FG mulls special company to implement Mambilla hydro project
Nigeria’s Federal Government is planning to set up a special company to effectively complete the Mambilla hydro project, 36 years after the power project, which holds up to 3,050 megawatts promise to the grid, was conceived.
In an exclusive interview with BusinessDay, finance minister, Kemi Adeosun, confirmed government’s plan to adopt a project risk model, and that the whole idea was to ensure a record time completion, sustainability and also guarantee that, that long-term project was not truncated by successive administrations.
The Mambilla hydro project would be partly funded by a China Exim Bank loan, and the financing agreement is expected to be signed this September, according to her. The NSIA is also to spend part of its $650 million fresh capital under the Presidential Infrastructure Fund on the project.
“There will be a Mambilla hydro company for the project. Nigeria Sovereign Investment Authority (NSIA) is just bringing in the counterpart funding. This is a China Exim loan; so then we also need to operationalise it because if you are debt-funding a project, you need to check your revenues, the strategy.
“So, that company will have all the important structures because if you leave it in the hands of the ministry, they will just deliver a project and go home,” Adeosun explained.
Conceived in 1982, the Mambilla Hydro-Power Plant Project has suffered serial neglect by successive governments and had featured in almost every presidential campaign promises since the return of democracy in 1999.
But the power project came alive following the Federal Executive Council (FEC) approval for the construction of the 3,050mw of Mambilla Hyro-Power Protect at Gembu in Taraba State in August 2017.
The proposed project, it is said, could be one of Africa’s and Nigeria’s biggest hydro dams, and was to connect to three dams across the brownish River Donga, snaking through the fabulous Mambilla mountains in Taraba State.
The Federal Government and China Export Import (EXIM) Bank would jointly finance the project, as the finance minister confirmed and would see Nigerian government commit 15 percent, while the EXIM Bank would provide 85 percent of the cost.
She said following FEC’s approval, key ministers linked with the project, including herself and the minister of power, works and housing, Babatunde Fashola, travelled for financial discussions with the officials of China Exim Bank.
They also sought to understand the best implementation approach that would ensure that the project does not fail.
Speaking to BusinessDay on the outcome of that meeting and the financing model being considered, Adeosun explained, “We don’t have enough capacity because it is a big project so we went there to negotiate the terms of that loan.
“The China Exim were offering us blended, not fully concessional loan. They funded a project in Ethiopia, so we would learn how they do their own to avoid pitfalls,” the minister said.
“The reason why the China Exim Bank was offering us blended conditions for that loan is that we also want to learn from other bigger and similar projects like we have seen in Ethiopia. Bigger projects comes with bigger risks,” she explained.
“We don’t want a situation where we will get involved and there would be nothing to show for it.”
Projected to cost $5.792 billion (N1.140trn), the Mambilla hydro is a multi-year project and is expected to shore up current grid capacity of 7,000mw, while boosting Nigeria’s quest for economic diversification through industrialisation.
Speaking further on the funding agreement, she said, “It is about seven years project, hopefully, we are aiming at September to be able to sign the final agreement.
“We had very fruitful discussion with China Exim Bank officials and we are very excited about it, hopefully we are going to sign it in September and the project will then kick off. But it needs its own structure, its own Managing Director, and just people that have done this kind of project before, not someone coming to experiment because this is borrowed money.”
The minister acknowledged Taraba, as one of the states that had so much potential in agriculture due to its highland, but that the key problem had majorly been power and road. “This is why the Federal Government is prioritising that project in Mambilla.”
Fashola had confirmed FEC’s approval of the project that the construction should take about 72 months (six years) for completion.
According to Fashola, the scope of work would include the construction of four dams and 700 kilometres of transmission lines.
He pointed out that the project when completed, the hydro project would boost the nation’s economy and unleash the potential that had been reported about Mambilla in the fields of agriculture, tourism and energy.
“It would also help Nigeria strike a very big blow on the climate change and fulfil its commitment under the Paris Agreement, because this is going to be renewable energy, coming also at a relatively competitive cost.”
Nigeria’s power generation still hovers around 7,000mw of electricity, with huge distribution challenges. Distribution and Transmission channels are reportedly only able to take 5,000mw.
Chuks Nwani, an energy lawyer and power sector analyst, told BusinessDay that the Federal Government’s effort to improve power supply and especially commence the long-talked about Mambilla was a good step, but there should also be a sustainability plan in the ensuring long-term success of the project.