8 November 2012

Nigeria: FG, Chinese Firms Bicker Over Power Projects

Chineme Okafor — The controversies stalling the construction of two major hydro- power projects in Mambilla and Zungeru Wednesday took a new dimension when the Federal Government and the contracted Chinese firms failed to agree on a completion date for both projects.

The Federal Government and its contractors, Sinohydro Corporation and China National Electric Engineering Corporation (CNEEC), had at the signing of a Memorandum of Understanding (MoU) in Abuja, for the construction of 3050 megawatts (MW) Mambilla hydro plant and 700MW Zungeru hydro plant disclosed different timeframes for the completion of the projects.

While the contractors specifically stated that the Mambilla hydro power plant would take approximately six years to complete in line with the standard work schedule for the construction of such high profile hydro dam, the Federal Government insisted the project must be ready for inauguration by President Goodluck Jonathan within the first quarter of 2015.

"Federal Government has no time for dragging of feet, we have a transformation agenda that we are pursuing and we don't have all the time to waste. We don't have six years to deliver Mambilla, Mr. President has to inaugurate these projects in 2015 and we are targeting first quarter of 2015," Minister of State for Power, Mrs. Zainab Kuchi, retorted when a consultant to the project, Mr. Joseph Okoye, clarified the completion timeline.

But Okoye insisted: "From our work plan, it will take at least six years to complete Mambilla. As you are aware, this is not just any project; the plant we are talking about will have several tunnels of about 20 kilometres long, shafts and underground power house, we are talking about the biggest power dam in this part of the world and from our plan, this project will not be completed within the time you are talking about which is 2015."

Expected to be undertaken on a Build, Operate and Transfer (BOT) concession agreement, Mambilla will cost about $3.2 billion to complete with the Federal Government contributing 15 per cent of the sum as its counterpart funding obligation while Zungeru will be partly financed by the Exim Bank of China to the tune of 75 per cent.

Kuchi in her remarks stated that outstanding legal encumbrances that stalled the projects following a legal action initiated by a Nigerian contractor that had initially emerged as the preferred bidder in 2003, Messrs Sunrise Power and Transmission Ltd had been resolved and as such the project will now be executed by Sinohydro and CNEEC.

She added that it had been a torturous process resolving such controversy around the Engineering Procurement and Construction (EPC) contract for Mambilla and Zungeru which feasibility studies were done in 1981.

Kuchi said: "The Mambilla hydro power project has had a torturous history dating as far back as 1982 when Messrs Bennie and Partners prepared the first feasibility studies for the project. I am also glad to report that the ministry has worked with the project consultants to revise upwards the design capacity from 2600MW to 3050MW, making Mambilla the largest single power project in the country.

The proposed contracting structure is for Messrs Sinohydro to cover 70 per cent of the project while Messrs CGGC covers 30 per cent of the project scope.

"The Zungeru hydro power project has been less challenging except for the need to identify clearly the source of funding for the entire project, however, in this regard, the Ministry of Finance has finalised arrangements with Exim Bank of China towrads financing 75 percent of the project while counterpart funding the balance in the sum of $309 million is currently available with the ministry of power."

The minister explained that the project is expected to generate sufficient revenues for repayment of the loan upon completion, adding that the additional 3750MW of electricity from both plants will enhance Nigeria's generation capacity.

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