Electricity Distribution - An Operator's View

ELECTRICITY DISTRIBUTION OPERATORS VIEW

Benin Electricity Distribution Company (BEDC)

Presentation Flow

o Nigerian Power Landscape

o Power Sector Reform

o Investment Opportunities

2Benin Disco

o Way Forward- Critical Issues for Success

o Investment Opportunities

oActions taken so far

oAbout BEDC

Publicly-owned Utility

Highly centralized vertically integrated ( Generation, Transmission and Distribution

under one structure)

Poor Operational and Commercial Performance

Nigerian Power Sector Pre 1999

Dwindling FG funding from 1980 to year 2000

No new electric power infrastructure commenced and completed between

1989-1999.

The last transmission line built was in 1987 while distribution sector did not

receive any major investment

Absence of a service delivery culture

Significant Aggregate Technical Commercial and Collection levels in excess of 50%.

Little impetus toward reform (significant resistance to change) despite the above3

Nigerias Power Situation is particularly precarious

Nigerias per capita electricity consumption is one of the lowest in the world

accounting for only 3% of South Africas.

As at October 2013, the

peak generation supplied

by Nigerias PHCN was

4,500MW for an estimated

High Cost of Lost

GDP

High Self

Generation Cost

Low Generation

capacity

Self-generation of

electricity (from diesel and

petrol generators) is

conservatively estimated at

Stalled expansion in

Nigerias capacity

combined with high cost

of diesel and petrol 4,500MW for an estimated

population of 150 million

people

South Africa has 40,000

MW of grid-based

generating capacity for a

population of 50 million

people

conservatively estimated at

a minimum of 6,000 MW

i.e. more than twice the

average output from the

grid during 2009.

The poor pay N80/kWh

Manufacturers pay in

excess of N60/kWh on

diesel or LPFO

generation

The rest pay N50

70/kWh on self

generation

of diesel and petrol

generation has severely

crippled the growth in the

countries productive and

commercial industries..

If situation were to

persist, the cost by 2020 in

terms of GDP would be

around USD 130 Bn 4

Passage of The Electricity (Amendment) Decree 1998 and the NEPA (Amendment)

Act 1998 , terminating the monopoly status of NEPA and inviting private sector

participation in the electricity sector.

The Electric Power Reform Implementation Committee (EPIC) was inaugurated by

BPE and resulted in FEC approving the National Electric Power Policy in

September 2001, which recommended:

Establishment of a sector regulator.

Nigerian Power Sector Reform

Establishment of a sector regulator.

Privatization of the electric power sector

A market trading design and new rules, codes and processes

In March 2005 the Federal legislature passed the Electric Power Sector Reform

Act. The Act outlined the framework of the reform as follows:

Unbundle the state owned power entity into generation, transmission and

distribution

Provide for the transfer of assets , liabilities and staff of NEPA to PHCN and

then to successor generation, transmission and distribution companies

Create a competitive market for electricity services in Nigeria

Set up an independent regulator

5

Key reform activities for establishing an electricity market

Enabling Legislation2001-2005

Unbundling Process

Power Sector Reform: Reform Roadmap

6

Regulation Process

Market Structure

Privatisation

FGN privatisation of unbundled PHCN companies through core investor

sale of 60% of government equity in the 11 DisCos and 4 Therma GenCos

with granting of concessions to 2 Hydro GenCos.

Multi Year (15) Tariff Order, MYTO 2, promulgated by the Regulator aimed

at:

Power Sector Reform: Privatisation So Far

Incentives for rapid ATCC losses reduction

Encouraging capital investment

Cost recovery

Return on Equity of 29%

New owners took over on 1st Nov., 2013

7

Huge suppressed demand for electricity (as evidenced by the large amount of costly selfgeneration)

Low Electricity production per capita (Currently at about 103.81kwk per capital

consumption)

Country Population Per Capital Consumption(kwh)

South Africa 49 million 4,222.46

Egypt 83.6million 1,383.71

Ghana 24.6million 248.33

Nigeria 170million 103.81

Growth Prospects of Nigerian Power Sector

Nigeria 170million 103.81

8

The rule of thumb for any developed industrial nation is that at least

1 gigawatt (i.e. 1,000 megawatts) of electricity generation and consumption is required for every 1 million head of population

Investment in Generation

Privatized 6 GenCos

Privatized NIPP Assets

IPPs

Embedded Generation

Renewable Energy

Investment in Transmission

Power Sector: Investment Opportunities

Investment in Transmission

Strengthening of TCN network Infrastructure

PPP Model 5 major contract signed at the Power Finance Conference

Investment in DisCos:

Equity participation/Refinancing of the privatized 11 DisCos

Investment in CAPEX for network rehabilitation and Refurbishment, network upgrade

and expansion

IT Intervention and Automation

Investment in Support Services like manufacturing of Poles, Transformers , Meters, etc.

