electricity generated even when there is no market to sell it”, the daily concludes.


Nigeria’s Power Minister’s Bold Electricity Framework Stands on a Shaky Base

By Toyin Akinosho

Saleh Mamman, Nigeria’s Minister of Power, who has only spent close to 20 months in office, identifies liquidity issue as the most important challenge of the country’s electricity supply industry.

Nigeria generates around 5,000MW of electricity, which is inefficiently transmitted and poorly distributed.

Mamman has constructed a framework for the sector with, Infrastructure Alignment as the Number 1 focus. He wants to fix the infrastructure gap in Transmission and Distribution, by executing the Electrification Plan, which is, largely the Siemens Plan he met on the table.

That plan, which will cost around $2Billion aims to refurbishsome very important equipment and construct new ones, in order to deliver far more generated electricity than its being done now

Saleh’s second focus is a soft power item: Market Efficiency and Transparency..involving the refinement of the commercial technical, and regulatory components of transaction agreements; promoting fiscal discipline and effectively utilizing all sector loans (World Bank and Payment Assurance Facility) as well asenforcing market discipline and contract effectiveness by the regulator. 

This is the area that the private sector part of the chain -the Generating Companies (gencos) and the Distribution Companies (discos) -has seen the most cause to criticize government for not addressing. So, it has to be addressed.  But it can be far more challenging to deliver than building infrastructure and it is a perpetual work in progress. What it needs, for a start, is the high visibility of the Minister’s body language. And Saleh has shown a particularly good example. 

In a recent case he queried the changes to the minimum capacity quantities of two power plants: Olorunsogo and Omotosho, by the Transmission Company of Nigeria (TCN). He publicly criticised the company’s non-compliance with the rulings of the Nigeria Electricity Regulatory Commission (NERC)-arguing, forcefully that such attitude of a government owned company to the regulator, “poses not only operational challenges but also reputational implications for the sector, and by extension, the Federal Government”. Saleh directed that NERC’s rulings “should be obeyed”.

The Saleh Blueprint’s third thematic focus areaCorporate Governance/Sector Policy Coordination may come across as different from the second, but the way to address it is similar: largely by the Minister’s own body language. In fact, if Mamman Saleh forcefully backs the NERC as a regulator, and vigorously promotes its independence, NERC would have little reason to think it has to court the National Assembly (the parliament) for approval on any issue. The same way the Minister addressed the case of TCN versus NERC case, and came out courageously to respond to the National Assembly’s suggestion to postpone the idea of cost reflectivity, his interventions can send out positive message about law and order on several other interface issues.

 The Nigerian government has finally shown the politically will to allow a cost reflective electricity tariff, after significant pressure, ntably from the IMF..

The last two focus areas in Saleh’s Blueprint, are equally challenging: Increase Energy Accesswhich talks of extending the net of electricity offgrid and the Execution of Legacy Projects. These are two focus areas whose execution can readily slip because most of the work is outside the minister’s ready grasp. 

For the Increase in Energy Access, which in the framing in Saleh’s blueprint, is largely about renewables and minigrids, significant inflow of capital is required, outside those already committed to the Siemens Plan and the Pre-Siemens funding on Transmission infrastructure. It is true that the Minister’s success in other areas, especially Market Efficiency and Transparency and Governance, will help in unlocking the vault, but these things have to be happening around the same time, so some Big Bold New Idea has to be seen by the Renewables Community and Private Equity Funders and Development Financiers around the World.

Regarding the Legacy Projectsa lot is riding on trust by the investing community, because, truly, in the year 2021, the Nigerian state shouldn’t be funding, from the treasury, a mammoth project like the 3,500MW Mambila Plateau Hydroelectric power. Yes, if that community sees that the needle is moving in the right direction in terms of Market Efficiency (Focus area Number 2) and Governance (Focus area Number 3), they will show interest. But we still need to provide solid commercial case

That is why we argue Saleh Mamman’s framework has a bit of challenge in detail. 

I am not looking for nuts and bolts, but there is little inkling of what we can do differently to pull the likes of Mambilla, which will make a significant difference in generation capacity, even to communities not being served at the moment.

Nigeria’s BIG plan to unlock the suppressed generation capacity is the SIEMENS plan. But what are the equivalents of this idea for Renewable IPPs and the Legacy Projects? How do investors see clear line of sight to recouping their money?

