Yamashita: Nigeria’s Power Sector Can Benefit from Japan’s $8.3bn TICAD Offering

Managing Director of Marubeni Engineering West Africa Ltd, Mr. Seiichi Yamashita, spoke to Chineme Okafor and shared his company’s experience as a key player in Nigeria’s power sector. He also believes the country can benefit from the $8.3 billion funding

Could you please introduce yourself to us? My name is Seiichi Yamashita, I am a Japanese and Managing Director of Marubeni Engineering West Africa Limited. I have been assigned here since April 2012.

Our responsibility is to supply power project equipment and to construct power stations. Over the last 40 years, we have constructed in total 4600 megawatts (MW) power projects in Nigeria, ranging from hydro power projects to thermal power projects.

We constructed the Kainji and Jebba hydro power stations. For thermal, we constructed the Egbin, Delta, NIPP Sapele, Ihovbor and Calabar power plants. All together, they are 4600MW, which is about 40 per cent of Nigeria’s total installed electricity generation capacity.

What have you experienced differently in your 40 years of operating here in Nigeria? We have many experiences, good and bad experiences but one thing I have to say is that Nigeria’s power sector market is not so easy. Frankly speaking it is a difficult market to survive in and the risk is very high. There are so many risks and construction difficulties which include taxation and local communities’ risks.

The most difficult of these risks is to maintain project schedule, but anyhow, we have good and bitter experience altogether.

How have you been able to cope with all these risks? Finally, we have good experiences as well, that is why we have been here for 40 years now. We try to communicate and convince difficult people to conclude. For example on the tax, their assessment and demands, we sometimes cannot discuss with the tax people as Marubeni and we have to get some assistance from the Japanese Embassy or the Ministry of Finance, with such assistance, we could survive here.

For the local communities’ people, there are nice and bad people amongst them but finally, the important thing is that we open up communication and those people could understand what we are doing here and we settle everything amicably.

Which of the power projects was the most challenging to you during construction? The most challenging are the NIPP Projects: Sapele, Ihovbor and Calabar. These three projects, and what was difficult about them was that we were just the contractor to construct the projects, that is the EPC contractor and the client which is the Federal Government owe certain responsibilities to make gas and transmission Infrastructures available, their work was not well prepared and even though we were ready to go ahead, with the constraint of gas unavailable and transmission line not ready, we could not go ahead. Of course, I have to admit that as an EPC Contractors, we accept some responsibilities for the Project delay.

Originally, those projects timeline was two years from 2005/2006 to 2007/2008 but unfortunately, it was completed in seven to nine years and this make them the most difficult and challenging project we have executed in Nigeria in our 40 years of being here.

in NIPP Projects because of the long delay.

So, can it be said that you made no profits from building the NIPP projects? Yes, our profit was huge minus but anyhow, we are Japanese, we never run away or abandon any project we start – this is our business Culture in Marubeni. In other words, we had the obligation to complete any project we start. This culture was demonstrated when we waited for commissioning for several years only for the client to continually persuade us with phrases like: “be patient, be patient, gas will come very soon or next month” but a few years we had to wait but gas never came. Only one project which is Calabar, we withdraw our site man-power because gas was not available after we achieved mechanical completion and we had nothing to do there and we could not wait without doing anything and that is why for certain period we withdrew our site man-power and put very few people to maintain the project.

But eventually, we have completed the projects and now we are negotiating with the NIPP to settle the additional cost incurred due to prolonged Project delay, naturally and contractually, we have to ask client to pay back these additional costs and so we are still on the negotiating table.

Are these also part of the initial contract terms? Of course, we have that in the contract to ask for any additional cost for works done outside our scope of work.

What do you think needs to be modified for real progress to be made in the sector? For the power projects, the important thing is that there should be good planning, this means that power evacuation and gas availability should be secured before these projects start. Unfortunately, in the past, without doing a proper planning, projects were started and in the middle of construction stage we faced some serious problems. Consequently, both EPC and government became unhappy and that was not good for the projects and Nigeria nation.

Needless to mention, a well-articulated planning is very important in projects of this magnitude. Now the power sector is privatised. The government will say that certain things are not its responsibility but privatisation does not mean that government will be free from certain responsibilities

Even with privatisation, government has to owe certain responsibilities and stakes. For example, the TCN is within the government responsibility and even in planning power projects; power evacuation is the responsibility of the government. Gas supply is mainly in the private business but government owes certain responsibility to secure stable gas supply infrastructure against vandalism. A good example is the pipelines which supply gas to the power plants. However I think that the new government is going in the right direction. One of such moves in the right direction is the signing of the Sovereign Guarantee for Azura – the first project financed IPP in Nigeria.

Nigeria is constantly talking about using other sources of power like solar and wind; would you suggest to the government what sort of ways it could make the most of this?

Nigeria’s GDP is now very huge and now No.1 in Africa and No.21 in the world but electricity consumption per capita is very low, say about No.150 in the world. This imbalance is not nice and I can say that the government is responsible for this.

I can also say that there are some problems in the government’s administrative capability and that is why such huge imbalance happens. The government has to improve on their administrative capability and policy making and this should be a top priority. Then, secondly, power sector is now very quickly privatised but still government has to owe certain responsibilities and to maintain some balance in public and private involvement is important .For example, in some very important projects, government has to develop them by themselves and it is not good to force everything to the private sector. Power projects development will never go well if the government forces everything to the private sector.

Power projects should be developed to maintain good balance in public and private sectors. General global tendency is that many sectors have to be privatised in order to reduce government deficit but for power infrastructure, I think it should be well balanced between public and private sector participation.

Actually, my opinion is that solar and wind is not appropriate for Nigeria. As you know that solar makes sense in the highly developed countries because generation costs are very expensive and also huge government subsidy is required in those highly developed countries like Germany, Japan and US, and then this make solar projects sustainable in those areas. But in Nigeria, I don’t think the government will give subsidy.

And also, solar power project availability is very low. For example in the evening, it does not really work. The availability of thermal power maybe 80 per cent, hydro because of the seasons, 50 but wind and solar could be 20 per cent and very costly. That is why in Nigeria, I don’t deny its possibility completely but economically, it does not make sense.

Are there new business decisions that you are considering in Nigeria soon? Yes, our government, the Japanese government has organised Tokyo International Conference for African Development (TICAD) every few years over the last 23 years and Japanese government has very challenging and positive strategy to assist infrastructural development in Africa. Based on this TICAD policy, we are developing a few large scale projects in Nigeria.

I may not be able to mention the company’s name but we are supporting one big IPP project of 1500MW in the Lagos area and one more IPP project of around 1500MW thermal plant in Lagos. We are not IPP developer, but behind them we are supporting their project development as EPC player and we can also bring some financing support from Japan

Is the TICAD part of the $8.3 billion framework that the Japanese government had set apart for infrastructure development in Africa? Yes, this year, the sixth edition will be held in Nairobi and chaired by the Prime Minister, Abe and then he will declare this as a start. If we consider Nigeria’s population and GDP, the country can get a considerable part of the $8.3 billion and then utilising it, it can develop power projects in very dynamic ways.