Nigerian Local Content is being encouraged by the Regulator in these areas

9

DisCos are critical to the viability of the sector because revenue can only

be realized or collected through the distribution sub sectors .

Issue of financial viability/ guaranteed income stream must therefore be

addressed at this level.

Distribution Sub Sector

The investors are thus expected to ensure that the integrity of the

network is improved through maintenance and investment in

rehabilitation, reinforcement and expansion; invest in modernization and

technology upgrade especially Billing Systems, SCADA and GIS; expand

metering coverage as per agreed plan.

10

Monthly Remittance to MO

Eko

Ikeja

Ibadan

Kano

97.65%

87.55%

65.37%

62.97%

DISCOBase Line Remittance

(% of MO Bill)% Power Allocation

11%

15%

13%

8%Kano

Abuja

PH

Enugu

Benin

Kaduna

Jos

Yola

62.97%

53.5%

47.45%

41.24%

37.88%

33.16%

20.70%

0%

8%

11.5%

6.50%

9%

9%

8%

5.5%

3.5%

Current Landscape & Reality

NIGERIA

BENIN ELECTRICITY

DISTRIBUTION COMPANY

States- 36 state +FCT

Local Govt- 774

Households- 32 million

Population- 160 million

Electricity Customers- 4 million

State Involved- 4 Edo, Delta, Ondo, Ekiti

Local Govts - 77

Households - 4.6 million

Population - 13.2 million

Electricity Customers- 770,600

12

Electricity Customers- 4 million

Access to power 12.5 %

Energy Avail. 2,500mw - 4,000 mw

24/7 Ideal Energy Avail - 160,000 mw

FGN Targeted 2020 Energy Avail- 20,000 mw

Current Average Daily Power

Avail. (hrs) Less than 3hrs

Electricity Customers- 770,600

Access to power 18.9 %

Energy Available- 625 mw

24/7 Ideal Energy Availability 13,000 mw

Current Av. Daily Power Avail 17hrs

ATTC Loss - 52%

Ave. Cost of Power - N13.86 per kwh

Ave Sale Price - N 7.89per kwh

Licensed IPPs

Azura Power West Africa Limited

License: Generation On-Grid 450MW

Contour Global Solutions (Nig) Ltd

License: Generation Off-Grid 7MW

Delta Electric Power Limited


NIPP Power Plants

Ihovbor Power Station (NIPP)


Ogorode Generation Co. Ltd (NIPP)License:

Generation On-Grid 450MW

Omotosho Power Station (NIPP)


POTENTIAL POWER SUPPLY TO BEDC - Power Stations within BEDC Geographical

Coverage

Ethiope Energy Limited

License: Generation On-Grid 2,800MW

Nigerian Agip Oil Co. Ltd


TOTAL IPP 3853MW

PHCN Successor Generation Companies

Ughelli Power Plc


Sapele Power Plc (NIPP Expanded)

License: Generation On-Grid 1,020MW

TOTAL NIPP - 3362

13In addition, BEDC is a transmission hub

This is out of a total of 5153 mw from Govt initiatives

Located in Transmission Network Hub

Allocated 9% but gets up to 12%

Availability Uptime Highest in the Country

BEDC Strategic Positioning

STATE 11KV FEEDER AVAILABILITY

DATE

STATE

AV. AVAIL.

(HRS)

EDO 12.17

Largest Gas producing terrain- key source

of cheapest power- Delta State

Has largest number of power plants

Most Gencos would prefer sales to closer

14

EDO 12.17

DELTA 10.09

ONDO 7.60

EKITI 11.52

STATE 33KV FEEDER

AVAILABILITY

DATE

AV. AVAIL.

(HRS)

STATE

EDO 19.52

DELTA 19.89

ONDO 10.48

EKITI 19.44

Most Gencos would prefer sales to closer

distribution companies to reduce

technical losses

Network Condition:. Aged, Undersized & over extended High Tension/Low Tension lines. Overloaded Feeders and Transformers Obsolete & faulty switchgears. Poor maintenance practices Poor Health and Safety Practice High level of losses

Customers issues: Over Billing of customers No service orientation to customers Staff collecting money illegal from customers Illegal Connection & stealing of power by customers Inadequate metering

Status At Takeover

Inadequate metering Inadequate Power supply

Technology & Automation intervention issues Low level of Information Technology application. Obsolete and non integrated ICT system in place. Stand Alone Billing Centres No Website, E-mail, Customer Information System, ICT tools available. Absence of IT intervention like CRM, ERP, SCADA, DMS, OMS, GIS etc.

Finance & Accounts: Manual Accounting System Decentralized Payroll System Manual Audit & Internal Control System

Conclusion Net work is in deplorable state Customer are not being served Public is expecting value for money Investors are expected to change things massively and

dramatically

Massive investment of over N 45billion is required over a

BEDC Challenges and Issues Contd

Massive investment of over N 45billion is required over a sustained period before positive results can start to be visible

BEDC management focus is to address the rot in asset and to reposition the company in the path of :

Providing good service to the customers

Ensuring operational viability

Ensuring financial viability

Meeting the requirements of the regulators, especially NERC

Having well trained, motivated and highly competent workforce

Management Focus

However the problem of over 25years will take time to clear up

This requires dedicated, honest, experience and competent staff who will put customer first and be ready to work hard.

