Read Time:13 Minute, 30 Second
Deputy Chief Executive Officer and Chief Financial Officer of Symbion Power, Mr. William Olukoya, spoke to Steve Omanufeme and Ejiofor Alike on Western Sahara, a joint venture between Symbion, Iroko Capital and Jyoti Americas of Houston, and other issues in the power sector
Could you please give us a brief background of Symbion Power?
Symbion was formed nearly 10 years ago and it was very active in the war-time reconstruction efforts of the United States government in Iraq and Afghanistan. At that point, Symbion had actually worked at most dangerous times in Iraq, bidding for 11 projects and winning nine.
Every single project that was done in Iraq by Symbion was completed on time and on budget and was primarily done by locals that were trained in the United States with American standard of doing work. They were brought back to Iraq to do the work on behalf of Symbion.
While we were still in Iraq, we went on to Afghanistan where we built a substation and a power plant in Kabul. Following that, the United States government had under the Millennium Challenge Corporation (MCC) given a grant to Tanzania. Tanzania is one of the four identified partners for growth of the MCC of the United States.
Tanzania, at that point, got $780 million as a grant from the US government. The bulk of the money was for infrastructure but over $200 million of that was for electricity. Symbion won the most of that particular work for power on electricity side.
In that contract, we constructed over 2,000 kilometres of distribution lines and 26 substations. While we were working on this MCC contract in Tanzania, Symbion identified the need for us to get into power generation, so that the lines we were constructing would have the benefit of being able to connect power to people.
So, we were able to acquire one particular power plant in Tanzania and that power plant was acquired in the capital, Daresalaam.
After acquiring that particular power plant, we were then commissioned to develop two more power plants in Tanzania. The first was in Arusia and the second one in Dodoma. Today, Symbion is the largest Independent Power Producer (IPP) in Tanzania.
As a result of our activities in Tanzania, where we had also worked on the rural electrification projects, we then began to look at other areas in Africa.
In Tanzania, Symbion set up a training school and just like we did in Iraq, we also took locals to the US to get them trained and they had manuals that were done in their local language – Swahili, and also English. So, we had training manuals on the two languages and when they came back to Tanzania they also trained their fellow countrymen. In Tanzania, Symbion has a labour force that is predominantly locals.
Over 97 or 98 per cent of the labour force was locals that are actually doing all the works. Symbion has a commitment to training locals and to empower locals. While we were in Tanzania, we began to look at other African countries at which point the need for us to get into the privatisation in Nigeria happened.
What are the activities of Symbion in Nigeria?
We came to Nigeria and we spent a lot of time – about one year and a half on the ground, understanding the lie of land; who the key players are; who to partner; who not to partner; and how we should go about doing business in Nigeria.
We eventually partnered Transcorp in the privatisation process and ultimately, we collectively won the Ughelli power plant in Delta State. That power plant is a 972 megawatt-capacity plant, which we are now rehabilitating from 160 megawatts, when we took it over, to close to 400megawatts, right now.
With our Transcorp partners, we are looking to develop it to over 700 megawatts this year. We are an equity participant in Ughelli and we are also the main technical partner. The Ughelli power plant, again, is staffed primarily by Nigerians and creates a lot of jobs locally.
We then join forces with Iroko Capital and we started having discussions about how to further strengthen the electricity process here in Nigeria. What we then decided to do is since we are already in generation, it makes sense that given that the transmission infrastructure is seen as the weakest link where the biggest bottleneck will be in the bid to provide electricity to Nigerians, we decided to get involved in the transmission infrastructure network.
We decided to collectively invest heavily in that particular infrastructure network. Based on our collective experience, we are aware that for us to work in the transmission industry, we have to be very competitive and the only way we can be competitive is in the area of steel manufacture.
So, Iroko and us formed Western Sahara and then teamed up with Jyoti Americas of Houston to develop Nigeria’s first end-to-end transmission solutions company, which is Western Sahara Transmission Company.
Western Sahara will provide everything end-to-end, starting all the way, from tower design, transmission, tower testing – all the way through to manufacture and construction. Because of the technical experience that Symbion and Jyoti have in transmission, we will also bring that into Western Sahara to make sure that our technical expertise is successful.
We will also make sure that we can bring in technical expertise to solve the problem. We are going to set up a local factory – tower manufacturing factory here in Nigeria – that will be state-of-the-art and very similar to the one that is currently in place in Houston, Texas, which is one of the power companies owned by Jyoti.
Jyoti currently has five power plants – three in India; one in Dubai and one in Houston. The one in Houston is state-of-the-art, brand new and very technologically-advanced. That is the one we are trying to replicate here in Nigeria.
You were into generation and you are now forming Western Sahara as a transmission solutions company. Are you going to work with the Transmission Company of Nigeria?
Yes, the structure there for us is as follows. Remember, generation and distribution have been privatised. Transmission is retained by the Federal Government. Definitely, government will not do the work itself. What government will do is to issue tender for companies to come and help them build those transmission networks.
When they have to build transmission infrastructure, those companies, as it is today, will have to import all the steel, while all the fabrication, testing and design will be done offshore. We all know government’s goal of having local content and import substitution.
So, we and Iroko saw that opportunity to now bring in and be able to establish that in Nigeria, where we can then say that we have the whole design that will have been done offshore will be done here. The whole testing that will have been done offshore will be done here. The whole manufacturing that will have to be done offshore will be done here. And once we have all these in place, we can then do the construction of that transmission infrastructure.
Now, remember, even if we do not win all the tenders, the companies that are going to be winning the tenders will eventually have to buy steel locally. Since we will be the only one that space, we will be able to afford Nigerians the opportunity of participating in that, so that all the jobs that are required will not be done offshore.
