After decades of failing to consummate the deal on the 3,050MW Mambilla hydro-power plant, Nigeria recently signed a $5.8 billion contract with three Chinese firms to construct the power station in six years. Chineme Okafor reports
When completed in the next six years, the 3050MW Mambilla hydro power plant could immediately move on to become one of the 30 largest hydro power plants in the world, and perhaps the second largest in Africa after Ethiopiaâ€™s Grand Renaissance Dam which is scheduled for completion in 2018 with an estimated electricity generation capacity of about 6,000MW.
Located in Mambilla plateau of Sarduana Local Government Area of Taraba State, the preliminary feasibility study on the project was reportedly carried out by Moto Columbus in 1972 after the military government of General Yakubu Gowon (rtd) had considered it a good renewable energy source that could give Nigeria some edge in energy security and economic industrialisation.
Between 1981 and 1985, Diyam Consultants with Binnie and Partners of the UK was further contracted to carry out another preliminary study and it recommended a 3960MW capacity hydro power dam after its studies.
Another feasibility study was again done in 2011, when the Federal Executive Council (FEC) awarded a fresh consultancy job for detailed engineering design and project management and supervision to Messrs Coyne et Bellier/Decrwon/WADSCO JV Consultants to further review the two previous studies based on new hydrology and geology investigations and come up with a comprehensive and adoptable study on the project.
But years passed by and nothing concrete was made out of the project despite these studies, except for a failed attempt by former president, Dr. Goodluck Jonathan, to revive the project negotiations with the Chinese which had offered to largely fund its construction.
Breaking the ice
Notwithstanding the several years of back and forth conversations on the Mambilla project, Nigeria last week took a fresh step to bring it to reality within six years. Details of the construction timeline are however yet to be fully disclosed.
Through the FEC, it approved in August 2017, the contract for the project, subsequently negotiated its execution with three Chinese firms, and then signed the contract to have it built and completed in six years with the firms on an export-import funding model, which would see the federal government bring 15 per cent of the construction cost to the table and the balance of 85 per cent provided by the China Exim Bank through a consortium of Chinese lenders.
Having suffered neglect under successive governments, the project could through this fresh means, now move on to become the fulcrum on which Nigeria launches her economic renaissance and energy diversification plans.
What is at stake
It is almost a no-brainer that a completed and functional Mambilla hydro plant would add more to Nigeria in terms of economic benefits.
At the moment, Nigeria has a population of circa 180 million people, and an installed power generation capacity of 12,000MW. She also has over half of her population currently without any form of grid electricity connection.
Having Mambilla on the grid would increase the countryâ€™s generation capacity by its nameplate capacity, improve her contributions to the reduction of global greenhouse gas emission as agreed in the Paris Climate Change pact, as well as enhance her capacity to provide electricity to withstand her industrialisation plans.
Similarly, the development of the project would help her plan adequately for a robust energy security, considering the frequent break of gas lines that supply fuel to gas generating power plants in the south of the country.
In addition, there could be an upsurge in tourism and agriculture around the Mambilla plateau, as the cascading waters from the dams flow to form beautiful sceneries for recreations and other agricultural activities such as fish production and irrigated agriculture.
Having taken so long, including disagreeing in 2012 on the construction details, to agree on the best approach to go about the construction of the hydro project, the federal government last Friday signed an agreement with a consortium of three Chinese companies to proceed with the 3,050MW hydro power project, and complete it within six years.
At the ceremony where the construction agreement was signed, it was disclosed that the project would cost $5.79 billion, with $868.87 million of the cost expected from the Nigerian government and $4.92 billion representing 85 per cent of the projectâ€™s cost from Chinese lenders through the China Exim Bank.
The firms which got the contract to build the plant include China Gezhouba Group Corporation (CGGC), Sinohydro Corporation Limited (SHC) and CGCOC Group Co. Limited. They are expected to bring on to the project, Chinaâ€™s years of expertise in building large hydro power dams.
