VZCZCXRO3325
PP RUEHMA RUEHPA
DE RUEHUJA #2264/01 3230740
ZNR UUUUU ZZH
P 180740Z NOV 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4478
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 0276
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 002264 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR- AGAMA, USTDA - FITTS/MARIN AND EXIM - JRICHTER 
DEPT OF ENERGY FOR CAROLYN HAYLOCK AND GEORGE PERSON 
USAID AFR/SD FOR MICHAEL CURTIS 
 
E.O. 12598: N/A 
TAGS: ENRG EPET ECON PGOV EAID NI
SUBJECT: NIGERIA: POWER SECTOR TO GET $5.3 BILLION 
 
REF: A. ABUJA 1942 
 ¶B. ABUJA 1930 
      ¶C. ABUJA 1311 
      ¶D. ABUJA 1082 
      ¶E. 07 ABUJA 1607 
      ¶F. 07 ABUJA 1582 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
 
¶1. (SBU) SUMMARY: On October 30, 2008 the National Assembly approved 
the Federal Government's portion of $2.4 billion the required $5.3 
billion for Nigeria's short-term power strategic plan.  The funds 
will be used to rehabilitate the electricity grid and begin the 
completion of the National Independent Power Projects (NIPP).  The 
rehabilitation of the existing plants will net additional power 
output, as much as 6,000 megawatts (MW), as many units are in need 
of repair.  The funding is expected to be released by the first of 
December 2008, when an implementation oversight committee is 
inaugurated.  The price tag for increasing electricity supply to 
16,000 MW will cost has been estimated by the Ministry of Energy for 
Power at least $20 billion, and will require public private 
partnerships or some type of joint venture to accomplish.  END 
SUMMARY. 
 
¶2. (U) President Yar'Adua's 18 month long promise to declare a state 
of emergency in the power sector moved closer to fulfillment on 
October 30, 2008 as the final vote to approve the Federal 
Government's portion of $2.4 billion of a total of $5.3 billion 
power sector emergency implementation 2008 supplemental budget for 
the rehabilitation of the power grid was passed by both the House 
and the Senate.  The total of $5.3 billion will be withdrawn from 
the Consolidated Revenue Fund as excess crude proceeds with the 
approval of all three levels of government, namely the local, state, 
and federal. 
. 
Next Steps 
---------- 
. 
¶3. (SBU) On November 01, 2008 Permanent Secretary of the Ministry 
for Power Dr. Abdullahi Aliyu told EconOff that agreement is 
expected to be reached by the end of November on the structure of 
how the implementation of the $5.3 billion will operate, including 
the new NIPPs.  Currently the existing power plants are owned and 
operated by the Power Holding Company of Nigeria (PHCN), which is in 
reorganization and has a management oversight committee (reftel C). 
The vision for the formation of this second committee will be to 
monitor and approve the implementation spending and benchmark the 
expected results of the $5.3 billion.  The implementation oversight 
committee will be headed by the vice president with 19 planned 
members of the committee to include the following.  Six governors, 
one from each of the six geo-political zones; three governors who 
were former ministers of power; the minister of state for gas and 
power (both sacked in the recent cabinet reshuffle); minister of 
finance; Attorney General of the Federation; Minister of National 
Planning; two representatives from banks, one from labor, one from 
the media, one from the oil operators. 
 
¶4. (U) In 2008 a number of National Assembly committees executed 
detailed studies on the power sector.  The Ministry of Power 
inaugurated task forces to undertake a site assessment of the Power 
Holding Company Nigeria's (PHCN) facilities.  The Federal Executive 
Council commissioned the Presidential Committee on Accelerated 
Expansion of the Electricity Infrastructure to carry out due 
diligence studies covering technical, financial, and legal audits on 
the power sector.  The Presidential Committee also hired KEPCO 
Energy Resources Ltd, a Korean firm, to execute the studies.  The 
reports were reviewed and once the information was vetted, it was 
incorporated into the strategic plan, which is the basis of the 
supplemental budget. 
. 
Big Price Tag 
------------- 
. 
¶5. (SBU) The complete rehabilitation of the power sector and the new 
generation to satisfy demand for 16,000 MW will require an estimated 
$20 billion investment as noted in the Ministry's strategic plan for 
the power sector.  The supplemental funding approved by the National 
Assembly for $5.3 billion will increase average electricity 
generation to 6,000 MW by December 2009.  The 2008 budget and its 
supplemental supports the rehabilitation of the following existing 
power plants owned by PHCN: Egbin, Kainji Hydro, Sapele, Afam, 
Shiroro Hydro, Jebba, Delta, Geregu, and Omotosho; the 
rehabilitation of the existing transmission grid and distribution 
networks; completion of NIPP plants with Sapele expansion, Alaoji, 
Ihaovbor, and Egbema by December 2009; first year implementation of 
 
ABUJA 00002264  002 OF 002 
 
 
the Multi Year Tariff Order; the first year costs toward the 
construction of the Zungeru and Mambilla Hydro projects; and the 
first year estimated costs toward the expansion of the transmission 
grid to handle  16,000 MW. (NOTE: Several NIPPs will come on line 
through 2011; some of their construction funding is in this 
supplemental for: Omotosho, Plant II; Papalanto Plant II; Geregu 
Plant II; Alaoji Plant II; Sapele Plant II; Calabar; Gbarain; and 
Omoku.  END NOTE.) 
 
¶6. (SBU) The 6,000 MW will be generated by: 
-- Existing plants 2,110 MW 
-- Rehabilitated plants 1,590 MW 
-- NIPP 1,140 MW 
-- Low-Pour Fuel(LPFO)40 MW (Used for firing boilers/ furnaces) 
The majority of plants will be run on natural gas - 79.9%, with the 
remaining mainly from hydroelectric - 19.3% and finally LPFO - 0.7. 
 
. 
Way Forward 
------------ 
. 
¶7. (SBU) COMMENT:  Following President Yar'Adua's inauguration he 
placed increasing electricity supplies as a major goal of his 
administration.  His Seven Point Agenda also focuses on electricity 
generation.  Despite the President's best efforts, there has been no 
quick fix.  The administration has been engaged in slow and 
deliberate discussions and have finally reached a point where its 
understanding of the problems, costs, and previous missteps in the 
Obasanjo's administrations are well understood.  The approval of the 
$5.3 billion is a positive step forward. 
 
¶8. (SBU) There are several risk factors for this rehabilitation and 
supplemental budget to be successful - whether funds will be 
executed as budgeted; will implementation continue on the steady 
path, which would attain the following benchmarks: (average of 4,100 
MW output per day by March 2009; 4,600 MW by June 2009; 5,400 MW by 
September 2009; and 6,000 MW by December 2009).  Additionally, is 
there enough natural gas available and can it be delivered to the 
gas fired plants?  In October 2008 the U.S. Agency for International 
Development (USAID) commissioned a technical assistance program to 
examine whether current gas policies will result in sufficient 
natural gas supplies (reftel A).  END COMMENT 
 
¶9. (U) This cable was coordinated with Consulate Lagos. 
 
SANDERS