BUSI­NESS Can moguls un­tan­gle Nigeria’s power lines?

Daily Trust - - BUSINESS / NEWS -

The quest to turn the lights back on in Nigeria is pit­ting some of the coun­try’s rich­est men against rusted power lines, pil­fered elec­tric­ity and grenade­lob­bing sabo­teurs. Since in­de­pen­dence from the U.K. in 1960, Nigeria’s govern­ment built only 12 power plants—all of them now in dis­re­pair. Mean­while, its pop­u­la­tion tripled to 174 mil­lion. The re­sult: Nigeria pro­duces less than half as much elec­tric­ity as North Dakota for 249 times more people. Black­outs strike 320 days a year, ac­cord­ing to the World Bank.

Now, Africa’s top econ­omy has asked its wealth­i­est busi­ness­men to get the plants hum­ming again. Last Novem­ber, the Nige­rian govern­ment auc­tioned off six power plants, in­clud­ing a 50-year-old tum­ble­down fa­cil­ity lo­cated near swamp­land.

That plant now be­longs to Tony Elumelu, a Nige­rian mogul whose com­pany made its name run­ning a lo­cal Hil­ton re­sort. In the months to come, the hote­lier hopes to jolt the power plant back to life, push­ing out a surge of elec­tric­ity into this coun­try where­big city of­fices charge their lap­tops with­car bat­ter­ies and the poor eat by can­dle­light.

“Things will change,” said Mr. Elumelu, the chair­man of in­vest­ment fir­mHeirsHold­ings,lastOc­to­ber,days be­fore the govern­ment handed him the keys to the power plant. “You will see what power will do.”

Nigeria isn’t Africa’s only na­tion hand­ing run­down in­fra­struc­ture to lo­cal mul­ti­mil­lion­aires. African gov­ern­ments from Ivory Coast to Ethiopia are sell­ing off as­sets, rang­ing from ports to rail­ways and re­finer­ies. Nigeria’s power sell­off, though, rep­re­sents the big­gest test of that drive.

The Nige­rian govern­ment hopes the fresh cap­i­tal and new equip­ment, such as tur­bines, will help it gen­er­ate 25,000 megawatts by 2020—10 times what the coun­try cur­rently pro­duces.

It’s an am­bi­tious tar­get. Even 25,000megawattswouldn’tbee­nough to keep the lights on all day, ac­cord­ing to com­pa­nies and an­a­lysts. Nigeria, they say, needs as much as 170,000 megawatts to gen­er­ate 24-hour elec­tric­i­ty­forit­s174mil­lion­peo­ple—a pop­u­la­tion pro­jected by the United Na­tions to grow an­other 100 mil­lion in the next 15 years.

And there are some snags. Half of Nigeria’s elec­tric­ity is stolen or lost on quar­ter-century-old power lines. Com­pa­nies have taken on the job of in­stalling elec­tric me­ters and bring­ing bills to the hun­dreds of thou­sands of Nige­rian house­holds that run wires to near­by­elec­tri­calpoles,with­out­pay­ing.

Plus, Nigeria will need to lay fresh pipe­lines to tap its gas re­serves—the world’s eighth largest—to fuel those tur­bines. One prob­lem: Sabo­teurs lurk­ing in the swamps keep throw­ing grenadesun­der­what­few­gaspipelines ex­ist in an at­tempt to ex­tort pro­tec­tion money from Nigeria’s govern­ment.

None of this has de­terred Nigeria’s new power barons.

Mr. Elumelu paid $300 mil­lion for his 60% stake in his power plant. He has some ex­pe­ri­ence: To keep the lights on at his 10-floor Hil­ton, he runs a mas­sive gen­er­a­tor on the premises, churn­ing four megawatts—more than the coun­try of Guinea-Bis­sau pro­duced, un­til re­cently.

The think­ing is sim­ple, he said: Thanks to all-day out­ages, Nige­ri­ans con­sume scant elec­tric­ity—less than Puerto Rico. Once elec­tric­ity flows into their homes, though, tens of mil­lions of people will rush to buy re­frig­er­a­tors, air con­di­tion­ers, elec­tric ket­tles, he added—all pulling power from his tur­bines. Still, it’s a big job. When Mr. Elumelu’s staff first walked­in­tothe­p­lant­lastNovem­ber— they weren’t given ac­cess un­til it was pur­chased—they dis­cov­ered tech­ni­cians weren’t wear­ing safety gog­gles or even shoes. Some crawled into the in­nards of deadly gas tur­bines wear­ing flip flops.

Those work­ers had also lost track of­tur­bineparts,ren­der­ingth­e­mas­sive ma­chines un­us­able. All told, the sta­tion­pro­ducesjust160megawatts— halfthe­wattageth­e­com­pa­nyas­sumed when it bought the place.

“Maybe some of us didn’t know it would be that bad,” said Adeoye Fadey­ibi, the chief ex­ec­u­tive of­fi­cer of Transcorp Ughelli Power Ltd., the Heirs Hold­ings unit that runs the plant.

By year-end, Mr. Fadey­ibi hopes to get his work­ers trained and the tur­bines spin­ning. Then he’ll in­stall new tur­bines, revving up to 3,000 megawatts by 2016.

He is in talks with both U.S.-based Gen­eral Elec­tric Co. GE -0.60% and Ger­many’sSiemens AG SIE.XE +0.66%,he­said,as­the­com­pa­ny­mulls which tur­bine maker to or­der from. Low in­ter­est loans from the Ex­portIm­port Bank of the U.S. tilt the bal­ance to­ward GE, he said.

Over the next five years, as the plants sold by the govern­ment in­stall new tur­bines, GE says it ex­pects to bring in $1 bil­lion in rev­enue from Nigeria.

Ri­val Siemens fore­casts adding nearly 5,000 megawatts by 2020.

“Ev­ery­body’s jump­ing in,” said Michael Lakota, CEO of Siemens Limited Nigeria.

Mean­while, Mr. Elumelu said he has to con­vince Nigeria’s govern­ment to sell or re­fur­bish the creaky elec­tri­cal tow­ers, droop­ing high volt­age lines, andfire-prone­sub­sta­tion­sre­spon­si­ble for car­ry­ing the cur­rent to­ward big cities.

If he and oth­ers get it right, econ­o­mists ex­pect Nigeria’s fac­to­ries to pro­duce through the night and, in time, com­pete glob­ally. Air­lines will be able to land af­ter sun­set. School­child­ren will do their home­work af­ter dark.

“One way or an­other,” said Transcorp’s Mr. Fadey­ibi, “it’s go­ing to hap­pen.”

(Source: Wall Street Jour­nal)

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