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State Grid Corporation of China: Waiting for the World’s Famed Largest Power Utility’s Nigeria Debut

13 Oct 2012

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State Grid Corporation of China (SGCC)

Reputed to be the world’s largest power company, the State Grid Corporation of China (SGCC) obviously has a reputation that precedes it. The parent company of Shanghai Municipal Electricity Power Company’s collaboration with its local partner, Amperion, has helped to raise optimism in the quest by Nigerians for stable power supply.  This follows the consortium’s successful bid for Geregu Power Generating Company in Kogi State. SHAKA MOMODU takes a look at the company’s huge operations around China and beyond

Finally the bid to acquire state-owned power generating companies (GENCOs) has come to a successful end, winners and losers have emerged and the stakes couldn’t be higher. A few surprises here and there, but the bid certainly lived up to expectation. The tension surrounding the power sector privatization bid apparently encountered a hitch with the sudden resignation of the supervising Minister of Power, Professor Bart Nnaji. In the end, as disappointing as his exit had been it did not eventually have a hurtful effect on the exercise. 
Although a few might disagree, there is no doubt the process attained the requisite benchmark with regard to transparency. Not surprisingly Amperion’s successfully clinching of the Geregu power plant having earlier emerged the sole bidder. It won with a bid prize of 128.25 million dollars for the 414 megawatts Geregu power plant – even though it fell below the reserve price of 132 million dollars for the acquisition of 51 percent stake.


Amperion was however offered the chance to match the reversed price, which it promptly did. Amperion’s partnership with the State Grid Corporation of China (SGCC), the world’s largest power company is being seen as a significant development in the nation’s quest to attract foreign investors, especially the likes of - State Grid Corporation of China (SGCC), the parent company of Shanghai Municipal Electricity Power Company (SMEPC) who are members of a consortium bidding for Generation and Distribution Assets.


With assets in excess of $233 billion and ranked seventh amongst the fortune five hundred companies – the ranking of the top five hundred companies in the world, it is clear SGCC has a desirable pedigree. But it is not these alone that indicate that the company will play a crucial role in the transformation agenda of the Federal Government by transforming the epileptic power sector and thus bringing about economic growth to the nation.


The company’s core business spans the electricity chain and includes electricity generation (mostly renewable energy), transmission and distribution. It constructs and operates power networks that covers 26 provinces, autonomous regions and municipalities in the People’s Republic of China and serves nearly 88% of the national territory, supported by more than 1.5 million employees, covering a population of over one billion with over 244 million metering units.


In just a quarter of a century, China’s economy has transformed itself from a relatively closed agriculture based system to a market-oriented system with World Trade Organization membership and a reputation as the manufacturing capital of the world. The electric energy infrastructure is the engine that drives economic developments. Recent expansion in electric generation and transmission has been phenomenal. China now ranks second in the world in terms of installed generation capacity, electricity production and supply system in the world. The Federal Government of Nigeria is seeking to achieve a similar turnaround in the nation’s power sector through privatization of state owned assets. Foreign companies are now partnering with local companies and scrambling for the opportunity to partake in the development of the Nigerian power sector. One of those companies is Shanghai Municipal Electric Power Company (SMEPC) a subsidiary of State Grid Corporation of China (SGCC).


The power sector in this country is one that has almost become an intractable problem with many wondering whether those who are bidding to acquire the PHCN successor companies have the wherewithal to cope if they win the bid in their areas of core competence. Going by the pedigree and reputation SGCC has built in the countries where it has interests; perhaps it is one of the likely candidates to be given the benefit of the doubt. There are facts to back up the decision to take this risk.


Beyond the shores of China, SGCC has embarked upon an impressive global expansionary programme spanning India, the Philippines, Portugal, Brazil and increasingly into Africa where its footprints are seen in Ethiopia, Kenya, Equatorial Guinea and now with Nigeria in its sights.