It is a journey that must show continuous improvement.

17

Customer Re-registration and Enumeration ( Know Your Customer- KYC) has commenced

Call Centre and back-end complaint tracking solution currently being implemented.

Website up with information to customers about BEDC an access to submit complaints

The first publication of BEDC Digest, a fortnightly BEDC news already out

The NERC Forum Office for lodging of complaints to the regulator currently being worked on and undergoing renovation

Action so far taken on Customer Care

Customer Enlightenment program in major radio stations is ongoing

Online Payment System to create payment convenience for customers on test run

Improvement in power supply by monitoring of uptime and transmission related issues commenced; and setting turnaround benchmark on faults resolution also commenced

Improvement in Safety Standards through better awareness for staff and public has commenced

Regular line trace clearing and maintenance of injection substations to reduce power outage due feeder tripping has commenced

18

Technical Audit of High Value Customers has commenced

Installation of Check meters and Boundary Metering commenced

All Injection Stations in Edo States now metered

Metering of Injection Stations in Delta States ongoing and expected to be completed this month

Metering of Injection Stations in Ondo & Ekiti expected to commenced next month.

Metering of Distribution 8000 Transformers is to commence in June, 2014

Actions taken on Technical & Commercial Loss Reduction

Metering of Distribution 8000 Transformers is to commence in June, 2014

Pilot Enumeration of Customers on a feeder along substations, Uprisers & Acct. Officers done. This will help reduce overloading and power theft

Pilot Outsourcing of Revenue Drive ( Disconnection & Reconnection)has commenced

Replacement parts and line materials identification for network maintenance and stocking up has commenced

Intensify Preventive Maintenance for effectiveness and reduction in tripping is about to commence

19

Replacement and upgrade of overloaded power transformers and Installation/Commissioning of various power stations

Out of 36 NIPPs projects existing, already commissioned 6 NIPP Projects within the network to improve supply availability and will soon commission another 3.

Metering:

HT Meter Replacement

Action on Loss Reduction Contd.

HT Meter Replacement

Selective Metering for Illegal Customers

Mass Metering of Non MD customers to commence soon

Criminalize Energy Theft with strict enforcement

List of customers for name and shame currently being compiled and will be published

Zero Tolerance for Non Payment of Bills & Vandalisation of Power Installations by any Community

20

In order to make progress customers need to pay for power used. Only 48% of power bill is currently being collected in Edo. High level of power theft and bypass is taking place.

Over 8,000 backlog of meters paid by customers (in Edo, Delta, Ondo, Ekiti) under previous regime not serviced need to be sorted out

Some Staff benefits existing without fund backing by previous management need to be sorted out

Challenges

High volume (30%- 200000) of estimated billing need attention inherited need to be sorted out over time

Contingent liabilities/ Judgment debts arising from pre takeover actions need to be sorted out

Customer enlightenment on various issues need to be done eg, Estimated billing

Fixed Charge

Obsolete meters

AND MANY MORE.

21

As at today:

FGN /BPE have collected money- total of $ 2.6 billion from all investors (Gencos &

Discos) & is SMILING

Most staff of PHCN have collected money- total of N 380 billion as severance pay & are

SMILING

Union has collected N6billion to N7billion as their share of workers benefit & SMILING

Core investors are out of money and paid for assets that they are only starting to know

about 9months after they should have had access. They are NOT SMILING

Conclusion

Public is expecting drastic improvement in power availability overnight- They are NOT

SMILING

Findings by all investors have indicated that several of the data given to the investors were

wrong and inflated (customer base, ATC&C Loss level

The above applies that tariff structure was wrong and will eventually have to increase if

investment is to take place

The current interim rule had to be introduced because several parameters for TEM is not yet

in place 22

6MONTHS SHADOW MANAGEMENT THAT WAS NOT ALLOWED TO START BASED ON AGREED CONTRACT IN FEBRUARY 2013 ONLY JUST BEGONE ON 1ST

NOVEMBER 2013 FOR ALL GEMCOS AND DISCOS

ROT OF OVER 25 YEARS CANNOT BE WIPED OUT WITHIN A SHORT TIME

PUBLIC OUTCRY IS EXPECTED TO FIRST INCREASE AS WE ATTEMPT TO REARRANGE THE SYSTEM

Conclusion

REARRANGE THE SYSTEM

WE ALL NEED UNDERSTANDING AND SUPPORTIVE STAKEHOLDERS FOR ALL OF US TO MAKE A DIFFERENCE

PROCESS IS A JOURNEY NOT AN OVERNIGHT RACE !!!!!!!

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Electricity Distribution - An Operator's View