Also included in the scope of work for the project are the construction of its four large dams – Nya, Sumsum, Nghu and Api Weir, two underground power house of 12 units of 250MW each, two numbers of 330kV of 700 kilometres transmission lines that would run to Markudi and Jalingo, 120 kilometres of access roads connecting the project site and nearby communities as well as a plan to resettle an estimated 100,000 persons that could be impacted by the construction.
Earlier in August, the FEC approved the total sum of $5,792,497,062.00 for the project, and that approval paved the way for the signing of the contract document with the China Gezhouba Group Corporation (CGGC), Sinohydro Corporation Limited (SHC) and CGCOC Group Co. Limited, which are all considered a joint venture.
The signing of the agreement would also allow the federal government to seek finance to meet its counterpart funding obligation to the project.
Speaking on its significance, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, who signed the agreement on behalf of the Nigerian government, said the project would open a huge window of opportunity for Nigeria to harness its hydro potentials for electricity and irrigation purposes.
Fashola, who commended government officials and the Chinese for making the project a reality, explained that when completed, the project would change the dynamics in Nigeriaâ€™s power sector.
â€œThe project is a new dawn for Nigeriaâ€™s power diversity and energy mix. This project will give us the opportunity for energy security, it will give us the opportunity to comply with our Paris Climate Change Agreement because it will be delivering renewable energy,â€ he said.
According to him, â€œIt will provide the opportunity to unlock the gift of nature to Nigeria in Taraba State, agriculture, energy, construction, development. You only need to see the number of applications we have already received from people who want to participate in the logistics, who want to participate in the insurance, Nigerians who are already queuing up to get involved.â€
He further said the project implementation will involve the ministries of environment, water resources, justice and finance, adding, â€œThis is going to be inter-ministerial undertaking.â€
Other derivative benefits
Beyond the long term benefits from the hydro power project, there are also certain short term benefits that could accrue to Nigeria while the construction phase lasts using the export-import funding arrangement that had been agreed on.
Confirming this, Fashola, in an interview with Arise News, a sister broadcast arm of THISDAY, stated that about 25 local insurance firms had indicated interests in providing insurance coverage for the project.
â€œWe have received not less than 25 applications from insurance firms already, just hearing that we have signed Mambilla, they are saying they want to provide insurance for the project, and it is just going to give a lot of momentum to the Nigerian economy when the construction starts,â€ he said in the interview.
He also explained then on the funding arrangement: â€œWhat we just did was to award the contract (Mambilla) for the first time in over four decades. The next phase is to go and negotiate the financing, as the Chinese have offered to fund it under an export-import financing arrangement where they will contribute 85 per cent of the financing and we will contribute 15 per cent.â€
By its nature, export-import financing models which are usually concessional loans, have long moratorium of up to five years, in addition to long tenor that could be as long as 20 years, and very low interests of like two per cent as against the 17 per cent interest on government treasury bills which is one of the funding sources available to the government.
Also, they require that companies, equipment, and workers of countries offering the loan are often used in the projects, but infrastructure financing experts told THISDAY that Nigeria in this case, could derive a lot of benefits from the arrangement and project construction.
They noted that with it, Nigerians would mostly provide and man the trucks for movement of materials to the project site, cook food for workers at the site, while materials such as sand, granites, cements and others would be sourced locally.
Open book needed
But even with the excitement that perhaps followed the signing of the agreement for the project, industry experts who spoke to THISDAY stated that it was necessary for the government to make public the content of what it signed with the Chinese.
They, in this regard called for an integrated open book contract from which Nigerians can evaluate the projectâ€™s Environmental Impact Assessment (EIA) report, as well as the loan terms the country signed with China Exim Bank for the project.
Basing their call on the need for transparency and the $6.4 billion estimated cost of financing the construction of the about 6000MW Grand Renaissance Dam of Ethiopia which is up for completion in 2018, and much larger than the Mambilla which is to be constructed with $5.7 billion, the experts stated that it would not be out of place for the government to show transparency in the process by process execution of a project which debts would be transferred to future citizens of the country.