Nigeria: Mambilla Power Project and the Unanswered Questions

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Hydro Electric Dam

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, stirred up a hornet’s nest recently while reviewing the power sector, with his dismissal of a Nigeria firm, Sunrise Power and Transmission Company Limited (SPTCL) and the company’s involvement in Mambilla hydropower project. Though the minister admitted that the project was not just a power project, but economic driver, he argued that there was no time it was expressly stated that SPTCL was awarded any contract. He also stated that there was no point for intermediary in a government to government relationship as it concerns Nigeria and China in the case under review.

Fashola stated that the project was an investment in infrastructure and that he couldn’t remember in short time, when Nigeria dedicated as huge as $5.7billion to such project. Among other opportunities, he stated that during and after the construction must have been completed, local contractors, SMEs and players in the agricultural sector, who require irrigation to survive, in some part of the country, would have been hugely impacted.

The merit of the minister’s submission notwithstanding, many analysts have argued that he was unfair to the Nigerian firm – SPTCL, who is believed to have nurtured the project from the conception period. It has also been argued that the minister’s decision to puncture the integrity of the firm was a calculated attempt to call the dog a bad name in order to hang it.

The promise, the project

Among other promises, the Buhari/Osinbajo administration had assured Nigerians during the buildup to the 2015 election and after inauguration that it would do everything humanly possible to surmount the infrastructural challenges facing the country, especially in the area of electricity. It was not however a surprise when the administration decided to revisit the Mambilla Power Project that has remained in comatose for over a decade. But with the latest development and the legal crisis that has set stakeholders in the project against one another, it may as well become another failure of a nation.

Hope was high in November 2017, when Fashola, announced that President Muhammadu Buhari has approved $5.792 billion (about N1.1trillion) for the construction of the 3,050 megawatts Mambilla Hydro-Power Project at Gembu in Taraba. To many people, who heave a sigh of relief their belief was that the country has finally broken the jinx of power failure stalling the economic development in many sectors.

As the news broke that partners on the project and supervising ministries are no more on the same page, many questions are being asked over what exactly went wrong, when and where. The worst part of the issue has remained the experts’ view that the federal government is at risk of a $2.3 billion fine in arbitration over an alleged breach of contract in the project.

The project, a 3,050-megawatt hydropower facility, has stalled as a result of legal and funding crises after SPTCL, a local content partner, was reportedly sidelined in the project by the ministry of power, works and housing.

In many correspondences, the firm has insisted that it was awarded the contract to build, operate and transfer (BOT) in 2003, has dragged the federal government and its Chinese partners before the International Chamber of Commerce (ICC) in Paris, France.

A UK arbitration court recently awarded nearly $9 billion against Nigeria over a breach of contract with Process and Industrial Developments Limited (P&ID), earlier given the green light to build a natural gas development refinery.

Meanwhile, the China Exim Bank, which is expected to provide 85 per cent of the joint funding with the federal government for the Mambilla project, has insisted on compliance with due process and terms of the November 2017 engineering, procurement and construction (EPC) contract signed with the partners before releasing funds.

Chief Executive Officer of SPTCL, Mr. Leno Adesanya, in a letter dated March 31, 2017 to Fashola, had accused the minister of reneging on his promise to support the project.

Adesanya said between 2003 and 2009, SPTCL had spent millions of dollars with financial and legal consultants to raise about $6 billion for the execution of the project, yet the company has suffered a lot over the years “through improper administrative interruptions and interventions.”

Other things that have called for attention include the failure of Federal Government to comply fully with the Settlement and GPE Agreement(s) of Nov 2012 between Sunrise and FG, which is the basis for the ICC Arbitration.

Besides, China with its $3 trillion in reserves and 6-10 per cent annual growth rate has called for amicable resolutions in their defence of the Arbitration proceedings.

Again, the Attorney General of the Federation, Mr. Abubakar Malami, who has written six memos urging the federal government to honour the agreement with Sunrise is believed to have made a sudden u-turn allegedly out of the fear of some powerful people in government, and they advised AGF in writing to negotiate an out-of-court settlement with Sunrise because of existing 2012 agreements.

In the beginning

As part of the plans to solve the perennial problem in the power sector, the Obasanjo/Atiku administration had proposed Mambilla Project in the early part of its first term in office. According to a document obtained by THISDAY, prior to the official tender process, a Nigerian company, Sunrise Power Transmission Co. Limited assumed the front seat in promoting the project.

To harmonise all stakeholders in the project, the firm had reportedly engaged the offices of former President Olusegun Obasanjo and former Vice President Atiku Abubakar as well as the Nigerian Embassy in China and that led to the first state visit of then President Obasanjo to China in 2001 and Vice President Atiku in 2002.

It was thereafter that a bidding process was opened for the project and the Ad-Hoc Inter-Ministerial Committee recommended Sunrise and its Chinese Partners. On April 7, 2003, the committee wrote the President for approval to officially issue an award letter.

Therefore, on May 22, 2003, the then Federal Ministry of Power and Steel (Now Part of the new Ministry of Power, Works and Housing) issued a letter of Award to Sunrise Power and Transmission Company Limited in consortium with North China Power Group as Technical Partners. The contract was for the construction of a 3, 960MW Hydroelectric Power Project in Mambilla on a Build, Operate and Transfer (BOT) arrangement for a provisional $6 dollars. Sunrise accepted the offer.

