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FM AMEMBASSY ABUJA
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INFO RUEHOS/AMCONSUL LAGOS PRIORITY 8842
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 000402 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT ALSO FOR OES/PCI FOR SPECHT 
DEPARTMENT PASS TO USTR (AGAMA) 
DEPT OF ENERGY FOR CAROLYN GAY 
 
E.O. 12598: N/A 
TAGS: ENRG ECON EPET PGOV EFIN SENV NI
SUBJECT: NIGERIA: AF DAS MOSS' MEETINGS WITH POWER SECTOR 
REPRESENTATIVES 
 
REF:  STATE 09421 
 
¶1. (SBU) SUMMARY:  The Minister of Energy for Power and the Chairman 
of the Electricity Regulatory CommissiQtold AF DAS Todd Moss that 
investments in the power sector over the past seven years have not 
netted adequate and reliable electricity to support economic growth. 
 Reforms for the power sector are in the discussion stage.  A new 
legal framework, coupled with the implementation of a 15 year model 
tariff, is intended to establish a level playing field, encourage 
private investment and expertise, and meet social and economic goals 
-- but needs a lot of work, and there is resistance to tariff rates 
that would encourage investment without recourse to government 
subsidies.  The Ministry is looking to the USG to introduce it to 
strategic partners that could advise on commercially viable 
public-private models to increase generation capacity and separately 
for advice on how to reform the government operated transmission and 
distribution system.  End summary. 
 
¶2. (SBU) AF DAS Todd Moss, the Ambassador, Econ Counselor, and 
Econoff (notetaker) met with Minister of Energy for Power Fatima 
Balaraba Ibrahim, on January 24, 2008.  Moss and Econoffs also met 
earlier in the day with Dr. Ransome Owan, Chairman/CEO of the 
Nigerian Electricity Regulatory Commission (NERC). 
 
---------------------- 
Power Ministry Meeting 
---------------------- 
¶3.  (SBU) DAS Moss asked the Minister her view of the power 
situation and the government's plans.  Minister Ibrahim told DAS 
Moss that the situation in the power sector is critical, and is the 
result of decades of neglect.  She explained that the government's 
inability to fund and sustain the sector also translates to the poor 
state of the economy and inability to implement development 
activities across the country.  She noted that there are problems 
facing the Nigerian electricity industry, apart from inadequate 
funding, linked to each of the key sub sectors (generation, 
transmission, and distribution).  Generation is currently 
insufficient to meet national demand of 10,000 MW and rural 
electrification remains distant.  DAS Moss asked the Minister about 
the adequacy of the transmission system and was told that the system 
is very fragile and inflexible in its ability to wheel the planned 
increased power. 
 
¶4. (SBU) Minister Ibrahim spoke of the $10B reportedly spent to 
upgrade the sector's infrastructure from 2000 - 2007.  Projects 
commissioned with this budget include Greenfield plants in the Niger 
Delta (new GON gas fired power plants) where already-purchased GE 
turbines are to be installed. The Minister acknowledged that the GE 
turbines are still sitting in warehouses at the docks.  She also 
said that GE had visited and committed to support the GON in its 
efforts to "jump start" the sector, but there was no specific plan 
as yet.  The minister said that further funding to double generation 
capacity to 6,000 MW would need to come from the excess crude oil 
account, but cautioned that more money was needed and the GON is 
looking to the private sector for help in the form of partnerships. 
She emphasized to DAS Moss that the GON is still in a period of 
transition.  (Note:  Ministry contacts have told us that subsequent 
to this conversation President Yar'Adua rejected a plan for moving 
forward largely with government funding.  The President favors 
Public-Private Partnerships-details to be defined-for the long-term; 
he has approved some quick fixes to increase generation capacity by 
the end of the year.  End note). 
 
