Onyeche Tifase is the managing director and chief executive officer of Siemens Limited Nigeria, the company with which the Federal Government recently signed a power deal that is expected to extend the national grid to 11,000mw of electricity. In this interview with Olusola Bello, she gives insights into how the deal was struck and its potential impacts on the economy. Excerpts:
Tell us how the deal was struck and what it is intended to achieve
The initiative originated from the meeting that President Muhammadu Buhari had with the German Chancellor, Angela Markel, when she visited Nigeria last year.
The German chancellor came with a delegation from Germany and in her delegation was the president and CEO of Siemens Joe Kaeser. At that meeting, there was a discussion between President Buhari and the German Chancellor, Angela Markel, about how Germany could support Nigeria and they decided to focus on energy and infrastructure in particular. Soon after their discussions, there was a presentation from Joe Kaeser to those present at the meeting and he spoke about what the company had done in Egypt. So in summary what the company achieved in Egypt was within 27 and a half months. It delivered 14,000megawatts of electricity to the grid.
The company supplied about 14,000mw of electricity to the grid. There are two different power generation plants. This achievement helped to boost economic development in Egypt. The company is also supporting this with a very robust vocational training concept that would eventually be delivered with the cooperation of the German government. Certain schools in Germany now deliver vocation training for apprentices that can work in the power sectors and other sectors of the economy.
The intention for the vocational training is to create thousands of jobs for young qualified and highly skilled Egyptians
He also spoke about the impact that this has had on the Egyptians economy. It was a game-changer for the Egyptian economy, a game-changer for the Egyptians themselves because it offered small and medium-scale entrepreneurs a lot of opportunities. They have an excess capacity which they can export o other countries.
Also what was critical in that project was that there was knowledge and technology exchange. Thousands of SMEs in Germany and in Egypt are collaborating now and are able to grow their businesses through that project.
The Siemens CEO spoke about these with many details and I think at the end of that presentation the president got more interested and decided to ask the CEO to support Nigeria with the same concept. So from that moment, we started working with the president’s office and through the Chief of Staff’s office. There and then we started coming up with the concept of what we thought Nigeria could achieve. There were several workshops with the government, all stakeholders, Transmission Company of Nigeria, all the 11 distribution companies and Bureau for Public Enterprises (BPE).
The BPE is also co-ordinating these efforts on behalf of the government. There were meetings also with the Ministry of Power and Nigeria Electricity Regulatory Commission (NERC). It has been very supportive, and they submitted several recommendations and finally came up with a road map for the Nigeria electricity industry. This road map details how in three phases Nigerian power sector will expand its grid and could increase generation capacity to achieve competitiveness. This is because without sufficient electricity we can’t achieve economic competitiveness.
Obviously the issue we are facing now is that with the grid, we discovered that it is not really about additional generation as it was in Egypt, but about fixing and ensuring that stranded power gets to end-users. So in the first place, we would be fixing the transmission and distribution grids in such a way that would enable evacuation of additional capacities, that is stranded right now. Operational capacities are being upgraded but cannot get to consumers. So by fixing transmission and distribution infrastructure would raise peak capacities from 5000mw to 7000mw in the first phase.
In the second phase, we would know that other plants are coming on and consumers would be switching on additional capacities as new projects in the works may come on stream. We have the Mambila hydropower projects. There are other power plants that have their phases two and three yet to take up.
So there are plans to extend the grid by additional 11,000megawatts capacity. Before we get to phase two we would do detailed studies to understand what is really required for us to revalidate the assumptions, so that we would probably have much more robust projects for phase two which would enable us to achieve expansion and double that capacity from 7 to 11 gigawatts (7,000mw to 11,000mw)
From Phase three we have 11 gigawatts of electricity and probably by that time we would have about 13,000mw generating capacities working.
If you look at all the plants and where the power purchase agreement has been signed there are a lot of projects that are planned to come online. By the third phase we would be looking at extending the grid from11 gigawatts installed capacity to probably be around 13 gigawatts or more and we expand that to 25 gigawatts. So this is really about expansion. I have seen certain newspaper publications that are just adding these targets, the ultimate aim is to achieve 25 gigawatts for Nigeria in the medium to long term and to do it in a very strategic and integrated manner.
It is a comprehensive approach to resolving the issues that exist and to also ensure that whatever additional capacity comes online is guaranteed that it is transmitted and distributed to the consumers. Because when you have gaps or lose power then the sector becomes unbankable and it is not a viable sector any more. We just have to ensure an efficient and high-quality grid.
