‘MAN Diesel sees huge opportunities in Nigeria’s power challenges, energy sector’

MAN Diesel and Turbo, German and global energy solutions firm, has been operating in Africa since 1951. It recently opened a Lagos office with eyes on the nation’s energy sector.

On the sidelines at the event, Martin Katler, senior vice president at MAN Diesel and Turbo, and head of the company’s African power plants business, speaks with Mabel Dimma, on the company’s strategies and plans for its Nigerian operations and their outlook on global business in the immediate future. Excerpt:

Give us a brief history of MAN Diesel and Turbo

MAN Diesel and Turbo is more than 250 years old. We are proud to be called the birthplace of the diesel engine. But I need to explain myself: people say diesel is always related to the fuel; but this is not true. Diesel is related to the inventor, Rudolf Diesel.

In 1893, MEMK gave him the opportunity to develop that engine and in 1897 the engine was developed. And MAN itself started as a factory in 1753; that’s how old the company is. Of course it developed to where we are now.

We are predominantly in the energy business – upstream, mainstream and downstream. We have products for gas extraction, oil extraction, power generation, all the way to liquid cans.

It’s a very old European-based company; we are based in Germany but we have production facilities in Europe, India, China and Indonesia. We now have over 140 offices worldwide. In Africa, we have re-invented Africa more or less. Africa has always been a growth area for us. We started six, seven years ago to put up our own offices instead of going through dealers in places like Kenya, Senegal, Namibia, Angola and South Africa, which is our main office and where we also manufacture. Just recently, we opened here in Nigeria to cater for the global market.

Obviously, there are opportunities MAN Diesel has seen in Nigeria, but the question is, why now

It’s not really a question of “why now?” for Nigeria. We have been doing business in Nigeria for many years. I think our first engine supply to Nigeria was in the 60s. Now, we have a local presence. We feel it is important to have a local presence – local people, local empowerment where we can be close to the local market. But this is not only in Nigeria; in many other countries we follow the same concept. Are new in Nigeria? Yes, we are new in having our own office here. But we have been supplying to Nigeria for many, many years. And this cuts across many sectors of the economy – cement, fertilizer, etc.

We service Nigeria out of South Africa and that is not going to change in the future. But we are moving away from servicing other countries out of South Africa into many other countries. Nigeria, being the largest economy and most populated country in Africa, and having plenty of challenges and opportunities in energy; we need to be here. As a company, we cannot miss out on the opportunities in Nigeria.

Apart from the areas you have mentioned, what other areas of opportunities have you seen in Nigeria that you want to explore going forward

Quite a lot. For us, the main area is the power generation side. That is one of the biggest things that we do with the engines and the products we have. Yes, we have also been supplying to industries, fertilizer plants or refineries in the past and we will continue to do that, but our main focus right now is power generation.

I don’t think I need to explain to you what Nigeria’s power generation situation is right now. You probably know better than me that Nigeria has about 180 or more million people but the country has just 12,000 megawatts of installed electric power, of which just about 4,000 to 6,000 megawatts is what is available depending on gas availability and other factors.

So, there is a huge opportunity there. And we are very well positioned to provide our expertise to raise this capacity especially in the area of what is called embedded power plants. Why embedded? ‘Embedded’ means you don’t need to invest time and money on infrastructure or transmission lines, which at the moment in Nigeria, are already at a maximum, so it’s more difficult.

Embedded plants are very simple to set up; you just put between 20 and 100 megawatts where it is needed; even industries have their own power supply with this strategy. So this has huge growth potentials and we know that it is one of the best ways for the country to overcome the huge power supply challenge that it has.

MAN Diesel must be quite aware of Nigeria’s huge teeming population of unemployed youths. What are you planning to do about youth empowerment in Nigeria

How we set up our plants is that we don’t produce them in Nigeria. The equipment come from Germany, France, India, China; anywhere we have our production facilities. But when we build the plants, we use only local companies, local contractors. So for the construction period, which is often short, say between six to 24 months, depending on the size and location of the plants, we hire local companies with local engineers, local workers to build it. As I said before, we as a company, as we also do the operation and maintenance of our plants, we will hire local people and we will train those local people to run those power plants for us.

Are we going to solve all of Nigeria’s huge unemployment problems? No. But we believe that we have a contribution to make towards solving it by hiring those people and training them.

With MAN Diesel’s long history of success across the world, what are the principal factors that drive MAN Diesel’s success

We call ourselves innovators! Just recently, as I said earlier, we now have the biggest and the most efficient gas engine in the world available. We were the first to have the technology to handle turbo-charging and it saves you about 6 percent of fuel.

Being an innovator and having that history and the experience, and being an engineering company, we always try to be ahead and be the first in the market with the latest developments. In the past we have always proven that.

Recently, MAN Diesel acquired a small engineering company in South Africa. Now that you are in Nigeria, are going to adopt the same M&A strategy here

We will go in two ways: organic growth and definitely, M&A, just like we did in South Africa and just like we also recently did in India, where we acquired a small steam turbine company. Surely, M&A is also part our growth strategy just as much as organic growth is a part of it.

With a new government in place in Nigeria and still trying to settle down, what areas, if you had the chance, would you be asking Mr President to look into as priorities in the energy, oil and gas sectors

Of course, we know the president probably has a capable team of advisers to advise him on key areas of the economy, and I think he is quite capable of doing what needs to be done, we are primarily looking at energy and power generation.

And you know that this is an issue. Several studies (not actually done by us, but by the international energy agency and we are aware of them), show that a country (and that includes Nigeria), loses about 3 percent of GDP due to lack of energy.

So, if we were to advise Buhari (though he obviously has capable advisers), we would definitely say, this is an area of focus for his government. What we have seen so far of his actions seems to suggest that he is going in that direction.

But don’t expect a change from today to tomorrow. If you look at other nations who have done similar processes in their energy sector, yes, privatisation happened, but it is still a long road that Nigeria needs to go. There is power generation problem apparently, but there are also other challenges in there as well.

But if the government can do its job mainly on transmission, things will get better. Transmission is never, if at all, privatised. I don’t think it should be privatised; but that is my personal opinion. It is good if you build generation capacity, but you need to be able to evacuate it. So you need transmission lines. Certainly, the government needs to step in and put the infrastructure in place as well as get it up and running.

Second aspect is in your fuel and gas supply, which is already privatised. There are certain areas where you have the gas, it’s available, but a lack of infrastructures like pipelines and so on, is still a problem.

Let’s talk about government policies. What government policies do you think would help galvanise your presence in Nigeria

For us a company, to operate in the country, we are quite happy with the policies already in place in Nigeria and don’t see a need to change them. If you look at the power generation side, which is now privatised, investors have a need; they are not going to do it for nothing. Everybody is in business to make money.

But I believe that the first step is what the regulator has done and those steps are in the right direction. This includes making the industry open by getting your foreign investments in there. I think the steps have been made. Sure, there will be some hurdles but that’s normal. It’s not going to go from zero to 100 in one day or in one year.

I also believe that with what the regulator has done so far (and they are still learning with the new developers coming up) everybody has his or her own roles to play.

Surely, government needs to protect the people; you don’t want to pay too much for your power supply. So that is a job the government has to do. But the investors also have a job to do for their shareholders; same as we do. For us as a company, I don’t see a need for change in regulation for Nigeria’s power sector.