Contractors abandoned many transmission projects — TCN boss

January 14, 2018 7:26 pm

The Interim Managing Director/Chief Executive Officer of the Transmission Company of Nigeria, Usman Mohammed, tells OKECHUKWU NNODIM how unqualified contractors abandoned several projects across the country

What is the status of the $1.5bn loan being expected by the TCN from foreign donors?

When we came in, we had to assess the TCN in order to see what we could do to make it become an organisation that could meet its objective of wheeling power all over the country. You know our objective is to wheel power, stabilise the grid and ensure that the quality of electricity delivered in Nigeria is qualitative.

So in doing that, we had to come up with a programme, which is the Nigeria Transmission Rehabilitation and Expansion Programme. Now, this programme seeks to expand the capacity of the country’s transmission arm of the power sector, to make it what we call N-1 reliability capacity, whereby anywhere you have a unit or the requirement of a unit, that unit should be multiplied by two. This will ensure that if you have a failure on that unit, the people in that area should not be shut out of power, and that is the concept of N-1. So for us to do that, we need to put in a programme.

How does all this relate to the $1.5bn TCN loan from foreign donors?

There are various ways by which the TCN can raise money. We can raise money through the wheeling of power, which is from the charges that we bill the Nigerian electricity market for wheeling power. We can also raise money by using something like contractor financing. The third option is for us to use multilateral donors.

Now, the first two options are not readily available for the TCN and the reason is that what we get from the market is less than 40 per cent of our invoice, and so it is barely enough to pay salaries, do our operations and expand the grid. Of course, when salaries and other operations are taken care of from 40 per cent, there will be nothing left for us to use to expand the grid.

The second option too is not available. If you say contractor financing, you have to also get and set aside your revenue in order to be able to meet your obligation when they crystallise. So, the only option we have is for us to ask the government to support us in getting multilateral donor finance.

That is the reason why we presented our programmes to multilateral donors. But you know it is not automatic that if you give your programmes to multilateral donors, they will accept. This is because multilateral donor funding is the cheapest money you can ever find.

The least you can get from donors is a grant element of about 40 per cent. Every multilateral donor has a moratorium period which you cannot get in any other form of finance. So they always require you to also put some things in place. They will look at your implementation capacity and your procedure and will ask you questions. This means you have to address certain things before they will give you the money.

Can you share some of the things they asked the TCN  before agreeing to release funds to the company?

One of the things they asked us was the issue of our failure to implement projects very well in the past. And we had to address that. Now, one of the reasons why we had been failing in implementing projects very well in the past was our inability to recruit contractors that are qualified.

So they (multilateral donors) now came up and said that we (TCN) have to increase the qualification criteria in order not to have unqualified contractors. We had to agree. Now, in giving us that one, we also went to them and told them that we had a problem with them. It takes a long time for a project funded by a multilateral donor to be completed. From preparation to the effectiveness of the project, it takes a long time.

So, we said that it normally takes about one year to prepare such kind of projects and it takes about another year to procure the project. But we believe that both the preparation and procurement can take place simultaneously in some cases. And so we insisted that they have to accept that we prepare and procure the projects simultaneously.

They listened and agreed. So it became a win-win situation because we extracted something from them and they also extracted something from us. That was how we launched the programme.

How many multilateral donors were you able to get to invest in the TCN?

So many multilateral donors came in. We have $486m from the World Bank, $210m from the Islamic Development Bank, $454m from the African Development Bank, and $200m from the Japan International Corporation Agency. These are all commitments from the institutions because we are working with them.

We have not yet signed the loans but we have agreed to work together with them. The reason why this information got out to some people and they misinterpreted it was because of the agreement that we have, in which we can prepare the project and do the procurement at the same time.

This sent a wrong signal to some people who thought that we had already signed the contract and had taken the loans. Let me also tell you that even in engaging with multilateral donors, you have to get the consent of the Ministry of Finance. You cannot engage any multilateral donor without getting the consent of the finance ministry, which will give you a written letter to the donors, telling the financiers to engage you. So we got those letters.