To complement this, the other thing we are doing is you have to understand that there is a lot of human intervention and you can have the best technology, the most modern infrastructure, but without having the right skills to operate it, it will all be lost.
We also provide a very comprehensive technical training concept for the employees of Discos, TCN and possibly other agencies that support TCN and Discos and ultimately we would also complement that with a similar vocational concept as we have done in Egypt. Right now we have somebody who is doing studies and visiting different Discos and training agencies to try and understand what is on the ground for them and what the gaps are so that we can provide something that complements what is already available so as not to duplicate efforts. There would be a lot of cooperation with the existing training centre. We would, therefore, want to upscale the existing employees and plan for future employees and make sure the skills are in place when the new infrastructure comes in into the country.
Who Finances the project?
Well, the project is a government-to-government initiative. It kicked off as a conversation after the visit of the German Chancellor to Nigeria. However, there will be German Export Credit Agency (ECA) financing. It would be one of those agencies financing the initiative, so whatever other credit instruments are required we would secure as we go along but in the initial phase we see a bulk of it coming from the German Export Credit Agency (ECA)
What has been said is that it would take care of Transmission and distribution but what level of co-operation are you getting from Discos?
We have seen a lot of eagerness from the Discos to resolve the challenges they are facing. They understand that this a very competitive proposal, it is very low-interest financing, the products would be high-quality products of German and all European equivalent standard and they understand also that it is not business as usual. We have shown them a depiction in a graph where Nigeria GDP continues to grow at a very minimum rate similar to where it is going now and the impact of having the project done. The impact on the reduction of ATC and C (Aggregate Technical, Commercial and Collection) loses which is where the discos are also losing revenues. They also understand that with the equipment to be put in place they will recover revenues. So they also understand the potential in this programme, so they are willing to work with us.
They know we have a say in everything we do and we engaged very frequently with the discos. All the11 discos have been carried along, they understand very well where we are headed and have established lines of communications with their managements and technical teams. As I said, we will even be carrying out deeper investigations as we go on to understand in details what is required specifically to move further on the programme.
To the Discos, I think they are very eager to work with us. They also realise that they would have a say in whatever is delivered. We would not go against their requirements. We have seen a lot of tractions, they have been very supportive and engaging and give us inputs where they can and shared with us their experiences and some of the assumptions we made they have clarified them.
We went in with a very questioning and open mind too to really understand what their challenges are. We are not trying to force our solutions on the Discos or use what is popularly published in the press as a basis for engagement. We understand that these Discos are trying their best with the resources they have and they need support and we are trying to provide that support.
Does Siemens have the personnel required on ground to carry out this task?
The idea is that we need to know where is Siemens strength and the areas we need support. We know we need to work with a lot of local companies and we find out that a lot of companies could be our potential partners. We have a robust system of assessing the market to know who we could work with to ensure that the jobs are well delivered effectively. So we would be looking for a few partners as time goes on. Of course, just as we did in Egypt, those resources don’t exist but we have to train, you have to develop. But we have confidence that Nigerians are enterprising, smart and hard-working. Those resources we need are here, it is just that we would have to upscale them to make sure they are up to the Siemens standard and they can be effective contributors to the programme.
When are you taking off effectively?
Exactly where we are now is to sign implementation agreement; this gives us the platform to start engaging more intensively to achieve financial clauses and essentially enter into a contractual agreement with the government to get this project delivered. What we would be doing over the next four months would be to be structuring the financing and ensuring that all the capacities required are in place whether it is local or international. The other things we would be doing is that we would ensure that the studies we did are executed so that in a few months we are able to have a better view of all those issues involved in phase II. For phase I, we are already clear where we are headed and what needs to be done. This is why implementation agreement basically provides the platform for the execution of Phase I.
So we are working out what is coming into a firmed co-operation with the government. Right now we are still at the point to secure the financing basically. This is where we are. Once the financing is secured, we would enter into firm cooperation with the government. And that time a lot of planning and efforts would be in place to ensure that those resources, power equipment which have been produced are delivered and those plans for the project developed would be immediately rolled out.
There is this school of thought that the cost of the project is $3 billion. Is that all that is required?
There is no figure in the implementations agreement. I think what people have simply done is a simple assumption that to generate one megawatt of electricity will cost $1 million. Perhaps that is what they have used to arrive at such a figure because the government’s target is 25,000 megawatts. But this is not generation, we are simply fixing the grids so no prices, no figures have been proposed now but this will be the next stage we are getting to. In essence, we are getting to a point where there will be figures and agreements with the Discos, on these figures there will be an agreement with the Transmission Company of Nigeria and also with the government and ultimately we would enter into a firm agreement with the government.
