Energy transition’ll define the next century – Kola Adesina

The name, Mr. Kola Adesina, is a household name in the Nigerian cum Africa energy sector. He is the Group Managing Director Sahara Power Group, the owners of Nigeria’s largest power generation plant, Egbin Power Plant and Ikeja Electric Plc, one of the most viable electricity distribution companies in the country. In this exclusive interview with EnergyDay Nigeria, he reveals the company’s big plan for energy sector, as well as the need to urgently improve the power sector as a way of developing the economy among other issues. We bring you the part 1 of the chat with the man who knows what it takes to make the sector work. Excerpts

 

As a consummate entrepreneur with experience that traverses the academia, finance, energy, trade and diplomacy, how has these influenced your investments decision in the energy sector?

Experience, they say is the best teacher. The years of accumulated experience that I have acquired have been very relevant in putting together a framework that works. A theory is different from practice. Real life has a different colouration far from the theory taught in schools.

Some of the theories can be adapted and domesticated to local environment for a shrewd business man .

Thankfully, I have been able to break it down to work for me. System and people produce result. Creating a system and framework that works is a very important exercise. You are bringing different people from different backgrounds together for the purpose of breaking barriers and achieving an enterprise’s vision seen as usually critical challenges.

Essentially, it has been life- transforming and bringing together the accumulation of knowledge and experience that I have acquired on  the table to achieve the level of success we have made so far.

 

We realise that Sahara Group has invested in energy, power, oil and gas infrastructure conglomerate with operations in over 38 countries across Africa, Asia, Middle East and Europe, how sustainable is this investment amid global energy transition?

Well, for every human history there is a phase of <_o-fip-hl id=””>development</_o-fip-hl>, just as there have been different revolutions around the world before and after the industrial revolution.

Every epoch has their own driving vision, and it is always <_o-fip-hl id=””>development</_o-fip-hl>al in nature, goals, creativity, innovation, new ideas and the likes. Human being live in an experimental society permanently glued to finding more cheaper, better and qualitative ways of doing things.

Our investment decisions are reflective of all this, and their validity can be seen in terms of progress that has been achieved so far. Part of the most critical and foundational <_o-fip-hl id=””>development</_o-fip-hl> that have been made in human history is electricity.

Electricity has been the most life- transforming of all the things that human beings have created. Without it, nothing can be done. There can’t be mobility, technology, industrialisation and other human activities without electricity.

This shows that organizations such as ours have the responsibility to bring energy to life. The map of Africa shows that half of the continent is in darkness primarily because of lack of electricity.

So, essentially, we realised that investing in the areas of needs will help humanity solve basic problem and make Africa become a leading continent amongst continent of choice in the world.  Part of what is lacking is electricity, and we have chosen to be in that space.

 

What about Investments in the oil and gas sector?

Oil and gas is more for the purpose of capital and population. We need fuel for vehicular movement.We have chosen to be in that space for the purpose of trade and transportation to make it possible for us to move around.

Energy transition will ultimately define the next century, more than other things, apart from robotics, algorithm, virtual reality  that will drive and shape destiny of mankind in the future. Energy transition in terms of renewable will shape the way we behave. We are equally investing in that space.

 

It has been eight years of managing Egbin and Ikeja Discos, How will you describe the journey so far? And what is the plan for the Egbin phase 2?

It has been eight years of learning, unlearning and re-learning. Before we took over the asset of the defunct PHCN, we had a different mindset about the state of the infrastructure, but upon taking over the assets, reality dawned on us that things are far worse than what we acquired at the time of advert and acquisition of the facilities.That was a dilemma for us, a big challenge

As an organisation, we have to move on in spite of the reality we were faced with at that time. The electricity situation in Nigeria at the period of privatisation was in a primitive stage, to the extent that when you consider the period that the hydro-plants were built around the 50s and 60s, and the period that Egbin plant was built as a power plant, no new power plant was built in Nigeria.

It was after this period that Azura and other NIPPs were developed. The government later decided on the need to allow private players to develop the system to a desirable state. Egbin power plant was generating about 400MW at a take-over. As a matter of fact, we are at the verge of delivering full value from 1320MW but gas supply became a major issue coupled with archaic transmission lines which became obsolete because of poor maintenance.

That impaired our ability to commit more investments into the system. We need resources to revamp the facility back to life. The significant resources required to bring it back to life can best be imagined. That became a problem.

We have had to contend with energy used  and not paid for by consumers. We dealt with lack of apathy and cultural values system issues on the part of the consumers, because majority don’t want to pay for electricity used.

