lekki_728
Latest News

Firms generate 1,457mw off-grid power on growing supply gap

Filed under: main story |

Nigerian companies’ efforts to meet their respective power demand in the face of worsening supply have resulted to a whopping generation of about 1,457 megawatts (mw) off-grid electricity, about 36 percent of Nigeria’s 4000mw grid energy, BusinessDay has learnt.

The big power consuming firms, especially multinationals and manufacturing concerns, have in recent years disengaged from the national grid due to poor supply and over-bloated charges. They therefore invested in generating their own power off-grid through captive power plants, which cumulatively has been put at 1,457mw.

The companies’ efforts, according to sources, have led to cheap power, which has boosted gross margins and profitability. However, the gains by the companies, may adversely affect the fortunes of new investors in the sector who may have the Herculean task of winning the companies back on grid.

BusinessDay analysis shows that the captive power plants built by the various companies are helping them to remain competitive, which may make it difficult for the privatised generating companies (GENCOs) and distribution companies (DISCOs) to get them back on the grid in the short term.

Some of the companies that have invested in captive power plants include Lafarge WAPCO (90mw), Dangote Cement (258mw) at Obajana and Ibeshe, Western Metal Product Company Limited (WEMPCO) 52mw, Nigerian Breweries plc (16.8mw), Guinness Nigeria’s Ogba brewery (9.3mw), and Nestle Nigeria plc (3mw).

Others are United Cement Company (47mw), BUA Sugar Refinery (20mw), BUA Cement (45mw), Notore Fertiliser (50mw), Flour Mills (60mw), Unilever (6mw), and Academy Press (1.2mw), Cadbury (7.3mw), IMIL (14mw), Dangote Sugar (15mw), Golden Sugar (12mw), Island Power (114mw), Oando Akute (12.1mw), NLNG (400mw), and Indorama Eleme Petrochemical/Indorama Fertiliser plant, about (225mw).

Dangote Cement estimates that 80 percent gas and 20 percent low-pour fuel oil will be used to run its plants this year. After-tax income for the six months through June grew by 52 percent to N107.7 billion ($670m) from N70.8 billion a year earlier, the company said July 26. The firm’s operating margins, or profit from operations as a percentage to total revenue, widened to 66.5 percent in the period.

“There is no requirement that companies must rely on the national grid for their power supply. Everybody has a right to generate power by themselves,” Sam Amadi, chairman, Nigerian Electricity Regulatory Commission (NERC), said in response to BusinessDay enquiries.

“In many countries, companies generate power and they send the unused portion to the national grid,” Amadi noted, saying the DISCOs have a large pool of unmetered and unconnected customers who do not have access to power from which they can generate revenues.

An investor in the emerging power sector, who do not want his name mentioned, said it was not a bad idea that companies were generating their own power since the so-called national grid was nothing to bank on, with current capacity less than 5,000mw.

“A large part of our over 160 million population does not have access to power. Turkey generates about 70,000mw, South Africa generates over 45,000mw and Mexico generates about 100,000mw. And these countries have less population than Nigeria.

“There is huge unmet demand for power in the country. I don’t think we are at the point when we need to worry that investors in the power sector would not get enough revenue because some companies have captive power plants,” he said.

Captive power generation means generation of electricity exceeding 1mw for the purpose of consumption by the generator, and not sold to a third party.

US-based power firm Cummins Incorporated has invested $240 million (N37.9bn) in joint ventures operations in Nigeria to provide captive power to industries – to design, construct, operate as well as maintain gas-fuelled power plants in the country, according to Tony Satterthwaite, president, Cummins Power Generation.

“Gas power delivers significant operational savings in these difficult economic times,” Satterthwaite said, noting that “Cummins is set to capitalise on Nigeria’s growing network of natural gas distribution, which will facilitate the construction of distributed power plants to meet a wide spectrum of industrial and IPP customers in Nigeria.”

By: PATRICK ATUANYA & FEMI ASU

One Response to Firms generate 1,457mw off-grid power on growing supply gap

  1. Pingback: Firms generate 1,457mw off-grid power on growing supply gap | NAEE

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>