In specific terms when are we going to begins see the works happening?
I think we have done a lot of work and what is being appreciated is the volume of work into this agreement. We have been working since September last year. We had several workshops and with Discos we have done a lot of investigative studies and these things cost a lot of time and efforts but Siemens has done these as a partner to the government.
So where is groundbreaking for Nigeria? We understand in much details where and how this problem should be solved. It is not a conceptual document anymore; it is a project plan. What is left is cost, the plan, and to secure its financing and ensure it is implemented. What we have done right now already is a necessary step to ensure we can deliver the project. What we are now trying to do is to hit the ground running: start this grid studies which would give us enough transparency and fits into the environment. Sometimes there is a risk of over-specifying or over-delivering. However, we want to be sure that every gap identified is adequately resolved.
There are also priority areas such as urban centres. Where are the biggest loads? Where would the biggest impact be if we mobilise? How can we provide an adequate solution for those rural areas that are far away from the urban centres so that pricing is affordable and dependable and is not overly expensive but something that is competitive?
I think we have done that work. There is a lot of pressure from the government. This whole project is being spearheaded by the President himself. He witnessed the signing and I believe he would be monitoring the progress of the project.
We also heard our global CEO made a very clear commitment to getting this project take off the ground. He made a very clear commitment that Siemens was going to work with the Nigerian government to deliver this initiative. I think from both sides there is that commitment already spelt out and which was formally acknowledged in our implementation agreement. We are working at speed and we would be engaging with the government as often as possible to ensure that everything that is required for this initiative to move forward is put in place
Siemens restructured recently. Which of the sectors has Nigeria operation fallen into?
I cannot say much about that programme apart from what has been published in the papers. But beyond what we are trying to do is to ensure that Siemens and its partner businesses are set up to succeed in whatever market they are, so they are using their different strengths for their different markets. That level of independence gives them more entrepreneurial freedom. This is the intention in the segmentations of Siemens power from the traditional Siemens business. What we have is the traditional Siemens business, which is more of digitalization and automation, which is the core area of Siemens Power and Gas. But what I can assure you is that all those businesses would be represented in Nigeria and good evidence is this power programme.
What is the current situation with your participation with light-up Lagos?
I think the Lagos State Government is still trying to ensure sufficient electricity for the state. We had meetings with Lagos State Governor and he has expressed his interest to deliver electricity. What we are trying to do now is to come up with the concept for the government. We are also willing to work with the Lagos State Government to ensure the project is accomplished.
It is not a Lagos-wide project. It is targeted at areas in the state where electricity is a big problem and has to be resolved immediately. The government has just appointed its commissioners. The one responsible for energy would come up with areas where they think we can intervene. We have expressed our wiliness to work with them and also share with them studies we have already done on Lagos State and this programme we are handling currently.
I think Siemens is best positioned right now to support Lagos state government in its efforts, because again, in Lagos State a lot of issues have to do with the grid. Generation is important but it is complemented by the availability of infrastructure to ensure you can evacuate to end consumers. So generations is not a problem, it is the easiest part of the job. I always think of how to ensure end consumers get affordable and reliable electricity. We have a highly comprehensive concept in this regard.
Whatever is proposed to Lagos State would tie into the broader objective of the national project. So whatever that is proposed would be highly beneficial on how they can generate electricity for Lagosians and even export to other states if the state wishes to.
How do we ensure that Lagos receives electricity in the most efficient manner? We have seen where some IPPs have been developed but have not been able to run successfully in the long run, maybe because people have been able to find alternatives and those plants become redundant. We have to ensure that whatever infrastructure that is developed is really required and also recovers the investment for that power infrastructure because it will be an integral part of the grid.
Cost-reflective tariff: are you going to advise the government to let that happen?
On the matter of reflective tariff, I think NERC is doing a good job on that issue. We have engaged with NERC. We know it is a critical part of the success story that we are trying to develop for the sector. We are happy to provide whatever inputs that are required. We have met with NERC on a number of times. I think it has the responsibility and the resources to come up with an appropriate tariff that is viable and for different categories of customers that can afford to pay while the payment is channelled across the value chain of the power sector.
We are saying that the infrastructure we are putting in place will drastically reduce the loses. It gives room for a cost-reflective tariff that will ensure all value chain, including consumers, are adequately addressed.
