TOGY talks to
Stronger links in Nigeria’s power value chainDecember 27, 2018
Kola Adesina, the managing director and CEO of Sahara Power Group, talks to TOGY about the developing power network in Nigeria and government policy on the sector. Sahara Power Group is an affiliate of Sahara Group, one of Africa's largest energy conglomerates, with subsidiaries that are active across the upstream, midstream and downstream sectors.
• On Nigeria’s upstream: “The upstream opportunities are huge and they will continue to grow for the foreseeable future. We are interested in any opportunity that comes our way in marginal fields.”
• On power generation: “The system has the potential to deliver 13,000 MW today, but it cannot be transmitted and distributed. We can continue to increase generation, but if there is no infrastructure for distribution, it is worthless.”
• On investment: “We head for the polls next year and investors are generally wary of making investment decisions at such times. The general election will be held in February and it is expected that most investors will be going for short-term investments with a clear exit strategy. So we will certainly be very strategic with the timing of the project.”
• On affordability: “Generation and metering do not stand alone. We need to pay attention to the whole value chain, and consumers’ ability to pay is a key and overlooked concept. I like the idea of people playing with different concepts, but they need to be tested in terms of their validity and sustainability. You cannot just throw policies in the marketplace and assume that somehow equilibrium will be achieved.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Kola Adesina below.
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What does Nigeria need to address to be able to start building a functioning power sector?
In terms of power generation, it seems the conversation in Nigeria lately revolves around metering. That is just part of all the issues that need to be resolved as quickly as possible. Metering represents only a measurement tool to calibrate what is received, the unit of energy received for the purposes of billing and receipt of revenue. However, before metering, there are a couple of other components that should come in.
I have consistently recommended a holistic analysis of the system as it is to determine what is required and the key elements that will allow us as a country to get things done, to be able to design a rational cost structure and deliver an optimal supply of electricity to the population. Until that is done, metering may clash with another aspect to the conversation to which attention needs to be paid, which is the affordability question. If you are asking for metering systems to be installed, that means that the cost of the supply of electricity becomes higher. What is the unit cost of meters, and what is the minimum wage of electricity consumers?
How can the government better address power sector policies?
When I hear people speak about metering and generation, the question of the economic capacity of consumers often gets sidelined. Generation and metering do not stand alone. We need to pay attention to the whole value chain, and consumers’ ability to pay is a key and overlooked concept. I like the idea of people playing with different concepts, but they need to be tested in terms of their validity and sustainability. You cannot just throw policies in the marketplace and assume that somehow equilibrium will be achieved. That is why the system today has excess capacity.
The system has the potential to deliver 13,000 MW today, but it cannot be transmitted and distributed. We can continue to increase generation, but if there is no infrastructure for distribution, it is worthless. Creation of energy becomes efficient and effective if all the organs of the system are working together. When you see a human being at its optimum, it means that all organs are all in sync. If I go for an upstream asset with huge gas deposits and I invest massively in gas gathering, processing and infrastructure for distribution and to build a power plant, but the light switch is not there, there will not be light. We need a holistic view of the sector.
In our case, we have a committed investment to bring 1,900 MW to the grid. The government should be knocking on my door every morning, but they are not. The government is speaking to developers of 450-MW, 220-MW, 50-MW, and 15-MW projects, and you really have to ask if they are serious about their aspiration to jump start the Nigerian economy. If the economy is predicated upon electricity being available, your biggest supplier should be your first port of call. that is verifiable, why are you not speaking to me?
I am a Nigerian and patriotic, I want my nation to grow. We should make it work. But we have a situation where they give those guarantees to another company generating less than half of my capacity and pay them more; the tariff is higher. Could someone please explain to me what is going on? That is why a holistic and integrated approach is required. We need to think about the power sector from a realistic, pragmatic, bottom-up perspective.
What are Sahara Group’s latest developments with regards to power generation?
We currently have installed capacity of 1,320 MW in Lagos through the Egbin power plant. In Port Harcourt, we have 541 MW installed capacity. Regarding the Egbin power plant, we have just recently concluded the FEED for its capacity expansion. We are adding much more than 1,900 MW to the existing infrastructure, so we will have about 3,210 MW of total capacity.
The Egbin power plant provides Lagos with power, and the biggest offtakers are there. If you serve the Lagos market well, you serve Nigeria well. The idea is to find a way of ensuring that there is regular, stable, uninterrupted and affordable electricity for the Lagos environment. We are proud to be contributing to the Light Up Lagos programme. Fifty percent of the electricity will go into Lagos and 50% will go into the grid that will reach other areas in Nigeria. We are partnering with Mitsubishi, Siemens and GE for this expansion, which will start in 2018 and have a total investment of USD 2 billion.
In addition to that, in Port Harcourt, we are working strenuously to complete an additional 180 MW to double our existing Afam power plant’s capacity. In terms of distribution, we are expanding the metering infrastructure and we are doing network upgrades at Ikeja Electric, our power distribution company.
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