Ministry clears air on Zungeru power project cost

Prof Chinelo Nebo15 September 2013, Abuja – The Federal Ministry of Power has described as “unfair” insinuations that the contract award for the Zungeru Hydroelectric Power Project was excessively high.

The ministry made this rebuttal in a statement at the weekend while responding to a recent newspaper publication (not The Nation) which attempted a cost analysis of the contract and concluded that the contract price was unusually high compared to the cost of similar projects in other parts of the world.

While faulting the publication, the ministry stated that: “The selective benchmark pricing of three projects in Ethiopia, China and Brazil is over simplifying the complexity of three hydropower projects.”

Expatiating, the ministry said: “It is important to note that the cost of such projects depend on the details of the design, topography, geo-technical conditions of the site and the availability of supporting infrastructure to deliver the project”, adding: “It should be noted that the cost of dams worldwide further depends on the specific social and environmental issues and ancillary structures that are to be provided along.”

Citing the 2012 Worldwide Survey of the cost of large hydropower projects by the International Renewable Energy Association, IRENA, which indicates that a cost of US$1.05m to US$7.65m per MW of installed capacity, the ministry stressed that: “The Zungeru project has a projected cost of energy at 5 US cents perkWHr, a very favourable figure when compared with the IRENA survey of a worldwide average cost of 2 – 19 US cents for large hydropower.”

Contrary to insinuations that the cost of the contract was over bloated, the ministry insisted that: “The Engineering Procurement and Construction, EPC, cost of the Zungeru hydroelectric project approved by Federal Executive Council is US$1,293m including transmission lines and substations indicating a cost of US$1.847m per MW. It is obvious that the benchmark price per MW for the Zungeru project falls at the low end of average world pricing. It is also to be noted that the Bureau of Public Procurement had, in its Due Process Review Report, indicated the average cost of similar large hydropower projects and accepted the competitively tendered price for the project.”

The ministry further noted that despite the inadvertent delay in executing the Loan Agreement with China, which is the funding source, the contractors, Messrs CNEEC – Sinohydro Consortium has appropriately mobilised to site.

The ministry said that the EPC consortium, from its own resources, has been able to deliver to site construction equipment worth N371, 416,800 and placed on order for other construction equipment valued at over US$12,000,000, even as letters of credit have been opened and most of these items are now being shipped to Nigeria.

The ministry also hinted of plans by the authorities to deploy the key foundation staff of the Project Team ahead of work on the project over the next few months to fast track the completion of construction design, arrival of major construction equipment, establishment of quarries, and facilities for both employer and client.

– The Nation

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