A Review of the Nigerian Energy Industry

Mambilla hydro project hits security, logistical snag

Mambilla plateau hydropower project.
Mambilla plateau hydropower project.

*As cost rises for 30year electricity project

Oscarline Onwuemenyi

18 February 2015, Sweetcrude, Abuja –
Efforts by the Federal Government to kick-off the 3,050 megawatts (mw) Mambilla Hydropower Plant in Taraba State which is the largest hydropower dam in the continent, may have hit fresh challenges over inability to reconcile financial plans between the ministries responsible for the seeing the project to light.

The project’s planned kick-off may also have been thrown into quandary in the wake of the increase in terrorism activities by Boko Haram in the North East of the country.

The Minister of Power and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala was scheduled to travel to China last year to sign the billion-dollar agreement with the Chinese builders, but had to put that off in the face of the economic onslaught brought about by declining global oil prices.

In light of the recent deadlock for the project’s signing last October, officials hinted that the newly contracted company, China Gezhouba Group Company Ltd – that built the 22,500mw Three Gorges Dam (world’s largest dam) in China – will work with the financier, the China EXIM Bank, to arrange the finance.

According to sources in the Ministry of Power who spoke to our correspondent in Abuja, the inability to harmonise financial plans by the power ministry and its finance counterpart last year was the major setback that affected the project.

Last year, President Goodluck Jonathan gave marching orders to the power ministry to ensure the flag off of the project before the end of 2014.

However, reports show that part of the delay in the take-off was because the Minister of Finance and Coordinating Minister of the Economy (CME), Dr. Ngozi Okonjo-Iweala was not originally in the picture of the project, a situation which had created logistical jam and resulted in the halted last minute moves to flag off the electricity project in the North East last October.

“What delayed the project kick-off initially was that the Finance Ministry was not incorporated in the early process, and the Federal Ministry of Power could not have signed a loan agreement with another country without the Finance Ministry, on behalf of Nigeria. They now had to ensure that our Finance Minister travels to China to perfect the agreement signing,” a source said.

The source further noted that, “She (CME) was about to go in December when all these crises started. The fall in oil price was the most critical issue because she had to stay back to ensure that there were measures in place to cushion the effect; and then election fever started. There was also a crisis about the ministries not getting money in the month of December, she had to stay back.”

Shifting costs

In 2006, the Chinese firms CGC/CGGC won the Lot 1 tender for about $1.4bn while the contract was signed by May 2007 and later cancelled. The project consultant valued the cost at $3.2bn (about N653.7bn) in 2011, but it has encountered various hurdles since conception some 30 years ago.

The new cost of the project, according to the Ministry of Power, is about $5 billion (about N1.021trn). This is a significant $1.8 billion (about N367.7bn) difference of an upward review from the initial transaction plan.

The Minister of State, Power, Mohammed Wakil, gave the October timeline at a recent political rally in Gombe State in September. He said, “The president has broken the jinx of the Mambilla hydro dam which is worth about $7billion. The dam is to generate over 3,000mw and is about the biggest on the continent.

“This project has been on the drawing board since 1970. This president has given marching orders for the signing of the Mambilla hydro dam by this (last) October,” he noted.

A sister project, the 700mw Zungeru Hydropower station in Niger State was flagged off in May 2013, after the power ministry awarded the contract to China National Electric Equipment Corporation (CNEEC) and another Chinese firm, Sinohydro Nigeria Ltd at $1.2billion.

According to the terms of the contract, the companies arranged for the 85 percent financing through the Chinese Bank while the Federal Government will provide its 15 percent counterpart funding; but the agreement is awaiting a formal pact signing on financing between Nigeria and the Chinese government, similar to the process for the Zungeru hydro project.

Ministry officials also fear that the recent postponement of the Presidential elections in the country may further complicate the process, especially with regards to signing the agreement.

The ministry official further said if the election had been held as scheduled, the entire process would have been clearer now. “But now that election is in March, it is not ideal for anybody to travel now for such major transaction.”

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