INTERVIEW: Why Implementation Of $2.3bn Siemens Power Project Delayed -Adelabu

Recently, the Minister of Power, Chief Adebayo Adelabu at the Ministerial Press Briefing organized by the Minister of Information and National Orientation disclosed the efforts being made by the Federal Government to resolve the power sector challenges and boost power supply in the country, especially, with respect to the $2.3billion Siemens Power Project. Excerpts.

Q: Nigerians are concerned about the country’s power supply. However, some challenges I will mention now might not be within your control since they were inherited. Besides the recent increase in tariffs, Nigerians would like to know the progress of the Memorandum of Understanding (MOU) that Nigeria signed with Germany to enhance the country’s power supply. There was a lot of optimism when this agreement was signed.

Minister: In 2018, the Nigerian government signed a memorandum of understanding with the German government for the presidential power initiatives, also known as the Siemens contracts. The German government agreed to lend Nigeria $2.3 billion and employ Siemens to transform Nigeria’s transmission and distribution sector.

However, due to COVID-19, significant progress has yet to be made in implementing these projects. Unfortunately, the late Chief of Staff to the President, Malam Abba Kyari, the foremost champion of the project, passed away. After that, an election occurred, and a new government took over.

Between 2018 and 2023, there were no significant developments concerning the agreements. The project was supposed to proceed in two phases, but the pilot phase only progressed significantly once a new government emerged. In November 2023, during the visit of the German Chancellor to Nigeria, one of the issues discussed was the need to continue with the project.

Recently, there was an African Business Summit in Germany, which was attended by the President, and I was privileged to accompany him to the summit. During the summit, we had extensive conversations with our German counterparts regarding a project, and we were both convinced that it would benefit both countries to proceed with a Memorandum of Understanding (MOU). We agreed to sign an acceleration agreement to kick-start the project again.

In December 2023, at COP 28 in Dubai, an affiliation agreement was signed between the federal government, the German government, Siemens Energy, and FGN Power Company Limited. Following this, we commenced the project analysis, and I am pleased to inform you that we are almost through with the project’s pilot phase.

The pilot phase involved the offshore importation of ten power transformers and ten mobile substations to be used as a Proof of Concept (POC) for these projects. All these items have arrived in the country.

I can confirm that we have installed and commissioned five out of the ten transformers. I oversaw the installation of these power transformers at various locations across the country. We have also installed three out of ten mobile substations, with seven more to go. Once we finish installing them, we will commission and energize them. At that point, Nigerians will begin to see the impact of this project.

So, we are fully convinced that with the success recorded as the pilot phase of this project, we are moving forward unperturbed on the remaining phases of these projects. The phases include transforming our transmission segment or network by expanding the transmission capacity and strengthening the transmission to avoid the current fragility that leads to persistent grid collapse.

This will involve upgrading existing power transmission substations—about fourteen of them. It is going to involve the establishment of new transmission substations, about 22 of them. It’s going to involve the installation of new transmission power lines, the reconducting of some lines, and the conduct of some existing power lines, totaling almost 14,000 kilometers as the transmission segments.

The same thing applies to the distribution segments, whereby our existing injection substations will be enhanced in the distribution companies (DISCOS). There will be replacements and upgrades of 33KV and 11KV transformers, numbering about 6000 transformers. We will also reconduct and install new lines, totaling almost 22,000 kilometers of lines.

So, I believe that once we are done with this first phase of the presidential power initiatives, called Siemens projects, Nigerians will start seeing improvements in the strength of the national grid and the efficiency and effectiveness of the distribution companies. We are on top of it, and President Bola Ahmed Tinubu is exceptionally committed to seeing these projects come to reality.

Q: The other issue that continues to bedevil the electricity system is, you know, that Zungeru power plant was commissioned a few weeks ago but needs to be connected to the national grid. How would the government spend a tremendous amount of money to establish that plant if there was no provision to connect it to the national grid? Was it an omission or an oversight?

