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Power Gencos May Soon Pack up – Elumelu Warns



  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Africa Renewable Energy Fund II Secures €125 Million First Close With SEFA and CTF Investments



Solar energy - Investors King

The Africa Renewable Energy Fund II has achieved its first close at €125 million, following a joint investment of €17.5 million from The Sustainable Energy Fund for Africa and the Climate Technology Fund through the African Development Bank.

AREF II, a successor to the original Fund, is a 10-year closed-ended renewable energy Private Equity Fund with a $300 million target capitalization. The Africa Renewable Energy Fund II, managed by Berkeley Energy, invests in early-stage renewable energy projects, thereby not only de-risking the most uncertain phase of power projects, but also promoting increased green baseload in Africa’s generation mix.

The Sustainable Energy Fund for Africa and the Climate Technology Fund will each contribute roughly €8.7 million to mobilize private-sector investment into Africa’s renewable energy sector. The Sustainable Energy Fund for Africa will also contribute financing to the AREF II Project Support Facility, which funds technical assistance and early-stage project support to improve bankability.

Other investors include the U.K’s CDC Group, Italy’s CDP, the Netherlands Development Finance Company (FMO) and SwedFund.

“We are proud to be associated with Berkeley Energy and other like-minded investors, and look forward to AREF’s continued success and leadership in promoting sustainable power development on the continent,” said Dr. Kevin Kariuki, the African Development Bank’s Vice President for Power, Energy, Climate and Green Growth.

In 2012, the African Development Bank selected Berkeley Energy, a seasoned fund manager of clean energy projects in global emerging markets to set up AREF. AREF II has a sharper strategic focus than its predecessor on “green baseload” projects that will deliver firm and dispatchable power to African power systems through hydro, solar, wind and battery storage technologies.

Luka Buljan, Berkeley Energy’s Managing Director, said: “We are very excited to have reached this milestone with strong support from our backers. The catalytic tranche from the Sustainable Energy Fund for Africa and the Climate Technology Fund will assist in mobilising private institutional investors up to full fund size of €300 million. We now look forward to concluding the fundraising and delivering projects that will provide clean, reliable and affordable energy across African markets.”

“AREF is intertwined with the Sustainable Energy Fund for Africa’s history and success, and we have worked closely over the last decade to create precedents in difficult markets and challenging technologies. We look forward to continued collaboration to accelerate the energy transition in Africa,” said Joao Duarte Cunha, Manager for Renewable Energy Initiatives at the African Development Bank and Coordinator of the Sustainable Energy Fund for Africa.

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Crude Oil

FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI



Crude oil - Investors King

The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar



Crude oil - Investors King

The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.


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