We all know what happened about Renewables in South Africa between 2012 and 2015. The country was on the road to becoming one of the world’s largest renewable industries, without a single cent of government spend. And there were increasing localization achievements from Bid window to bid window -this was at government’s insistence and the investors were willing. Then (the power utility) Eskom started to talk down the commerciality and government, treating Eskom -as the be all and end all- made the mistake of listening too earnestly to Eskom. And all that investment dried up.

Finally, the Saleh Framework Plan is significant for what it says as it is for what it does not say.

One crucial thing it does not say is how the Ministry of Power will gain some handle on Gas to Power. I think that successive Power ministers have been too shy about demanding to understand the link between the reservoirs that geologists find, (and which engineers develop) and the Power Plants.

The mistake that is largely made is that “Oh: that broken link is a standard problem. Once it is fixed; everything will be alright. And the Ministry of Petroleum will fix it”.

No please, it’s a long, ongoing process of request, engagement, understanding, fixing, mitigation, all the time. 

And it is better for the Power Ministry to be fully attentive, with its own men, to the little details. Because, when you make those transmission and distribution gains after the Siemens Plan is implemented, you will find that you’d be struggling to get the gas to generate the power you thought was there ready to be generated.

Olusegun Obasanjo, Nigeria’s President from 1999 to 2007, used to superintend a monthly, fortnightly meeting with gas producers, who were invariably the major oil companies. He convinced two of them (ENI, Shell) to build a power plant each.Those are today, some of the country’s most reliable plants and they most readily receive natural gas in the country.

I believe that, with how far Nigeria has come, the least the Minister of Power could do is to insist on a monthly meeting with the Petroleum Ministry, and every company that has a Gas Processing Plant (not all have) and every company that supplies some molecules into those poorly maintained, gas pipelines.

This article was initially published in the November-December 2020 edition of Africa Oil+Gas Report

 


Michael Ajukwu Takes the Chairmanship of LEKOIL 

Michael Onochie Ajukwu, a Nigerian businessman, has been named Chairman of LEKOIL Limited, after Metallon Corporation succeeded in getting the three directors it nominated into the company’s board of directors, at the Extraordinary General Meeting (EGM) of the company on January 8 2021.

He takes over from Mark Simmonds, the British diplomat and politician, who had been in the position for just about a year.

Mr. Simmonds is as high profile as they come. He was Britain’s Foreign & Commonwealth Office Minister with responsibilities for Africa, the Caribbean, UK Overseas Territories, International Energy and Conflict Prevention. He served as a Member of the UK Parliament for fourteen (14) years and was also a senior advisor to the then Prime Minister, David Cameron.

Simmonds took over the Chairmanship at a time of huge reputational challenges for LEKOIL: the company’s shares were in a headlong crash in January 2020, after the AIM listed firm discovered that a $184 Million loan it had announced was fraudulent.

But LEKOIL had not been able to live down the smear. And it was one of the issues that Metallon Corporation raised, two months after it bought 15% share of the company and moved in for board changes.

“I am honoured to assume the position of Chairman of LEKOIL and would like to thank my predecessor, Mark Simmonds, for his contributions to the Company”, Ajukwu, known in Lagos  business circles for his closeness to South African brands and Nigerian banking interests, said. “I look forward to working with my colleagues on the Board and the management of LEKOIL to deliver a high performing company anchored on strong governance structures that produces value for all shareholders.”

The path to Mr. Ajukwu’s chairmanship was cleared when Mr. Simmonds chose to step down as Chairman at the EGM and all resolutions that Metallon put to the meeting were duly passed, with Metallon’s nominated directors, including Michael Ajukwu, Thomas Richardson and George Maxwell invited to join the Board with immediate effect.

Mr. Simmonds noted his intention to stand down from board Chairmanship role with immediate effect with a new Chairman to be appointed by the enlarged board of directors.

 


Tripartite Meeting Resumes on Ethiopia’s Giant Hydroelectric Project

Egypt, Ethiopia and Sudan have resumed negotiations on Ethiopia’s Renaissance Dam, in Khartoum, capital of Sudan.
A meeting between the three countries’ irrigation ministers, an AU representative, and AU chair South Africa’s foreign minister took place Sunday, August 16, 2020.
Although the giant dam is largely for Ethiopia’s electricity supply, the meeting brings together the irrigation and foreign ministers from the three countries.
The ministers will sit again on Tuesday, August 18, with Nalendi Pandor, South Africa’s foreign minister, who is representing Africa Union chair South African President Cyril Ramaphosa.

