Financial Energy Review
by Jenifer Dike………………
The Nigeria Chief Executive Office of Siemens, the German engineering firm, Onyeche Tifase, said that the company’s current rehabilitation of the nation’s power sector will cost N900 billion and is set to attract interest of new foreign investors for the nation’s power sector.
This new interest by private investors in the Nigeria electricity sector according to Tifase is not unconnected to Siemen’s plan to use the model it used in Egypt to raise electricity supply to 40 percent in the North African country.
This model being applied by Siemen is expected to include local manufacturing of electric power components as well as encouraging local allied companies to expand their production capacities.
Siemens power project was signed last year with the Nigerian government to rehabilitate and expand the nation’s electricity system. The company’s Egyptian model is expected to ramp up power supply in Nigeria to about 25000MW in three years.
The revamp in Nigeria will include upgrading dozens of power substations and building new ones, as well as installing new transformers and distribution lines, she said. The upgrades are persuading skeptical investors to see opportunity in the country, Tifase added.
“Our ability to deliver all the automation of distribution, transmission and generation has boosted investors’ confidence, and oil and gas companies that had stepped back because of a lack of benefits are reconsidering. We see further investments being unlocked.” Tifase said.
Nigeria has more than 13,000 megawatts of installed electricity generation capacity but only 7,500 megawatts of that is available and less than 4,000 megawatts is dispatched to the grid each day. The partnership with Siemens will modernize the existing network before enlarging it until the country can produce and distribute 25,000 megawatts.
The World Bank, which estimates that Nigeria loses about $28 billion or 2% of gross domestic product a year to power cuts, approved a $750 million loan in June to create a sustainable metering and commercial framework for running the grid.
The rehabilitation will help end incessant outages and ensure the inclusion of about a third of the population of more than 200 million people now excluded from the grid.
Siemens plans to implement the project in phases, starting with the initial phase of resolving current inefficiencies in distribution and transmission while upgrading capacity to 7,000 megawatts. The second phase will target 11,000 megawatts.
The project has attracted low-cost financing backed by the German government and credit-risk guarantees by Euler Hermes Group SAS, according to Tifase.
Lenders including Commerzbank AG and Deutsche Bank AG have indicated an interest in extending credit, she said. German lenders are expected to finance the supply of all equipment, products and systems for the project.
