‘We restarted botched power projects by settling disputes out of court’-Part 2

Babatunde Fashola, Minister of Power, Works and Housing, carries the nation’s burden of improving a good part of the infrastructure upon which rapid development depends. In this interview, the minister speaks of his vision to incremental power supply, steady power supply and shares his thoughts of activities in the pipeline to achieve the target.

Mambila and Zungeru are some of the key power generation projects by the government that have been on the drawing board for years if not decades. What are the reasons for the delay? Is there assurance of funding for the two projects and when are the estimated completion dates?

Let me start from where you stopped. Zungeru is under construction now. Construction had stopped for about three years because there were court disputes. But all of that has been resolved. The Niger state government worked with us. We got the restive communities to allow work to go on after we resolved compensation issues. They were in my office about two weeks ago. We are working now with them to solve the compensation issues, identify those entitled to compensation and find a way to pay them off. But construction has resumed, after three years. So Zungeru is behind time. However, its scheduled delivery is quarter one 2018 or 2019.

In the case of Mambila, it is a long story. But the good news from there is that the president is determined to revamp it. There is a presidential team that comprises of myself, the chief of staff, and all the procurement agencies working to see how we can close all of the project preparatory issues. The minister of finance is also involved. My office now provides the president with a weekly update of what is going on in Mambila.

The bad news is that Mambila was conceived in 1982. I was 19 years then. It has passed through many administrations and they all awarded it. But as I speak to you, the land on which it is to be built has not been acquired, even though contracts were awarded. Yet we were going to borrow. If we had borrowed in 1982, we would have had to finish paying the loans without doing anything. But we have moved on from where it is. The studies have been done. But the land hasn’t been acquired. Such projects start with acquisition, enumeration, compensation, and resettlement; before you can begin to construct. Otherwise you are going to end up in court almost like Zungeru.

In the process, there are now three contractors who were also fighting themselves. The good news again is that with presidential intervention, we formed that consortium into a single joint venture. Then we signed the joint venture agreement. All of them are Chinese companies. There has been seven years litigation in between. That is what we heard but we have moved on. We now have the three Chinese companies agreeing to work together. I have the document where they signed to work together and share the work amongst themselves. On that basis we can now move to the next step. I am talking to the governor of Taraba for land acquisition. So we are making progress. Mambila at its best and prolific capacity will take seven years to build. My concern is that whether we are there or not, once we start it, it must be possible to finish because it is like page turning a book; if you don’t plan it well then you will face constraints.

We are at the incremental power stage and we are looking at all options. I got a proposal to provide power from a barge at 109 megawatts. Again it is limited by gas. But we are looking at it because the barge in Lagos has 214MW and there is no gas. You then begin to quantify damages on the economy caused by gas vandalisation. So you have that idling away and even this one will now have to look for a coastal area because you need to move the barge. Coastal areas are partly the crisis areas. We are also talking to the Ministry of petroleum about regasification. That responds to what you said about moving the gas in barges. We see interesting prospects. We have some private companies working with us. Incidentally, there is a regasification project now that is being pursued by the Republic of Benin. They have a crisis there and are looking to get 115MW for their country. Liberia was also talking to me about 40mw, while Chad talked about 84mw.

All of these begin to set the context about how big 40mw can be in terms of powering homes. All of that is on. Now, you know that most of our gas comes from the oil well production. So Forcados and the major terminals are down. The reason is that we cannot store the condensate that is associated with oil production, but we are working now with a private group who see the prospects of using condensate to fire their turbines and provide energy. If we create an outlet for the condensate, not only will we get more power from condensate fired turbines, oil production will resume and we will get more gas into the system. We are at the inspection stage now to see how to connect because those turbines are coming in at 25mw and I think we have them looking at about 6-8 simultaneously. So, all of this is going on while we are managing day to day issues.

We also have work going on in transmission. There is this cliché that the transmission system is poor and unreliable. Although the transmission system can certainly do with an expansion, the system today is not behind the generation system. The highest power we have ever produced in the country was 5,000mw; and the transmission system could carry it. So why do you want to buy more buses when there are no passengers. So what we need to do, which is what we are doing now is that we are synchronising the transmission expansion with production. Otherwise you have hydro capacity for which again people will pay. So it is not technical, it is man made. We just need for everything to shake hands and then we are on the go. So we are planning to expand transmission to 7mw, we need to see also that we can produce 7mw. This is because transmission is a transporter, it carries a willing charge and it will inject a capacity charge. So people must understand that there may be no need to borrow money to build that asset. If you do not need it, do not build it.

How is gas pricing affecting the sector?

Gas is an international commodity, therefore, as long as you price it in dollars and our currency against the reserve currency which is volatile, it makes planning difficult. Gas price has stabilised, it is $3.30 but the naira volatility is there. When some of them signed their contracts they signed it at 197/$. Now it has gone to N320 and it continues fluctuating. How do you plan production when you are going to get paid in naira? By the time you collect your naira you have to pay the gas suppliers in dollars; the agreement you signed for dollar has moved from N197 to N300. Meanwhile you didn’t increase the tariff.

The tenure of commissioners at NERC expired since last December. Why is it taking so long to have new commissioners in place, especially given the need to engender confidence in a new sector?

There have been some fresh appointments; we are just waiting for Senate confirmations. But the Senate is on recess now. They will resume on the 20th of September. The President has made the appointment.

I think it is important before we move on; that our economy is challenged and all what we are talking about must be in a context. It is important to go back to how we got here. I hear people say do not talk about yesterday, just go and fix it and quit blaming the previous government. However, let us be contextual, the past would not go away. Whenever a referendum is called on this government in its four year term, it will not be in isolation but in context of yesterday. So let us not run away from it. What always happens is that are you better off today than before, so yesterday will not go away?

Secondly, let us use Nigeria in the allegory of a patient. If you had a stomach upset and you went to a doctor, the first thing he would probably ask you is what you ate yesterday. That is a natural thing, so we must talk about yesterday now that Nigeria is sick, because that is the basis for diagnosis. If diagnosed and the situation does not look normal, then they send you for a scan.

Is there anything stopping the state from generating power?

No. There is nothing stopping them. We have signed off for example with a few solar vendors who are collaborating with states. There is nothing difficult in generating power. I generated power as a governor.

The problem is distribution; because currently, the distribution companies have been sold to private companies. If you remember the dispute between Geometric and states, it was an encroachment on distribution rights that led them to court. So you don’t want to multiply that.

But where you have states able to work with distribution companies, then you don’t have a problem. It just means that states can find people who would generate the power. Distribution companies would agree that the power would be taken by them.

But there must be a preferred buyer, and the reason is that those small power plants don’t have the economies of scale of big plants, so the power will come at premium higher than local tariffs.

Of all the power plants that we did in Lagos, none was owned by government. We built them with private sector capacity. We signed PPAs to guarantee them that we would buy.

So for Iju water works, government was the off-taker and the promoter but the developer was a private contractor. When we did our numbers, it was cheaper to generate our own power than use diesel for our generators. So there is nothing in the way.

The sweetener we threw in which was not there when I was governor was willing buyer, willing seller which was a tariff issue; so that we didn’t need NERC.

When we did all those power plants, we had to go to NERC and they told us that the cost was too much but we refuted. They are like a referee and they are there to protect the public not intervene in negotiations with the private sector.

If government and a private power supply can agree, NERC ought to just approve, not try to dictate how to play. Once they have agreed and it has been signed, let it go. If you had that, you would free up more space on the grid.