More specifically, in Portugal, one of Europe’s smallest but influential countries, SGCC acquired about twenty-five per cent stake in REN, the country’s national energy network. The collaboration is said to be yielding results for the country. In Brazil, the country that will host the 2014 FIFA World Cup as well as the 2016 Olympics, SGCC is one of the transmission licencees in the country. In India, the world’s largest democracy, SGCC is executing a reconstruction of sub-stations and associated transmission lines while in Philippines, SGCC has a twenty-five-year concession of the country’s transmission network.


In Africa, SGCC seems to have started building a reputation of being at home in some African countries where the company has registered its presence. For instance, it executed a transmission network improvement project in Equatorial Guinea. SMEPC, the subsidiary of SGCC is currently executing the transmission and distribution enhancement project in Kenya while in neighbouring Ethiopia; the same SMEPC is executing the improvement of the transmission network in the land of King Haile Sellasie.


In 2008 the world’s first ±800 kV HVDC stretching over 2000 KM was commissioned. This is proposed to increase the transmission capacity by 35% and reduce loss by 50% compared to ±500 kV HVDC system.

Core competence
SMEPC has an enviable global footprint and experience in emerging markets and has demonstrated its technical efficiency by running a large transmission and distribution network at one of the lowest level of ATC&C losses globally consistently around 6%. Very few utilities in the developing countries have achieved this. Its reliability level has hovered around 99.97% and 99.98% in the past 6 years.
SMEPC has very high technical standards of performance which is reflected in excellent SAIFI and SAIDI data.
SMEPC gives highest priority to customer service and it reflects in consistent levels of customer satisfaction.  Going by its size and capacity, no utility company in the world delivers what SGCC/SMEPC does across such a wide customer base and geographic footprint.

Nigerian connection
Last year, SGCC/SMEPC entered into an agreement with a local company in Nigeria, Amperion Power Distribution Company Limited, to be technical advisers and undertake the technical due diligence exercise in the on-going privatisation of state owned electricity assets. SGCC/SMEPC subsequently became a shareholder in Amperion Power Distribution Company Ltd and will be the operator of acquired assets under bid in the privatization process should the consortium win its bids.

Undoubtedly, the inclusion of SGCC/SMEPC in this consortium brings the best utility company and operator in the world to Nigeria at a critical moment in Nigeria’s privatization story. SGCC has the capacity to deliver on the objectives of the government, provide uninterrupted power supply to the populace and reassure consumers that the future of electricity generation and furthermore distribution in the nation is in highly competent hands.


The consortium also includes BSG Resources Limited, a privately held multi- billion dollar company, owned by the BSG group of companies. The company is a leading player in the mining, oil and gas and power sector. It has a global footprint, working mainly in Africa in the past 25 years but also in Europe and Asia and has currently more than 6000 employees in projects in the mining, oil and Gas and Power sector. In the power sector the group has vast experience as EPC contractor (through an engineering subsidiary), and as an entrepreneur and developer both in the power and renewable power sectors.

Possible edge
One of the potential pitfalls of a total privatization process – in this case within the power space - could be the dearth of investors with the commensurate competence. An investor considered credible enough to deliver on both targets and the capacity to rid the sector of the issues dogging the industry for decades. The doubts in some minds that this exercise would be any different from other exercises may have to be excused until there is enough conviction built through performance and delivery on pledges made.


With the likes of State Grid Corporation of China and its subsidiary, Shanghai Municipal Electricity Power Company there seems to be some light at the end of the tunnel given the scale of achievements, level of competence and overall capacity to bring about the turnaround Nigerians yearn for in the power sector.


The successful completion of the Genco bid by the Federal Government through the direction of BPE may have indeed provided a new impetus and stimulus for multi national players to participate in the economy to the over all benefit of the Nigerian people.  Power is so essential to any economic activity, that Nigeria’s power report card has been most dismal and disgraceful to say the least. The poor performance of its power utility has dragged  the country far behind other nations of the world in the quest for industrial revolution in this part of the world despite its vast economic and human resources. All that may be about to change with private companies entering the fray.

Tags: Nigeria, Featured, Business, State Grid Corporation of China (SGCC)

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