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Ibom Power Plant and Challenges of Electricity Evacuation

15 May 2012

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Governor Godswill Akpabio

Since December 2009, when it began commercial operation, Ibom Power Plant has been generating average of 60megawatts of electricity, below its capacity of 190megawatts (mw) because the transmission lines from Eket to Uyo, as well as from Uyo to Itu can only evacuate 60mw.Ejiofor Alikewrites

 Worried over the epileptic power supply to Akwa Ibom State by the defunct National Electric Power Authority (NEPA), the state government had embarked on an ambitious project to supply electricity for businesses and other human activities to thrive in the state.

Incorporated in 2001 by Akwa Ibom Investment and Industrial Promotion Council (AKIIPOC), the investment arm of the Akwa Ibom State Government, the Ibom Power Company operates the 190 megawatts capacity open cycle gas-fired Ibom Power Station.

The current Ibom Power Plant, which is the Phase 1, consisted of two-GE Frame 6 and one GE Frame 9, as well as a 45kilometre 132KV DC Transmission line to connect the generated power to the national grid.

A half kilometre 12-inch gas pipeline and connection to the Nigerian Gas Company (NGC) treatment station was also part of the Phase 1.

With a capacity to generate 190mw, the plant commenced commercial operation in December 2009.

However, there is a plan for Phase 2, consisting of five GE Frame 9 or equivalent, with a capacity to produce 500mw.

Phase 2, which is still on the drawing board, will also consist of a 76kilometre 330KV DC Transmission Line to connect the power to the national grid and one kilometer 24-inch gas pipeline and new treatment station.

With an initial share capital of N20million, the Phase 1 had LYK Engineering Company of the United States as the first partner.

However, due to difficulty of raising non-recourse funds as there was no background and the projects agreements were incomplete, a disengagement agreement was signed in 2005.

But the state government remained undaunted by these challenges as $13million funding was provided between 2001 and 2004.

With this funding, development activities commenced during this period, with the mobilisation of power plant land and Owner’s and Lender’s advisors.

Also between 2001 and 2004, the Engineering Procurement and Construction (EPC) contract with LNC Consortium was sealed.

The scope of work included the conceptual and detailed design, site work, and procurement of two Frame 6 GTGs and 11/132KV transformers.

Between 2005 and 2008, another $127million funding was provided for further development activities; procurement of GE Frame 9 and balance of plant, as well as EPC contract with South Africa-based Group Five, an integrated construction services, materials and infrastructure investment group operating in Africa, the Middle East and Eastern Europe.

The scope of work of the Group Five contract include the redesign, installation and commissioning of the plant.

Project Consultants

Being one of the early Independent Power Plants (IPPs) to be constructed by a state government at a time there was no sufficient regulatory framework for IPPs in Nigeria, the Ibom Power Plant attracted an array of local and international experts that provided all kinds of services during its construction.

To ensure that the construction of the plant was done, according to international best practices, PB Power of the United States was retained early 2002 to provide site and home office technical and contractual expertise.

The firm was also mandated to certify the quality of the construction work and to sign off handover certificates.

Also to ensure that the project attracted local and international capital, Fieldstone Africa was retained late 2003 to raise equity and debt for the Ibom Power Company and to provide assistance and advice in project and funding matters.

It also assisted in preparation of international bid documents, review of submissions and appointment of other advisors.

To ensure that all agreements met global standards, Allen & Overy LLP, a United Kingdom-based international firm with legal practice in 39 major cities of the world was engaged as the international and contract legal advisor.

The firm’s specific mandate was to advise and negotiate Gas Supply Agreement (GSA), amended and restated Power Purchase Agreement (PPA) and Federal Government Guarantee (FGG); CSA agreement and various agreements with other advisors.

The international legal firm also offered advice on claims by the EPC contractor.

Aon South Africa Limited, which provides seamless insurance and risk solutions, backed by a world of resources, was appointed insurance advisor for the Ibom Power Station, to provide insurance cover.