We have so many free-riders in the system. It was evident that the majority of the knowledgeable free riders are the ardent critics of the power sector in Nigeria.

We are still facing that situation as an organization till date. Part of the fact is that, whereas we had a seemingly stagnant power sector <_o-fip-hl id=”_o-fip-hl-focus”>development</_o-fip-hl> in terms of infrastructure, the population was not stagnant. It was and is still growing, it means infrastructure that were built in Lagos and other parts of the country were meant to cater for specific individuals in different locations.

That population ballooned in an unprecedented manner, outspacing the resources available to provide electricity for them. It therefore means more people and old infrastructure. With the growing population there is likelihood that transformers would blow and the facilities won’t be able to evacuate energy being produced, and demand cant be met for the people.

When you put that together with price, then you come into reality of what the story of eight years has become. We have had so many of policy somersaults for years, thankfully and lately, there has been stability now because, the mindset has changed from abuse and condemnation to understanding of the real business.

It is easy to play football in the comfort of your sitting room, but when you take it to the football pitch, you realize, it is not as easy as one thinks.

By and large priority has changed, government has realised that for us to achieve the kind of target we have set for ourselves as a nation, there is a need to support the players in the electric market. I commend them for that, in terms of offsetting old debt of public employees, they are beginning to pay a few chunk of that debt. The resources and money availability to pay old debt is utilised .

Invariably, positively, there is sanctity of contract, Government now respect the fact that those assets, were not sold free of charge, we paid for them. Secondly, they have realised that it is not true that we are incompetent, we are competent to manage the power sector, but we have a lot of extraneous factors to deal with, and at first all of these were not taken into consideration at the take -off of the privatisation process. There is a re-calibration move ongoing and I have no doubt that all players are going to make it happen for Nigeria, we will have light that would go round.

 

How has developing the Egbin been as the largest privately owned power distribution business in South Saharan Africa (SSA) and the largest thermal plant in the region with 1,320MW installed capacity, providing a quarter of the total generating capacity in Nigeria) from 300 megawatts, an abysmal 22% in 2013, to 89%?

When we took over in 2013, we later realized that the assets were under-performing, they were not in their best. Most of the facilities were old and archaic. We realised that there was a need for us to maintain the system. We started the regime of maintenance , which led to the overhauling of the machine. So we had a better improvement in terms of rehabilitation of the old asset. The process of privatisation and investment has yielded real fruit in-terms of output that you are seeing in the last couple of year. We now have investment, discipline, understanding and about finding ways to ensuring that we meet the critical question of reliability and availability. We have invested in technology in terms of control system.

We have massively trained our staff in terms of attitude, operational excellence, behaviour and bringing them up to speed in terms of global best practices. It is a journey, we are navigating . We  would have doubled our capacity four years ago. It was our plan that at fourth year, we would be commissioning the first new turbine, we had different phases contemplated at outset, but we were confronted with myriad of problems including lack of payment of outstanding. There is no way any right-thinking investors faced with those issues would put additional resources into business that is not yielding the returns.

We were not paid for services we provided for customers. That hampered and stunted the Egbin 2 agenda. Things are getting better now, and hopefully, sooner than later,  we will be able to start conversation around investing more.

 

Amidst policy somersault and other anti-investment variables, what gives you the confidence that investing more in the sector characterized by obsolete assets and poor orientation, would yield fruit?

At Sahara Energy, it is so simple for us, we believe in life things undergo changes, but the light of hope must never be extinguished. Until  we get to that stage where we become  hopeful enough of the future and vision we desire to see, we are not going to make it happen.

The vision requires doing, which is critical in terms of getting Nigeria into the future of our dream. Apart from mindset, we need priority and implementation of ideas. We cant just sit in a point and be dreaming of changing situation, country by just dreaming, you have to do it to make it happen. Our investment efforts are yielding fruits through actions that we are taking. When God was forming the world, He created something out of nothing. As human being , if truly we are created in His image, it is therefore essential for us to be a replica of God, and that is why we have to be transformed in nature by taking anything we see and make it better.

It is more of an infusion within us, the belief system, passion that is a bit not so natural, we are uncommonly patriotic. We believe that the black race is a superior race. We believe that human <_o-fip-hl id=””>development</_o-fip-hl> has been built on the foundation created by black empowerment more than any other things. Black made wonderful innovations happen, mathematics, geometrics come from Africa, every basic foundational theories and principles emerged from Africa.

We are not as dark or ignorant as the world would make it look like. We need to change the narrative and that is what we are essentially doing at Sahara Energy.

 

What is the future of Egbin Power Plc, is there any plan to invest in renewable?