Ethiopia has been building the Renaissance Dam on the Blue Nile since 2011, a project that has become a source of intense tension between Addis Ababa on the one hand, and Cairo and Khartoum on the other hand. This dam is expected to become the largest water-powered generation facility in Africa.
The 6,000 MW dam is to have a power generation of 16,153 GWh per annum through 16 generating units with 375 MW nameplate capacity each.

The initial filling of the reservoir has been a sticky point in the conversations. Ethiopia has insisted it will not accept negotiations that will lead to “legally binding” on the initial filling arrangements as they limit the country’s fair and equitable access to the Nile.


High Rainfalls Crimp Natural Gas Demand in Tanzania

Natural gas demand by power plants in Tanzania were impacted by sustained and significant rainfalls that enabled the Tanzania Electricity Supply Company (TANESCO) to operate its hydro facilities at high utilization rates, Orca Petroleum has reported.

The country is now entering the dry season and gas demand is expected to increase for the remainder of the year.

But the state energy firm has remained a diligent customer to its gas suppliers.

“Despite the lower demand for gas from the power sector, TANESCO has continued to pay back its arrears during the first six months of the year”, Orca Petroleum says in a release.

Orca Petroleum produces natural gas from the Songo Songo gas field on Songo Songo Island onshore Tanzania. It is the biggest single supplier to the Tanzanian domestic gas market.

The company says it has carefully managed an operational team that has enabled it to maintain production on Songo Songo Island has enabled throughout the COVID-19 pandemic.

In seond quarter 2020, Orca’s production averaged around 85MMscf/d, comprising additional gas sales, which is what the company is entitled to earn revenue from and protected gas, which is what the Tanzanian Petroleum Development Company (TPDC) is assigned in the contract.


US Agency Awards Grant for Solar, Hydro Power in Northern Nigeria

The US Trade and Development Agency (USTDA) has awarded a grant to Konexa Energy for studies into solar power supply in parts of Northern Nigeria.

The support will enable technical and financial studies to be carried out. The studies will also address the regulatory and legal requirements of the mini-grids project. The American agency, which has shown keen interest in energy supplies in Nigeria, did not specify the amount of its subsidy.

Konexa, a new, renewable energy company with offices in London and Abuja, plans to generate 2.5 MW of electricity from several solar photovoltaic systems in Kaduna, in Nigeria’s northwest. “This project will support the development of critical energy infrastructure and an innovative business model to improve the generation, transmission and distribution of electricity in Nigeria, as well as to improve the supply of electricity to off-grid customers,” says Thomas R. Hardy, acting director of the USTDA.

The small solar power plants will be installed to supply mini power grids serving residential (household), commercial and industrial customers in Kaduna State in northern Nigeria.

Hardy says that the grant will also to support the acquisition of 30 MW of hydropower capacity from an existing but decommissioned plant. The electricity will be distributed through the Konexa grid. The USTDA grant is part of Prosper Africa, a U.S. government initiative to increase two-way trade and investment between the United States and Africa.

The company selected for the studies will carry out the environmental and social impact studies, assist in the selection of the meters and thus provide an analysis of the expected impacts of the development of the mini-grids.


South African Cement Producer to Build A Power Plant in Zimbabwe

Pretoria Portland Cement (PPC) is mobilizing finance to build and operate a 32 MW photovoltaic solar power plant in Colleen Bawn, in Zimbabwe’s Matabeleland South Province.

The Johannesburg based company has picked a Solar Power supplier for the project, the construction of which is expected to last around 18 months.

Half of the electricity produced will be used to power PPC’s facilities and the other half will be fed into Zimbabwe’s national electricity grid.

Zimbabwe is chronically short of electricity, with the country’s power utility supplying only around 1,000MW, to a population of 15 million people.

But Solar Energy solutions have become hugely popular in the southern African country in the last two years, such that more than 100 000 solar power systems are installed in homes across Zimbabwe, according to figures from the Ministry of Energy.

And companies are now turning to off grid independent solar energy. Last April,  the Caledonia Mining Corporation, which operates the Blanket gold mine, also in Matabeleland South Province, issued a call for tenders for a 19.65 MW solar project.

 


Egypt, Ethiopia Far from a Truce over Massive Hydroelectric Project

An agreement is still quite far-fetched between the three countries in the conflict over the largest hydroelectric power project in Africa.

Egypt’s Irrigation ministry says that the current round of negotiations, which concludes Friday, is not heading anywhere.

Egypt, Ethiopia and Sudan have been in talks regarding the impact on the flow of water in the River Nile, from the construction of the Grand Ethiopian Renaissance Dam (GERD) by Ethiopia.

