A Review of the Nigerian Energy Industry

Examining the ‘Power Africa’ Initiative – Senate Testimony by Tony Elumelu

Senators Chris Coons (Democrat-Delaware) and Jeff Flake (Republican-Arizona) with Tony Elumelu from Nigeria at Senate hearing on 'Power Africa'.30 March 2014, Washington, DC — Testimony of Tony O. Elumelu, CON, before the U.S. Senate Foreign Relations Committee’s Subcommittee on Africa

Mr. Chairman, I want to thank you, Senator Coons, and Senator Flake for extending this invitation to me to attend and provide testimony to the Subcommittee of the Senate Foreign Relations Committee on this important topic “Powering Africa’s Future: Examining the Power Africa Initiative.”

About Heirs Holdings & our foundational philosophy of Africapitalism

I am the Chairman of Heirs Holdings and founder of the Tony Elumelu Foundation. Heirs Holdings is a Pan-African investment company which operates in strategic sectors of industry including banking, power, oil & gas, agribusiness, real estate and hospitality.
We take a long-term investment approach in order to unlock value for our stakeholders and to create a catalytic effect in propelling Africa’s economic development.

I coined the term “Africapitalism” to describe our approach to business – our belief that long-term investment in key sectors, like power, can create economic prosperity and social wealth, benefitting investors and Africa’s development future. At its core, Africapitalism as an economic philosophy encourages practices that create and multiply value locally.

Energy-poverty is very personal to me.

I am an entrepreneur- one born, raised, and educated in Africa. And through the Tony Elumelu Foundation, we are working to help launch and support a thousand more successful entrepreneurs. Through our philanthropic efforts, I have repeatedly seen how lack of access to reliable power has constrained human potential and stifled economic growth, across the continent.

• Currently, 589 million of my fellow Africans, have no access to electricity, and many more lack reliable access.

• We are a continent of entrepreneurs, some of the smartest in the world. But how many budding entrepreneurs can really succeed, and create more jobs, if they don’t have lights to power SMEs, or the cost of electricity is more than 55% of the operating costs of their business?

• The lack of electricity in sub-Saharan Africa has significant implications on livelihoods.

• Lack of electricity significantly impacts food security. As technology advancements have supported food security in the west, while the lack of electricity in SSA has meant that the growing population continues to rely on rudimentary facilities for harvesting and storage, without the benefit of processing and value addition that could support food security and boost livelihoods.

• Lack of electricity impacts international security – because extremism is fuelled by poverty. With only 54 million new jobs available for the 122 million Africans expected to join the work force by 2020, I am extremely concerned with what this means for international security. The creation of jobs in Africa is completely dependent on industry, and industry cannot thrive without a consistent power supply.

Why is ‘Power Africa’ Important?

The leadership of the United States is considering this issue at an important time as African citizens, from both the public and private spheres, are prioritizing the issue of electricity access and linking success in this area to the alleviation of poverty and the promotion of lasting economic prosperity.

Power Africa is a vitally important initiative for the following reasons:

• First, influence matters! The U.S. government’s elevation of this issue has galvanized the private sector in the U.S., and other countries, to examine the African power sector as an opportunity for viable investments.

• Second, using a coordinated approach, Power Africa set a collective and measurable target to generate an additional 10,000 MW, within a set time frame, for US agencies, African governments, African private sector and investors to work towards in Africa.

• Third, the establishment of Power Africa has also encouraged other African nations to undertake reforms of their regulatory structures, so as to participate in future power deals and partnerships.

In my opinion, Power Africa must be viewed by the Administration and this distinguished body as only a start. The initiative is valued at $7 billion and Africa’s power infrastructure needs are estimated to be $300 billion.

But like all long journeys, the journey to infrastructure sufficiency begins with the first step or, in this case, the first $1 billion.

At the request of the leadership of this committee, the African success story I’d like to share with you today is that of the Ughelli power plant in the Niger Delta region of Nigeria.

Through Trancorp, Heirs Holdings committed to invest up to $2.5 billion to generate 2,000MW of electricity over five years, 20% the U.S government’s goal of doubling access to electricity in Africa over the same period.

The initial investment in the Transcorp Ughelli plant was $300 million. When we first took over the plant in November 2013, its power output was less than 160 megawatts (MW) of power. By January 1, 2014, we had doubled its output to 348MW, and this morning it was 382MW. With our on-going investment of an additional $200 million to refurbish some of its turbines, we project that Ughelli will be generating 725MW by the end of this year. We are also partnering with Symbion Power and General Electric (GE) on a 1000 MGW expansion costing $1 billion USD.

I am pleased to inform you that we are on track to fulfil our commitment to Power Africa and we will be producing the equivalent of almost 50% of the current total output of 4,200MW in Nigeria. And in 2015, we will begin plans to generate power in other West and East African countries.
Transcorp Ughelli also currently directly provides employment for nearly 300 full-time workers and 1,000 contractors, and this will grow to 700 employees and 2000 contractors with the planned expansion. And we have not even calculated the thousands of tangential and consequential jobs that will be created by plant operations and power output.

Natural Gas, Climate Change & Environmental Sustainability

With respect to climate change, environmental sustainability, and concerns about the development of natural gas for power, Heirs Holdings believes strongly in protecting the environment for future generations, but we also recognize the importance of addressing the urgent needs of this generation, through a mix of renewable and non-renewable resources, in accordance with African country plans, some of whom prioritize their abundantly available natural gas resources.

• To further put this in context, the annual average carbon emission in sub-Saharan African countries is .3 tons per person;

• In Europe the average is 10 tons per person, and in the United States, average annual emissions are as high as 17 tons per person;

• Africans now want to harness these same resources to meet our own urgent development needs;

• Sub-Saharan African countries account for less than 3% of global carbon emissions;

• Our poorest bear the brunt of the climate change problem, and it simply cannot be solved on the backs of Africans.

In conclusion, I would like to offer a few recommendations to this esteemed body as you continue to deliberate over Power Africa and U.S.-Africa policy matters:

1. Make haste to introduce and pass the Electrify Africa Act before the end of this Congress, to codify the expansion of access to electricity in Africa as a U.S. government international development and foreign policy priority. Like the Africa Growth and Opportunities Act (AGOA), Power Africa, augmented by Electrify Africa Act, could help lay the foundations for a new US-Africa relationship: one based on partnership for mutual economic benefit.

2. Encourage policy reforms by African governments and institutions. There is no amount of capital investment or entrepreneurial zeal that will provide affordable and sustainable access to electricity for Africa’s 1.5 billion people without the full buy-in and energetic support of African governments.

3. Make engagement with the African private sector a Congressional priority in oversight and new policymaking. Public-private partnerships are critical to developing the African continent, particularly in the power sector. It is important to recognize the revolution that has taken place in the African private sector and there is a lot of innovation, know-how and strong corporate governance values in the African private sector.

Finally, we call our company Heirs Holdings because we are committed to enhancing the lives of Africans today and driven to create transformative change for future generations.

We believe in Africa, we believe in our ability to help catalyze its emergence as a strong player in the global economy and we are confident that history would remember who played a role in making this happen.

Thank you again for your kind invitation to participate in this important hearing, and I look forward to answering your questions.
*Tony Elumelu Foundation

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