In August 20, 2003, Sinohydro, which has its principal place of business at no.1 Ertao Biaguang Road, Xuanwu District, Beijing, PR China, North China Power Engineering Co. Ltd with its business address as 24a Huangsi District, Beijing and Sunrise located at Oluwa (Fowler) Road, Ikoyi, Lagos Nigeria, signed a contract to work together on what was then the 3, 960MW project. Sunrise engaged Sinohydro to construct the project on an Engineering, Procurement and Construction (EPC) basis.

However, shortly after it has begun work, the firm received a shocking letter on September 3, 2003 from the Ministry of Energy (FMOE) claiming that the Federal Executive Council did not approve the memo recommending Sunrise for the project and directing Sunrise to tender for the project when it is advertised.

After all attempts made to resolve the issue failed, Sunrise and North China had engaged the services of a prominent Nigerian Lawyer, Chief Afe Babalola, a Senior Advocate of Nigeria, to demand compensation. In a letter written by Chief Babalola dated February 4, 2005, and directed to the government, the lawyer had argued that the ministry could not seek to repudiate the contract as it had attempted to do in the Ministry’s letter, stating that not after Sunrise and North China have incurred expenses on the preparation incidental to the execution of the project.

The crisis reached its peak under the Late President Umaru Yar’Adua when it enmeshed in another controversy over the way a Presidential adviser allegedly took millions of dollars in bribes, and eventually led to the removal of the official and the termination of the $1.46billion civil works contract.

In a letter dated June 20, 2017 to the then Acting President Yemi Osinbajo requesting his intervention in the matter, Adesanya accused Chief of Staff, to President Muhammadu Buhari, Mr. Abba Kyari of taking the unilateral decision of directing the ministry of power to sideline the company from the contract against the advice of Abubakar Malami, attorney-general of the federation (AGF)In the letter dated July 24, 2017 to Osinbajo, with a copy to the chief of staff, Malami had said SPTCL should be engaged as a local content partner on the project “as a means of accommodating its prior contractual interests on the project.”

In another letter dated August 17, 2017 to the company, the attorney-general of the federation said he issued the previous opinion on the project based on the limited materials provided at the time.He added that there was no requisite FEC approval for the project.

The question being asked in some quarters over this position is that why parties to the project invited the company for out-of- court settlement, when it was not engaged as being claimed.

Is it a case of sabotage

Considering Buhari’s no nonsense posture and zero tolerance to corruption, the recent development and power play among stakeholders in the project, is already setting tongues wagging with many members of the public asking if sabotage is again at play to frustrate the project.

Some observers, who believe that the project, which is being undertaken by the Federal Ministry of Power, Construction and Housing, with the help of Chinese investments if completed, will be Nigeria’s biggest power plant as it is expected to produce approximately 4.7 billion kWh of electricity a year and generate up to 50,000 local jobs during the construction phase, have continued to advise government not to allow the dream to die to needless political meddlesome.

But due to alleged issues of compliance with due process, funding for the project has stalled as the China Exim Bank which is to provide 85 per cent of the required funding for the project has insisted on compliance with due process and the terms of an EPC contract signed with the Chinese JV Partners on November 2017 before releasing funds.

According to THISDAY findings, in a passionate move to avert any major problem that may put the project on permanent hold, Adesanya has written series of letters to the relevant authorities to ask that the project be rescued.

Adesanya had written to Osinbajo while he was acting as president and Fashola as well as a petition to the International Court of Arbitration in Paris over arbitrary non-compliance with the contract signed with Sunrise

He had in a petition to the President Buhari called for justice and the intervention of the president in saving the project as his company was removed as a local content partner to the project as a result of a unilateral decision.

“Mr. President can save the project from being enmeshed in another controversy as it occurred during the government of President Yar Adua where a presidential adviser allegedly took millions of dollars in bribes, and eventually led to the removal of the official and the termination of the $1.46billion civil works contract,” said Adesanya

He had alleged in his letter to Osinbajo that on May 22, 2017, their Chinese partners had informed them that the federal government had through Kyari, instructed the Ministry of Power, Works and Housing that his company should not participate in the Mambilla Hydropower project.

He had also in the letter made an appeal, adding that “we have pleaded with our financial partners to be patient with the federal government as the various developments that delayed the project played out. We are however constrained to observe that the latest developments, if not rectified in line with the recommendations of the Attorney General of the Federation prior to seeking FEC approval, shall leave us with no choice but to seek legal redress where appropriate.”

In an interview with THISDAY, a construction engineer, Mr. Ayo Akinyemi, said this stall in funding will set the 3,050MW Mambilla Power project which is a signature project of the President Muhammadu Buhari administration on power back and affect the expected take-off date.

“In all these, I see power play, I see politics over necessity, I see the concept of rule of law being abused and I feel so bad. In my opinion, the minister of Power, the Attorney General, the Chief of Staff to the President and the partnering consortiums should go back to the drawing board in the interest of the country to resolve the issue. Perhaps the progress made in the project would have been a major breakthrough and campaign tool for Buhari administration, but for the selfish interest of some individuals,” he said.

When THISDAY reached out to the Special Adviser to Fashola on Media, Mr. Hakeem Bello, on the minister’s view to the whole issue, he promptly referred to the recent NTA interview and forwarded same for the reporter’s perusal, stating that he had nothing more to add.

Authored By: Raheem Akingbolu
SOURCE: THISDAY

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