Minister: Let me correct this misinformation: the Zungeru hydroelectric power plant is complete, the concession process is complete, the payments by the concessionaire have been made, and the official handing over of this plant has been done to the concessionaire, which is Mainstream Energy Limited, who are the current operators of Kainji and Jabba hydroelectric power plants. The stage we are now in is technical handing over by the Chinese consultants that built the Zungeru hydroelectric power plant to the concessionaire because there is a one-year defect liability where these contractors need to be on the project site to ensure that whatever problem that occurs within one year, they can fix it.

They are working earnestly with the concessionaire and the Ministry of Power, together with the Bureau for Public Enterprise (BPP), to ensure that we conclude the technical handover of the plant. I can tell you that the testing stage started yesterday, that the power generation at the plant started yesterday, and that it would last about one or two weeks, after which total production will start. And I can tell you with good authority that the Zungeru power plant can evacuate power from the national grid. Therefore, it is complete disinformation to say it is not connected to the national grid.

Q: Some of the power plants continue to collect money from the federal government. Still, not a single kilowatt of power is taken by Nigerians on what you call “take it or leave it,” which is provided for as a clause in the power sales agreement. Why should we allow an electricity-generating company to earn money only because it owns power plants? Whether Nigeria uses or does not use energy from the plants, the federal government is mandated to pay. Why should we allow that?

Minister: On the take-or-leave-it agreements that the federal government signed with some power plants, there are no power plants that collect money from governments without generating power. Nobody will allow that. Rest assured, not in President Bola Ahmed Tinubu’s transparent administration.

Q: I’m wondering why it is difficult for the government to be in charge of the generation, distribution, and transmission of energy to protect the masses. It is evident that privatisation still is not working. So, if we keep leaving these in the hands of investors, the masses are at the receiving end. Don’t you think the government should, at this point, take charge of generation, distribution, and transmission?

Minister: We all know the shortcomings of the privatisation process. Indeed, it has yet to achieve all these intended purposes. But I can tell you, to a large extent, that privatisation is the way to go. We carried or implemented it; it may be a problem, but it is not beyond revival. We can take steps to compel private sector operators to perform. The kind of investor funding required in the power sector is enormous; the government alone cannot provide the funds for investment in generation, transmission, and distribution.

Secondly, the government should refrain from running businesses. So, it was right to privatize some sections of the power sector value chain, and the efficiency and effectiveness depend on the execution of this privatisation, which is what this government is working on. We have to correct all the deficiencies.

The power sector is so unique that every segment is unique. If you pick generation, it is jointly owned; there are three types of ownership. Some power plants are 100% privately owned. Geregu, Sapele, Azura, and Omotosho power plants are there. Some other sets are owned by the federal government but concessionaired to the private operator; that’s our hydropower plants, Kainji, Jebba, Zungeru, Dadin Kowa, and Shiroro, which are owned by the federally run private sector on concession bases. The third group is government thermal gas plants, which are the ones built under the Nigeria Integrated Power Project (NIPP), and which are all owned by Niger Delta Power Holding Company (NDPHC). They are all government businesses, but let me tell you, if you compare NIPP plants today with any of the privately owned ones, they are better off.

We must look for a solution in the private sector’s hands. Still, the Nigeria Electricity Regulatory Commission as regulator will ensure that they not only perform optimally but also have the interests of the masses at heart. That’s why the government cannot liberalise the power sector today; we cannot leave it because of the centrality and criticality of the power sector to individual households, businesses, commercial institutions, and industries. So, we will make the best of the dire situation. That’s what we are trying to do.

Q: You talked about capacity and established the capacity of those in this 15% Band A category. Let me speak from personal experience now. On my streets in Kado Estate, Abuja, most of those who live there are retirees, and this estate falls under this Band-A category. Now, the question is, is it rational to put Kado Estate in the same cadre as the people in the Asokoro and Maitama areas?

Minister: Let’s look at it. I mean, it’s a very sensitive issue. I would have expected the federal government to start in those highbrow areas and say, Okay, we are heaping the responsibilities of the gains that Nigerians will benefit from on these people rather than spreading them across. It is just a privilege to be in that place. Not that there’s any money there.

We have to manage our consumption efficiently; that’s efficient power consumption management. So, I implore us to be prudent in consuming electricity. It is no longer cheap for Band A; we implore them to immediately report to NERC if the service is less than 20 hours of electricity.