- Power Gencos May Soon Pack up
The Chairman of Transcorp Ughelli Power, Mr. Tony Elumelu, has said the Nigerian power sector is abourt to collapse as operators reel under various operational challenges which include unpaid bills for supplies, and foreign exchange differentials, warning that the generation companies (Gencos) may not be able to hold up for too long before giving up.
Speaking in an interview with CNBC yesterday in Abuja, Elumelu said the generation companies (Gencos) were currently subsidising electricity generation in Nigeria.
He said this development was unhealthy to the operations of the Gencos.
According to him, a lot of the Gencos including Transcorp have lost share value on the back of the sector’s challenges. He explained that such could affect future investments in the sector if left unaddressed.
Specifically, Elumelu noted that payment delays and debts to Gencos, poor gas supplies and certain unhealthy governance issues were major contributors to the sector’s challenges.
“The current government is interested in diversifying the economy of this country, I will say that we can only make progress in that direction if we fix power. Power to me is one of the most critical agenda that we as a country should have at this time but the power sector appear to be threatened,” said Elumelu.
He further stated: “A lot is dependent on the power sector. I speak as an investor in that sector and my heart bleeds when I see a country that is endowed with a lot especially gas and a huge market like Nigeria, a market with enterprising people who are ready to move mountains if they are set free with improved access to electricity and we are not doing so much.
“This is a sector that initially attracted private sector excitement and investment. I know the price share of Transcorp shot up when we did the acquisition but today, the story is different not because we as a company are not doing well, it is different because the agency of government that has the responsibility of making sure that this sector truly delivers on its potentials is not doing well enough.”
He said on debts owed Transcorp by the sector: “We are owed a lot of money, Transcorp Power is owed almost N50 billion, by the time we put in the invoice for this month, it will be almost N55 billion. How do you survive in this type of situation?
“And other Gencos I know are actually dying, we are struggling because of our diversified resource base, so something urgent must be done about this.
“The truth is Transcorp Power as a key operator in the sector is struggling and if we are struggling, you can imagine what other operators are going through. There is a lot of debt being owed to us. Liquidity is an issue and there is gas vandalism, of course you will not blame government so much because there is a lot of vandalism going on but where we are located, there are some idle gas fields there, if government could allow us produce gas from the gas field we are seating on, we will have our own regular supply of gas and then we can do more because we have capacity to do over 700 megawatts of electricity.
“GE just completed installation of turbines that will take our capacity to over 750MW and by the end of March, we should be 815MW. We are excited about this sector because we know what power can do for this country, but we need to fix some of these issues,” he added.
He stated: “We are all living in a borrowed time, it is a matter of time before something drastic is done.”
Elemelu also said of his personal assessment of operators in the sector: “I believe the Gencos have demonstrated capabilities, some of the Discos in my viewpoint, I do not see seriousness and so government should engage more with these Discos and see how a marshal plan can be put in place.
“It is unfortunate, may be the wrong people bought some of these Discos. People who have capacity should own the Discos. The generating companies are reeling and suffering, there is a limit to how far we can subsidise the system because that to me is what is happening today.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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