Nigeria’s power sector is currently undergoing a monumental transformation thanks to the introduction of the new Electricity Act. This legislation is poised to be a true game-changer. However, it’s important to note that not everyone is equally enthusiastic about the Act, given that its provisions are geared towards expanding opportunities for investment by fostering increased competition.
In our latest Insider Interview, we sat down with two experts from Tempo Energy. Our aim is not only to gain insights into their company but also to explore how key players in the power sector, such as Tempo Energy, perceive the impact of the new Act. Additionally, we delve into the persistent challenges faced in the renewable energy and natural gas sectors of the energy market. These bottlenecks, intriguingly, also offer significant opportunities for potential investors.
Let’s begin with an introduction to what Tempo Energy is all about.
Tempo Energy is an integrated energy company that covers the upstream, midstream, and downstream segments of the energy sector. Our primary areas of focus are power generation and the distribution of captive power in industrial clusters and residential areas, achieved through the use of natural gas or renewable energy sources such as solar.
Could you tell us about the ongoing projects that Tempo Energy is currently engaged in?
Our business primarily centers on the mid and downstream sectors. While we do have some interest in Exploration and Production (E&P) through investments in oil and gas assets, our main involvement is in power generation through our subsidiary, Tempo Power Solutions. We pursue this through various means, including gas-based and solar power solutions. Solar power solutions offer more flexibility, allowing us to serve both individual consumers and larger systems. On the other hand, gas-based solutions primarily cater to industrial needs, offering larger capacities, which we refer to as captive power.
Additionally, we are active in utility services, encompassing gas supply through our partnership with Gas Hub LTD and petroleum product trading. We operate several filling stations in Port Harcourt, where we offer products such as Automotive Gas Oil (AGO), Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK), and Liquified Petroleum Gas (LPG).
This holistic approach characterizes Tempo Energy as an integrated energy company, enabling us to operate across the entire energy value chain. We also supply petroleum products to clients in other African countries, including Sao Tome. Our operations include Tempo Power for power-related activities, E&P, partnerships such as with Gas Hub, and petroleum retail. We are present in the Ogun-Guangdong Free Trade Zone, providing utility services for the industrial park, where we also manage a waste management project. Our Abuja office serves as the coordination center for our nationwide operations.
You’ve highlighted some significant achievements. However, could you elaborate on the challenges that your organization encounters?
In terms of power generation, particularly concerning renewable energy, most of the components used are not manufactured within the country and need to be imported. This leads to high costs, including shipping, customs clearance, and import duties, which ultimately affect our overall costs. Unfortunately, these costs have to be passed on to customers, potentially impacting customer engagement. The availability of subsidies or grants to offset these costs would be highly beneficial in addressing this challenge.
Regarding our gas-to-power solutions, we face an infrastructural challenge within the country. We rely on existing natural gas pipelines to supply gas. However, these pipelines do not cover the entire country. When we need to transport gas to areas without pipelines, it involves trucking the gas and storing it in liquefied natural gas (LNG) form, necessitating regasification, which increases costs. If we had gas pipelines extending across the nation, it would make gas more affordable and accessible, with competitive tariffs for those wanting to utilize gas.
Regarding the new Electricity Act, how do you foresee it affecting Tempo Energy?
After reviewing the new Electricity Act, I view it as a positive development for our business operations. However, there are some gray areas that the government needs to address. Specifically, the creation of state electricity markets where states establish their own regulatory bodies is within their jurisdiction. Yet, since it wasn’t clearly defined how the transition from the current regulation under the Nigerian Electricity Regulatory Commission (NERC) to the proposed state-specific regulation will occur, it might create challenges for investors and other stakeholders in the power sector. Apart from this concern, I see the Act as a welcome development, primarily because it increases the availability of options. If one state’s electricity market doesn’t favor us, market participants are free to explore other states where their electricity market regulations are more conducive. The new Act also includes a special provision to encourage the use of renewables as part of the generation options.
It’s commendable that you view the new Act as a positive change for your business. Could you share how your company is addressing the issues you mentioned?
Regarding the infrastructural deficit, it necessitates a substantial financial commitment. Consequently, we rely on LNG trucking to transport gas across the country where gas pipelines are absent. This approach has the drawback of increasing costs because a regasification plant is required to convert the liquefied gas back into a gaseous state. This is a significant challenge, but it is currently the only viable option for addressing the problem. However, the presence of a nationwide gas pipeline would make gas transportation more cost-effective and efficient.