FG Directs Ministries, BPE to conclude Siemens Electricity Deal
The Federal Government has directed the Ministries of Power, Finance, and the Bureau of Public Enterprise (BPE) to conclude the pre-engineering and concessionary financing agreement with Siemens AG, to boost power supply in Nigeria.
The Presidential Power Initiative (PPI).is a power infrastructure upgrade and modernization Programme agreed to by the Federal Government and Siemens AG of Germany, with the support of the German Government.
According to the government, the goal is modernize and increase the Nigerian electricity grid capacity from its current capacity of about 5 GW to 25 GW, over three phases.
Under the PPI initiative, Nigeria on behalf of the other shareholders in the Electricity Distribution Companies (DisCos), will invest in infrastructure upgrades in the form of improved payment systems, distribution substations, transformers, protection devices, smart meters, and transmission lines among others.
In what seems to be a reference to initial opposition by the DisCos, The Presidency explained that all DisCos have, directly and through the BPE, been diligently carried along over the last 15 months to understand in detail the challenges in the electricity systems.
The funding for the project will be secured under concessionary terms – up to 3-year moratorium and 12-year repayment at concessionary interest rates) through the German Euler Hermes cover, which Nigeria will on-lend as a convertible loan to the other shareholders in the DisCos.
According to the statement, President Buhari has given approval for the release of funding of the first part of Phase 1 of the PPI, to kick-off the pre-engineering and concession financing workstreams.
“To ensure fairness and transparency of the intervention, the President has also directed that the nation engage the International Finance Corporation (‘IFC’) to assist in developing the commercial structure of the intervention…
“The President has also directed that to ensure value for money and preserve the integrity & transparency of the procurement process under the Govt-to-Govt framework, Siemens AG shall be solely responsible for nominating its EPC partners to perform all onshore works; NO middlemen.
“Our goal is simply to deliver electricity to Nigerian businesses and homes… Our intention is to ensure that our cooperation is structured under a Govt-to-Govt framework. No middlemen will be involved, so that we can achieve value for money for Nigerians,” President Buhari added.
The PPI journey started on August 31, 2018, when Chancellor Angela Merkel visited Nigeria and met with President Buhari. Then the Chancellor brought along with her a business delegation that included the Global CEO of Siemens.
Nigeria and Germany agreed to explore cooperation in a number of areas, including Power.
PPI was designed to deliver improved power supply nationwide, with attendant results in job creation, investor confidence, cost and ease of doing business and economic growth. The partnership is also expected to guarantee training & capacity building for thousands of young Nigerians (non-graduates, students & graduates).
Other goals include the creation of economic opportunities for Nigerian engineering companies that will serve as local vendors for the provision of manpower and equipment. Overall, the partnership will guarantee inflow of additional investment into the power sector.