We have Sahara Group which is the anchor company of all the power assets that we have, so we are investing at Sahara in renewable. God gave us facility for electricity in Africa through solar. The sun is a fundamental feed-stock which has been grossly under utilised by human race. That is something  you will see in our agenda plan for renewable. We don’t want to rush as the world would make it look. We are doing this in different phases. The focus is more on decarbonation efforts. Africa is the lowest in production of carbon emission, I don’t see reason why Africa should  carry the burden more than those emitting more green house gases .

In our own ranking as an organization, is for us to fully utilize our gas potentials rapidly for the <_o-fip-hl id=””>development</_o-fip-hl> of our country and continent. We will be transiting side by side in the energy space using renewable solution. Part of what we are doing is to invest in the technology that will decarbonise our assets, in order to help us reduce emission in all our plants and facilities.We have an intention, a strategy in the gas space.

We will be doing more in investment in renewable. We feel it is something we have to push especially with the buggies in our facility moving people to reduce carbon emission without their vehicle smoke. We are going to triple the capacity of Egbin depending on the commercial viability of the sector.

 

Grid collapse has always been a major issue reportedly facing the power sector. How do you respond to this sir?

Grid collapse results from two things. Most people just limit it to one on the basis of convenience. The first one is the off take. If there is no demand, there can’t be any supply. If you see any product that is cheap and nobody is talking, it’s because there is no demand for it. If there is demand, then you see supply. A lot of companies left Nigeria years ago for different reasons. Of course you can see that the capacity we are deploying is around 4000 megawatts, and it’s not going beyond that. Why? Because there is no demand. For instance, if you go to Ogba Industrial Estate and it industrializes the way it used to be, there will be appetite for me to put investment in that axis, to ensure that the power supplied to the location is enhanced.

Because I know that valuable customers that will pay for services are there. The DNA of any businessman is profit maximization. If the market is good, you go there with your service and give it a trial. So the first thing we need to do is the activation of industrialization in Nigeria the way it used to be. Let’s reverse the trend of companies going to Ghana and the rest of them. Whatever is causing the migration of industries to other countries, we need to put a stop to it. Let’s us know how to create policies and set up programs to bring back those industries. I think this is the first thing that causes grid collapse.

The second thing is that most of our customers are not paying for services rendered. Now what is the incentive for us to invest? Simply put: you put your money where you recover your investment. Government started something recently which we need to applaud government for – the National Mass Metering Project. It is a significant push and move for that reason, Nigerians must actually celebrate this administration. Now the new minister has being installed. But guess what? Now I need you guys to go and validate the percentage of bypass of meters in all the Distribution Companies, the figure will astound you.

It’s just unbelievable. So it’s been an investment in something that is meant to be a bridge of trust because the reason for metering is due to the lack of trust between the consumers and the provider of service. So you need to validate your consumption. Now you the consumer have chosen not to pay for the power you enjoy. So, the meter is useless – the investments in the meter are meaningless. So what will the provider of service then do. It won’t push power in that direction anymore.

It would push power to those who can and will pay, not to those who are bypassing the meter, the line and enjoying free electricity. So invariably, the less I take as a DisCo, the higher the likelihood of the grid collapsing. So let’s leave that aside. The next one is the transmission infrastructure. Just like I mentioned earlier, the transmission infrastructure wasn’t buillt for the level of population – the users today. It was built for the old population and you know the growth rate of our population. So when we were just 80 million, some of these infrastructure were built. But now we are over 200 million. So there wasn’t any commensurate investment in transmission sufficient for us to evacuate power from the generating plants to various customers. So transmission meets investment. You need to find a way of recalibrating and ensuring that the lines are strong, good and can deliver the energy that the people desire to see. When there’s no gas, there’s no power. As a matter of fact, every other thing fails. When there is no gas. So part of what government needs to do and I think it begins to do something hopefully, is that gas should be made readily available to all power stations.

In fact, as far as government is concerned, it should be the priority of government to see that gas suppliers push gas to us. That means there is need for something – an integrated power plant. Do we have an integrated plant to cure the defects in the system. Grid collapse is not just from gas supply. The entire system plays a role in respect to grid collapse.

There is a need for us to do something in terms of having an integrated power plant. For us at Sahara, we are not investing in the gas space, as well. Because we have realized that we need to take our destiny in our hands. Previously, we had sourced our destiny in hands of other persons, but we realized that they failed us. So we don’t want a situation where our destiny would be toyed with. You want to build 100,000 megawatts power plant without gas – it’s useless. So we don’t want to get into that space.

 

NB: We bring you the concluding part of the interview next week. Keep a date with us.

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