The firm had a specific mandate to address issues of security and sabotage, as well as conduct terrorism survey.

The firm also advised on operational insurance requirements.

The Ibom Power Company also pre-appointed many lender’s advisors, including Norton Rose LLP as international legal advisor; Udo Udoma & Belo Osagie as local legal advisor; PB Power as technical advisor; Indecs LLP as insurance advisor and Ernst & Young as model advisor.

Project Execution

After the state government had assembled an array of international experts, actual project development started in 2001, with a local bank committing to raise $80million funds; while $20million bridge facility by the United Bank for Africa was guaranteed by Afrexim Bank.

Conceptual and detailed design started in 2002 with civil works.

Both the PPA and the Federal Government Support Agreement were also signed this same year, with Afrexim taking over $20million bridge facility from UBA.

However, due to four principal factors, funding for the Ibom Power Plant was stalled in 2003, even after the Federal Government guarantee was signed.

The factors that resulted in this unfortunate development include, the dispute between the Federal Government and the Akwa Ibom State Government on the sharing of crude oil revenues; lack of project documents; poor international perception of project funding in Nigeria at that time and the re-organisation of local banks.

Faced with enormous challenge, the state government was undaunted and had to commit $110million in 2004 to ensure the completion of the project.

An international EPC bid exercise was conducted in 2004 with 18 bidders and two responses and another international Operation and Management (O &M) bid exercise was carried out with 10 bidders and limited response.

A bid review was also carried out the same year by PB Power and Fieldstone.

In February 2005, the Frame 9 supply contract was awarded to the General Electric but between March and June the same year the process was stalled due to injunction by LYK Engineering.

In August 2005, the BOP supply contract was awarded to Everite (Pty) Limited; while EPC contract was awarded to Group Five Construction (Pty) Limited, with December 2006 as projected completion date.

Site work recommenced in November 2005 and progressed to 55 per cent completion by December 2006.

The work progressed to 89 per cent completion by December 2007 and was completed in 2009, operating commercially at 60megawatts.

Current Situation

Since it commenced commercial operation in 2009, Ibom Power has remained fully operational, generating and evacuating 60mw of power to its sole customer, the Power Holding Company of Nigeria (PHCN). 

Indeed, since it began generating power commercially in December 2009, the plant has remained active, generating on the average, 60mw of power to the national grid.

Although the plant’s overall generating capacity from the three installed generators is 190mw, it is technically constrained by existing transmission and distribution facilities of PHCN and the Transmission Company of Nigeria (TCN), to only 60mw.

It should be noted that the Ibom Power Company is licensed by the Federal Government to generate power only and is specifically prohibited from transmission and distribution of power. 

The generated power from Ibom Power flows through the 132kv transmission line from Ikot Abasi, through the sub-stations at Eket, Uyo and Itu before the transmission line exits the state. 

Ibom Power constructed the transmission line from Ikot Abasi to Eket where it joins the national grid. 

 While this line can carry 200mw, the transmission line from Eket to Uyo and from Uyo to Itu can only carry about 60mw of power.

This means that at current level, only one third of the company’s generated power can be evacuated from the plant.

Ibom Power has required PHCN and TCN to upgrade this line since 2004, and pending that upgrade has limited its generating output to only what its sole customer - PHCN can evacuate.

 However, an upgrade of the transmission line is underway by the Nigerian Independent Power Project (NIPP) and the project is expected to be completed by the third quarter of 2012. 

 A top official of the company, who spoke to THISDAY on condition of anonymity stated that the current state of power supply in AkwaI bom State was not the responsibility of Ibom Power but PHCN. 

He noted that although Ibom Power generates and sells the power, it does not have any control over how the power is distributed. 

“While we would appreciate that the power we generate is distributed across Akwa Ibom State to meet the needs of the state, we are unable to influence such outcome. Ibom Power is a forward looking company and has put in place system, procedures and agreements that are germane to its long term operations and success,” said the top official.