But if you look at the Debt Management Office Act of 2003, you will realise that no agency or subnational can take loan without the consent of the Ministry of Finance. So for anybody to say that the TCN had gone ahead to take loan without following the laid down processes, it is because the person is ignorant of the law. This is because by law, we cannot even take any loan without the consent of the Ministry of Finance.

This is the position of the law and no multilateral donor will talk to you because they know that legally you don’t have the power to engage them in such transactions and this is the situation. We have been providing a regime of transparency at the TCN because what we have come to do at the company is to make history and that is what we are doing.

What are some of the things your team has been able to accomplish since you came in about a year ago?

The transformers in some stations had been there since 2015 but when we came in February (2017), we started installing these equipment. We have done this installation all over the country. We installed three in Lagos which had been there since 2010. We have done a similar installation in Aba. We have one in Uyo as well. There is another 150MVA that we completed in Afam.

All over the country, we are undertaking different projects. In Damboa, we completed 40MVA. We have completed 60MVA in Hadeja. So this is what we have been doing and we have also stabilised the frequency.

The frequency stability we have achieved in TCN currently had not been achieved in the last 20 years to the extent that the West Africa Power Pool has agreed to synchronise the power from Nigeria with that of the rest of West Africa.

So this is to tell you that we have not come to do things wrongly but to make sure that we create history and to ensure that we solve the problem of power in Nigeria, especially those that are related to transmission.

You once said that the TCN projects that were abandoned across the country were enormous. Do you mind stating some of the projects?

We have so many of them that I cannot even mention them right away. You know that every year, they provided budget and created those projects and in the process of recruitment of contractors, they didn’t recruit quality contractors. This is because some of the contractors were actually suggested by some politicians and as a result, we end up having many abandoned projects. Some of the projects have even failed.

I can name a few of them. One example is the 132KV substation in Oba, somewhere near Onitsha in Anambra State. The contract for that substation was awarded in 2001. The contractor is a Nigerian who collected 81 per cent of the offshore amount and 54 per cent of the local portion but the contract has been abandoned.

Werelembe in Kano is also another example of a contract that has failed. It was handled by a Nigerian contractor who collected about 90 per cent of the offshore amount and about 60 per cent of local portion, but the project was abandoned. We have projects all over the country that are like that.

However, what we are doing is that some of the ones we can take over and fix, we are asking our staff to take them and fix them. So we are changing people’s mindset at TCN to ensure that we can do certain things by ourselves. And we know that this doesn’t go down well with some people who believe that TCN is supposed to be their farm.

How have you been working with the military? You once said you needed the security agencies to get certain things.

We have good collaboration with the military. If you look at our operations in flashpoints like in the North-East and the South-South, you will understand that we cannot operate in those places without the military.

The Chief of Army Staff and all the military formations in Nigeria are giving us the coorporation that we need to work with them and that is why even in a difficult place like Borno, we are operating. We don’t have any problem of security there because the military is giving us the required support.

Briefly tell us about the 60MVA transformer that was inaugurated by the Minister of Power, Works and Housing, Babatunde Fashola, at Keffi recently.

It is important to state here that the Transmission Rehabilitation and Expansion Programme also includes strategies for completing existing projects either through in-house capacity or through fast-tracking existing contracts. Through this process, several transformers and substations will be completed in the first quarter of 2018.

The substation reinforcement and many others that will be inaugurated between this month and March 2018 are part of the success of our new strategy in project implementation that significantly empowered the regional offices.

As we inaugurated many transformers in the TCN, we have discovered that there are several transformer capacities all over the country that were constrained by transmission line limitation. TCN intends to embark on massive re-conducting of transmission lines this year. This is expected to significantly increase the wheeling capacity of the TCN.

We were able to manage the recent instability caused by gas supply shortage to power plants in the Lagos axis. The challenge has also exposed some weakness in our grid which we intend to resolve.  (Punch)

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