We will be able to create a lot of jobs here in Nigeria; and train people. In every single work Symbion has done, we have always trained people. We will set up training school in Nigeria. With our partners, we will make sure that those jobs stay here in this country.
So, you want to latch in on the spin offs in the power privatisation exercise?
Yes, I think that is the key word. We have articulated it clearly. Across the spectrum, there is so much work to be done in the entire power spectrum. So, it is not just a function of someone just being a generation company. You can look at other aspects of the industry as well.
So, what Western Sahara is doing is allowing the three parties to aggressively look at the transmission part of it because that clearly is a big bottleneck and if that can be resolved locally, you begin to reduce the costs, and potentially, also improve the speed of deployments of the transmission infrastructure.
Let me also give you some statistics. Currently, the Nigerian Electricity Regulatory Commission (NERC) estimates that about 10 to 15 per cent of power generated is lost in transmission, before it gets to the distribution. So, you can now imagine, right now we are talking about not having enough power. If you lose 10 to 15 per cent of what you are even generating, it does not augur well. When you talk about generating 10,000mw or 15,000mw, 10 per cent or 15 per cent of these figures is very huge.
So, it becomes very critical that we minimise those losses. To minimise those losses, you have to invest heavily in transmission. The only way you can have a competitive edge as a country from cost standpoint is to make sure that the cost of improving that infrastructure is minimised so that you will not be spending or wasting too much money on losses.
We believe that if we have that kind of company here locally, it will create other industries by creating a lot of direct and indirect jobs.
Where exactly will you site your factory or steel manufacturing plant in Nigeria?
There are three critical items to note in sitting the factory. You need access to the sea so that when you are shipping, it will be easy. You need access to good roads. You also need access to power because power is what you are going to use to galvanise and build the steel towers.
So, those are the three key components. Right now, the factory will be situated in a location that is conducive to those three things. We are looking at series of options right now and different locations right now, but I assure you that a mix of those three will play a major impact on that consideration.
What is the timeline for the completion of the factory project?
Okay, in terms of establishing a factory, a factory normally takes between one year and two years to be established with a lot of standards that need to put into it. So, that is the timeline for the construction of the factory. However, one of the reasons why we embark on this endeavour is that we already have in our corner a company like Jyoti that already has that plant somewhere else.
So, as a stop gap, they have already invested in this in Nigeria and therefore the pricing of the steel, which they are going to be creating will be supplied here as if the plant was here. So, we, being Western Sahara, will be getting it at cost until such time when our plant is ready. Jyoti are heavily involved in the establishment of that particular tower factory because they have done it before. That is where their own expertise lies. Like I told you before, we are substantially replicating the state-of-the-art tower factory, which they currently have.
You participated in the privatisation of PHCN and acquired Ughelli Power Plant with Transcorp as your partner. Just within six months, you have moved into the transmission sector when other investors are complaining about post-privatisation challenges they did not anticipate at the beginning. Does it mean that you see the post-privatisation operating environment as very attractive?
That is a very good question. Let me say this and I speak about this on Symbion side. Symbion are very bullish about Nigeria. We believe in her significant opportunities. It also has significant challenges and everywhere Symbion has gone, we have always looked out for solving problems.
One of the biggest problems in Africa, as you know is unemployment, followed by electricity. We will not be here or anywhere in Africa as a power company and not take that value to that country. So, yes we are in generation but being into generation is not enough. You generate power; yes but you also need to look beyond generation to what the impact of your generation is.
If you are generating power but it is not giving any impact, then you have not really done anything for that country. Remember that I told you that when we were in Tanzania, we were building electricity lines and substations. But if there is no power, because Tanzania at that time had a power crisis; if there is no power to feed into those lines, we are just wasting time.
So, we began to look at acquiring a power plant so that the power plant can now generate power that can feed into those lines. Now, in Nigeria, we have acquired a power plant but the power plant is not getting to the end consumers because of transmission issues. So, we then, with our partners looked at that and said how do we solve this particular problem?
We have a very strong partner in Iroko that are actually able to assist and work with us and collectively with Jyoti, we begin to navigate and share and understand those challenges and how we can collectively resolve them. That is where we find ourselves and because ultimately you can come in as an investor but if your investment is not really benefitting the man on the street, then it becomes nothing more than just a waste of efforts.
Are you looking at investing in gas because gas is also a major challenge?
Some weeks ago, we happened to meet one of the investors working for the gas company. Also last week at the World Economic Forum, the guys at the gas side also came in and made some presentations where they stated that some of the gas problems are somewhat temporary, primarily because of vandalism of the pipelines.
The pipelines do not just carry crude oil; they also carry gas and so, because of that, there are some challenges there, which they are already working to fix. But they assured us that by the end of this year, the graph will move from a shortfall of gas to power electricity to more than sufficient gas for power. For us, we and our partners are already looking at alternatives in terms of how we can work. I had some discussions, for example, with Wale Tinubu of Oando at the World Economic Forum and our discussion was on the impact of gas and how we can have access to gas infrastructure.
How much are we looking in terms of the value of these investments in factory, I mean in financial terms?
Well, we are looking at tens of millions of dollars. If I have to give you specifics, we may be looking at the range of $50million or $100million or even more. We and your partners, even though we have already started the process, and we started looking at $50million to $100million, we have already telling ourselves that we should do more.
As more of those projects come on stream, we will also have to meet a lot of demand and that demand as I am seeing now, is growing significantly. So, we are already talking to ourselves that the plant we are establishing will have a capacity of about 50,000tonnes of steel. However, it will do more as demands grow.