Siemens: Distribution Remains Weakest Link in Nigeria’s Power Supply Chain

Onyeche Tifase,

Emmanuel Addeh in Abuja

Germany-based Siemens AG, a company with which the federal government is expecting to achieve 25,000 megawatts by 2025, said yesterday that it had identified electricity distribution as the biggest challenge in the Nigerian power sector.

Speaking on Arise Television, the broadcast arm of THISDAY Newspapers, the Chief Executive Officer of the company in Nigeria, Mrs. Onyeche Tifase, noted that Siemens was working closely with the entire stakeholders in the Nigerian Electricity Supply Industry (NESI) to ensure that the set targets are met.

She added that the first step was to ensure that Nigeria is able to evacuate its current 14,000 megawatts installed capacity of generated electricity before making arrangements for the phased addition to the national grid.

Tifase said the company had no fears over whether the project will fail, insisting that Siemens had done its due diligence and incorporated buffers in its discussions with the federal government, including obtaining a commitment for a sovereign guarantee.

She said: “We have done extensive due diligence across the value chain from transmission to distribution because that’s our initial focus. Today, Nigeria has about 13 to 14 gigawatts of installed capacity.

“However, only about 7 gigawatts of that are operational. The aim is to ensure we achieve a peak in excess of what was achieved a couple of months ago, about 5.3 gigawatts to ensure we can evacuate 7 to 8 gigawatts available today. We know where the hot spots are. We know what has to be done in each Disco.

“Even the Discos and TCN have their performance improvement plans. They have their extensive long term plans. So, we are aligning with those plans. Just the end of last year, the Discos issued the final version of their performance improvement plans. So, it’s up to us to take up those plans to draw up a longer term strategy to evacuate the 25,000mw.

“The federal government has taken over the role of chief stakeholder for resolving the power deficit. Generation and distribution are already privatised. However, distribution remains the biggest challenge in that value chain.”
On the financial risks involved in the agreement, Tifase stressed that the government has said it will come in and provide a sovereign guarantee to back further investments in upgrading the grid.
She explained that the 25,000mw target might not be enough for the entire country, but noted that it was a good place to start the growth of the power sector in Nigeria.

“The decision on 25,000mw remains fixed. Nigeria may need more than that. So, for some people, even that is not an ambitious enough target. However, by targeting 25gw, it will enable the market to resolve the initial challenges in the grid,” she said.

On the cost of the project, she explained: “Where we are now is a project that costs N20 billion, €20 million in total and we at this moment are at €15.2 million and N1.7 billion naira in total and that’s what constitutes the initial sum for the pre-engineering project.

“The project eventually will transition into a first phase that costs about €2.2 billion, but at this point in time, entering into the initial stages cost N1.7 billion and €15.2 million.”

The Siemens Nigeria boss posited that the company was not worried about maintenance of the infrastructure after completion, “because we recognise that this is one of the challenges Nigeria has faced in the past.”

She said: “If we didn’t enter into this agreement without the knowledge that that (maintenance) was a risk, it would have been foolhardy of us. So, we sat with the government and other stakeholders and we understood the challenges pertaining to operational maintenance of electricity infrastructure.

“We have come up with a concept that we believe is very comprehensive. It will utilise local resources and SMEs and leverage local third party EPCs that we will be working with, and the idea is to have trained and certified engineers in-country that can service these equipment. Even university students will be trained for this.

“We will ensure the right technology. We are doing an extensive study of the grid, training will be done here in Nigeria, whether they are within the TCN or Discos because Siemens will not be shipping loads of its hands to do the work Nigerians are capable of doing.”

On the prospects of achieving its target, the company chief executive said: “It is achievable because we have delivered such projects in Egypt, which was about 14.4gw of electricity in 27.5 months. This was a record. We can do the same in Nigeria. All stakeholders are committed and driven by the top level of government. It has the backing of the president himself.”