TCN requires N1.6 trillion to increase capacity

THE Transmission Company of Nigeria (TCN) would require $8 billion (N1.6 trillion) to increase its wheeling capacity to 20GW (gigawatts), under its five-year expansion plan.

The Presidential Taskforce on Power (PTFP), which made this disclosure in a document titled: “2014 year in view”, made available on its website, stated that failure to adequately fund TCN could make transmission a bottleneck, ultimately undermining the power sector reform.

It disclosed that the Federal Executive Council pledged investment of $1.6 billion should be delivered and this money should be leveraged for greater effect in 2015.

It stated that many of the issues plaguing TCN performance over the years must be solved in 2015.

“First, TCN management must show credible leadership and drive improvements with an ownership mentality focusing on proper priorities. The System Operator must effectively manage system reliability instead of remaining in reactive mode.

“TCN must at a minimum, set in motion modest plans consistent with its budget to realize effective change management including improving business infrastructure and staff capacity development”.

It said that the company must also establish and promote a practical financial framework in support of its system expansion plans.

“On the financial side, TCN requires both a realistic expansion plan and cost reflective tariff.

“From a market support perspective, it requires requisite communications and effective work processes to proactively and effectively manage its hourly market performance obligation”, it added.

According to the report, a financial framework in support of system expansion plans must be identified. “Both technical and commercial losses should reduce with improved metering of trading points and elimination of bypassed meters. Likewise, energy wheeled should increase above 6,000 MW and earned revenue collected should exceed 75percent.

It is also expected that TCN’s balance sheet will improve with the possibility of the organisation becoming independently credit worthy. Donor organizations such as World Bank and Japan International Cooperation Agency (JICA) continue working towards satisfying Condition Precedents for funding projects scheduled to start from two years into the future.

Access to finance, PTFP said will be a critical requirement for the operators in the Nigerian power sector in 2015.

It said that a major challenge in the market has been liquidity, due to the non-cost reflective nature of MYTO2.

It stated: “Thus, lenders will be looking to see cash flow projections that are healthier than that which currently exists. “Again, this establishes a direct linkage to the requirement for an adjustment or revision of the current tariff structure, to provide the comfort that there is sufficiency of liquidity in the market for repayment of any loans that are made to the sector. The devaluation of the Naira, as result of rapidly falling oil prices, the possibility of an increase in socio-political uncertainty, will all contribute to the difficulty of operators accessing finance in 2015.

Limited or non-access to funding for working capital and capital expenditure could, potentially, impede the ability of the operators to meet their performance requirements”.