¶5. (SBU) DAS Moss asked the Minister about the implementation of the 
tariff that he had been briefed on at an earlier meeting by Dr. 
Owan, the NERC chairman. The Minister noted that the new 15 year 
tariff model is ready to implement, but requires consensus. 
Minister Ibrahim said that the people are against the new tariff, 
"they want power first, tariff later".  To meet this demand, 
Senators are suggesting a 2008 GON supplemental budget be 
implemented, together with the tariff, that will neutralize the 
increase to the residential and small business consumer for the 
near-term. 
 
¶6. (SBQThe minister said that the President may declare a state of 
emergency in the power sector, but not until the legal framework is 
in place for private partnerships and the tariff issue is resolved. 
In the short term the President wants to first double the electrical 
delivery to 6,000 MW and then redouble to 12,000 MW within four 
years.  She further explained that "while in the planning mix, the 
achievement of 26,000 MW may not be realistic in the near-term" as 
gas may not be available in large enough supplies to fuel the power 
plants.  She noted that a PPP model GON experts had observed in 
 
ABUJA 00000402  002 OF 002 
 
 
India encouraged IPP investors and fuel suppliers to work out 
contracts for delivery arrangements in advance.  In Nigeria, this 
has not been the case.  The Minister said she is supportive of 
"renewable energy projects and would like to move forward with 
more". 
 
----------------------------------- 
Meeting with Electricity Commission 
----------------------------------- 
¶7. (SBU) In the meeting with the NERC Chairman Dr. Owan, AF DAS Moss 
asked about short-term plans to jump start the electricity sector. 
Dr. Owan said that the plan would begin with the eleven 
government-owned power plants, which would include the strengthening 
of distribution and transmission lines.  He said this is the 
immediate way forward; the IPPs will need time to work with the 
bankers and lawyers to feel comfortable with the upcoming 
legislation and the new tariff.  He also said related funding would 
come from the excess crude oil account, and this targeted effort 
could bring capacity to 10,000 MW.  (Note:  Again, it is not clear 
that government will tap the ECA for the short-term fixes).  Dr. 
Owan said that two plants currently in the commissioning process are 
receiving "bottled" gas to exercise the turbines (790 MW), but gas 
supply for production is not currently available and will not be 
until mid 2008 or later 
 
¶8. (SBU) DAS Moss asked Dr. Owan to highlight some of the other work 
being done.  Dr. Owan explained that the system currently has losses 
of 30 percent due to the absence of state-of-the-art dispatch 
facilities in the transmission sector and the fragile and overloaded 
distribution network, and theft.  NERC is monitoring 22 transmission 
projects and 17 new substations that address the evacuation of power 
from all power stations to the national grid through major 
corridors.  A new system of distribution at a higher voltage level 
is being adopted. 
 
¶9. (SBU) Dr. Owan continued by addressing the theft issue. The GON 
has active projects to adopt a slum electrification anti-theft 
system from a successful program in South America.  Dr. Owan said 
that he is especially thankful to the U.S. for its continuing 
support, especially from USAID and the U.S. Trade Development 
Agency.  He confirmed that the power sector has been "studied and 
there now needs to be implementation and funding," and that Nigeria 
needs to engage large American firms in that effort. 
 
----------------------------------- 
An Opportunity to Shape the Process 
-------------------------------- 
 
¶10. (SBU) COMMENT:  It is clear that the GON does not yet have a 
comprehensive plan to accelerate production and delivery of 
electricity.  Long-term, the most critical issues center on the 
availability of gas, secure pipelines to deliver gas when available, 
and effective transmission and distribution to new customers. 
Some/some of the short-term fixes announced separately by 
Presidential Energy Advisor Lukman probably are in fact doable.  The 
Minister will be in Washington the week of March 3 to attend WIREC 
¶2008.  The Minister is seeking USG assistance in arranging 
introductions to for-profit and/or not-for-profit (preferable) 
entities that could advise and assist the GON in bringing its draft 
PPP model to final, and also advise on transition possibilities for 
the corrupt, inefficient, and deteriorating parastatal-run 
transmission and distribution system. 
 
¶11. (SBU) DAS Moss cleared this message. 
 
SANDERS