At 6,450MW, the dam, formerly known as the Millennium Dam, will be the largest hydroelectric power plant in Africa, when completed.

Located in the country’s Benishangul-Gumuz Region, 15km east of the border with Sudan, it will also be the seventh largest in the world.

The gravity dam on the Blue Nile River has been under construction since 2011.

As of October 2019, the work stood at approximately 70% completion., but the filling of the reservoir, scheduled to begin in July 2020, is what is being held up by complaints from Egypt, which insists that the work will drain away large volume of water from its own section of the river.

An emergency meeting and videoconference of the Executive Council of the African Union, chaired by the South African President Cyril Ramaphosa, a week ago, resulted in considerable ease of tension.

After the talks, Egypt, Ethiopia and Sudan agreed to postpone the impoundment of the gigantic dam.

Sudanese Prime Minister Abdalla Hamdok said in a statement that it had been “agreed that the filling of the dam would be postponed until an agreement was reached”.

Mr. Hamdok added that “Sudan is one of the main beneficiaries of the dam, but also one of the big losers if the risks are not limited, which is why it reminds Egypt and Ethiopia of the absolute need to find a solution, “.

The Nile, which flows over some 6,000 km, is an essential source of water and electricity for a dozen countries in East Africa. Egypt gets 97% of its water needs from this river.

 


Cameroon’s Gas to Power Market in Distress

By Sully Manope

The Cameroonian electricity company ENEO (Energy of Cameroon), has announced a 32.6% drop in the production of thermal power stations in the country in the first quarter of 2020.

The reduction (compared with production during the same period in 2019), was due to rationing carried out “at some power stations because of a fuel shortage caused by enormous cash constraints.

ENEO has been unable to pay companies that supply gas to its generators (including Victoria Oil &Gas) as well as companies that generate power from natural gas (Globeleq, Aggreko).

Altaaqa, which supplied the generator ENEO used to convert gas to electricity at Logbagba, in Douala City, suspended operations at ENEO’s Logbaba site in September 2019.

Production capacities at Aggreko operated generating plants at Maroua and Bertoua decreased by almost 60% during the period under review, ENEO reports. Generation from Globeleq operated Kribi and Dibamba gas-fired plants also fell drastically.

This drop in thermal energy production, was, very slightly, offset by increased hydropower production, which had an uptick of 3%.

Overall, the Song Loulou and Edéa hydroelectric plants, both on the Sanaga River, provided 65% of Cameroon’s energy supply over the period.

 


Cameroon’s Power Utility Pushes its Gas Supplier into the Red

ENEO was once a key reason for Gaz du Cameroun (GDC) to dream big.

Seven years ago, the Cameroonian power utility promised an offtake of double the size of gas that the factories and other firms in Douala could readily demand from GDC, as the latter constructed pipelines and other infrastructure to incentivize consumption of gas in the country’s main commercial city.

But now ENEO (short for Energy of Cameroon), has fallen far behind in payment. The gross amount outstanding from the utility as at 31 December 2019 was $10.5Million, a significant debit in the balance sheet of a small player with production hardly exceeding six million standard cubic feet of gas per day 6MMscf/d.

The Logbagba gas field near Douala is GDC’s source of gas.

 As far back as 14 September 2019, Altaaqa, the generator supplier to ENEO, suspended operations at ENEO’s Logbaba site due to non-payment of invoices by ENEO.

GDC had continued to invoice ENEO based on take-or-pay provisions agreed to in the binding term sheet.

In April 2020, GDC announced that ENEO had arranged “payment of Four Invoices amounting to a net total of $2.9Million to GDC via “promissory notes” in the quarter”. That comes to no more than $4.2Million gross, but there is still a significant value of unpaid invoice to go.

ENEO’s default in paying a hydrocarbon producer is contrary to the new normal in Africa, where monopoly utilities and state hydrocarbon companies have general turned the corner in their attitude to paying debts owed to hydrocarbon producers in their countries.

Tanzania’s state hydrocarbon company TPDC and state power monopoly TANESCO pay gas producers more promptly. Egypt’s EGAS has improved terms of gas tariffs and annulled its debts significantly. Nigeria’s NNPC, though not exactly comparable as its case is joint venture agreements, has almost extinguished cash call arrears.

What makes the ENEO example particularly odd is that it is not an entirely state-owned company. It is majorly owned (51%) by Actis, the British investor and 44% owned by the Government of Cameroon. ENEO employees own a 5% stake. It is indeed an outlier of an example.

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