Though the plant is generating 60mw, which is enough to provide quality power supply to the people of the state, the generated power is supplied to the national grid operated by the Transmission Company of Nigeria (TCN) which provides power to the various distribution companies across the country.

Due to its location, the power generated by the plant is mainly provided to the Port Harcourt Distribution Company, which owns the distribution lines and transformers used by the people of the state.

“We have no control whatsoever over where and how that power is distributed.  While we would appreciate that the power we generate is distributed across Akwa Ibom State to meet the needs of the state, we are unable to influence such outcome,” he said.

Issue of Maintenance

All power generating plants require maintenance and if that maintenance is not performed the plant will fail.

The maintenance of Ibom Power Plant is carried out approximately yearly by reputable local and international organisations so that the plant can guarantee to the best of its ability the constant availability of power to consumers in the area.

THISDAY gathered that two of the units are due for this regular planned maintenance, which will be carried out within the next three months. The third unit, which does not require maintenance yet, due to the plant’s inability to evacuate power, will also undertake its final commissioning.

Inadequate Gas Supply

There are two constraints currently preventing Ibom Power Plant from generating and evacuating the full phase 1 capacity of 190mw. First is the inability to evacuate above 60mw – which has been highlighted and which it is anticipated will not be a constraint by the fourth quarter of 2012.

The second constraint is gas, as negotiation with the Nigerian Gas Company (NGC), which took over seven years, was hampered by what a source close to the plant described as NGC’s reluctance to agree to bankable agreement.

The plant is said to be currently facing double challenges of NGC’s inability to supply adequate gas and at required specifications.

On the issue of Power Purchase Agreement, THISDAY gathered that the old PPA signed in 2002 was not bankable, when international investors began to show interests.

It was learnt that a new PPA was drafted and vetted by the Nigerian Electricity Regulatory Commission (NERC) and the Bureau of Public Enterprises (BPE).

THISDAY could not however confirm if the amended and restated PPA negotiated with PHCN to take into account, changes since the old PPA was signed in 2002 has been approved for execution.

To address the issue of gas challenge, the Ibom Power Company, operators of the plant have signed a gas agreement with the Nigerian Gas Company (NGC).

But a source close to the plant told THISDAY at the weekend that this agreement is on a “best endeavour’s basis.”

 “That is, the attitude of NGC is: ‘if we have gas - then you can have it’. This is not acceptable for our Power Purchase Agreement which requires the gas supplier to guarantee adequate and regular supply of gas, so that we can guarantee to supply power to our buyer,” he said.

THISDAY however gathered that the Ibom Power Company had entered into an agreement with Septa Energy to provide gas from gas fields within Akwa Ibom State. Their development work is complete and it is anticipated that the commissioning of their facility would be completed also in the third quarter of 2012.

Conclusion

PresidentGoodluck Jonathan recently admitted that mistakes were made by the Federal Government at the planning stage of the Independent Power Plants (IPPs) in the country.

These mistakes, he said, were because the government was in a hurry to achieve results and the feasibility studies were overlooked.

THISDAY reported that although he did not elaborate on these mistakes, but when most of the contracts were awarded in 2006, there were no plans on how they would get gas, leading to the non-commissioning of many of the plants.

 However, efforts are currently being made to lay gas pipelines to the new power stations, so that they can begin to generate electricity.

The Federal Government should assist Akwa Ibom State Government to find a permanent solution to the issue of the gas challenge facing Ibom Power Plant, which has been generating electricity since 2009.

The government should also urgently address the issue of transmission lines at Uyo and Itu to enable the plant perform at its full capacity.

When Nigerians are facing acute shortage of electricity supply, a generating plant of such world-class standard should not be allowed to remain under-performing because of inadequate gas supply and absence of transmission lines to evacuate the generated power.

The removal of these two constraints will help ensure evacuation of the plant’s full 190mw capacity and boost Nigeria’s electricity supply, which has remained epileptic.

Tags: Business, Nigeria, Featured, power plant, Electricity

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