OPPORTUNITIES
This deal makes possible a synchronization of related power sector activities that will create jobs and opportunities for Nigerians. There will be need for local companies to work as sub-contractors and partners with Siemens in the delivery of various aspects of the deal. This will lead to the transfer of technical know-how aside the deliberate intervention by way of training of staff of DisCos, TCN, NERC, and other agencies in the power sector which was included in the proposal. The benefits of training will extend to vocational training colleges, polytechnics, universities and local power training institutions. When properly implemented, this deal has a high social value, improving the competitiveness of power sector workforce, creating employment and the opportunity to earn forex by exporting knowledge of power systems.
THREATS
Although the FG declared this deal as “government-to-government”, without “middle men”, to avoid bureaucracies that usually lead to cost-variation, the deal was signed without a substantive Minister of Power and what is more, the Permanent Secretary, Ministry of Power, in charge of the Power Ministry in the absence of a Minister, seemed to be unaware also. Whilst representatives from the Bureau of Public Enterprises (BPE) were present at the ceremony, it was not clear whether the Vice-President, who is in charge of the affairs of the Power Sector, was also involved in this deal. This raises questions around the level of detail and robust thinking done before signing the deal. Although a few sessions have been held, operators in the NESI have to be robustly engaged to make this work.
As TCN, fully owned by the FG, already received financial support for transmission network upgrade via a combination of loans and grants from several donor agencies, it had plans (in the TREP) to have transmission capacity greater than anticipated in this deal in the short to medium term. Similarly, a total of 72billion Naira has already been approved by the FG for the Distribution Expansion Programme (DEP) following due consultation with DisCos. The intended scope of work in this deal with Siemens is a subset of both DEP and TREP. This has a potential for duplication of scope and mismanagement of funds.
Furthermore, DisCos and GenCos are private entities. It is not clear how the arrangement will work with Siemens. One thing is certain, to make a success of the deal, Siemens will have to work in synergy with the operators to ensure the realization of the objectives, effectively becoming the de-facto technical partner of all the operators while representing the interest and or shareholding of the FG where applicable. This may create technical, legal and commercial issues.
As the DisCos come to the end of their 5-year contract with the FG in December, 2019, they have been asked by the Nigerian Electricity Regulatory Commission (NERC) to prepare Power Improvement Plans (PIPs) detailing the scale of investment they plan to carry out during the next regulatory review period upon which tariffs will be set. Clearly, some of the planned upgrades to be catered for by tariffs payable by consumers are the same as those included within the scope of the Siemens’ deal – a case of double jeopardy for consumers who have to pay for both!
In addition, majority of our portfolio of power plants are gas-fired. With lack of adequate gas infrastructure and pricing, the successful implementation of this deal remains in doubt. More has to be done in the area of flare gas collection and utilization, gas-to-power initiatives, pricing, and a more secure network of gas distribution with adequate redundancies or flexibility.
The privatization process failed partly due to lack of project management and thus, there is need to avoid a repeat. It makes no sense to go through the deal only to realize years later that we have put the cart before the horse. Power Sector technocrats, especially those with demonstrable knowledge of power systems are needed to manage the interface between the FG and Siemens ab-initio.
In conclusion, there is a huge scope for the implementation of the local content Act within this deal. All detailed engineering design should be done in Nigeria as a minimum. In the preparation of the Act in 2014, I have listed a number of services which should be handled by Nigerians and further work was done with NERC in 2017 to expand the list to develop a broader scope of deliverables including financial, legal, commercial and technical services. This deal will create employment opportunities within the sector while providing training that enhances the quality of existing human capital resources in the NESI.
The FG is determined to attract private sector investment in the power sector by upgrading the transmission and distribution networks while ramping up generation capacity available for consumption by consumers in the Nigerian Electricity Supply Industry (NESI) to 25000MW (25GW). The proper implementation of the deal with Siemens is capable of making this a reality.
Idowu Oyebanjo is a UK Chartered Power System Professional
2 comments
I’ll like to have update
I will provide updates as things develop. For now, the discussions have reached commercial levels. Federal Government and Distribution Companies have to review the prices quoted by Siemens.
Finality of matters included in the meeting held in Germany earlier in March 2020 by Abba Kyari and Minister of Power with Siemens in Germany.