Biyi Sangowawa, an Engineer and Deputy Managing Director of Rockson Engineering company limited, a wholly owned Nigerian company notable for massive construction of huge power plants and currently handling a sizeable number of projects to boost the country’s power generation capacity. The company recently handed over the first phase of the 130 Megawatts Trans-Amadi Power plant to the Rivers state government in a ceremony that had the President and Commander-in Chief in attendance. Sweetcrude’s Yemie Adeoye spoke with this seasoned professional on the sidelines of the handover ceremony in Port-Harcourt, South South, Nigeria on the challenges faced in delivering such a viable project in a volatile region, as well as efforts at completing the 1074 Mw Alaoji power plant in the South eastern part of the country, which according to him is also due for hand over in a couple of months.
Trans-Amadi has been delivered. Now at what project level is Alaoji power plant, and when do you look forward to delivering the project to the federal government?
Alaoji is almost at completion stage, and we are looking at starting commissioning activities by the third quarter of this year. If you look at the one we commissioned today for example, the commissioning activities had started much earlier, so if we don’t have any technical challenges, then there won’t be need for an extension.
What are the key challenges an indigenous company like yours could encounter when delivering such huge projects like you’ve undertaken?
Funding is a key challenge that companies must anticipate. The banks do not support long term projects. For example those turbines you see have a production period of between 15 to 18 months on the average. If you open a letter of credit and you don’t pay the money in 6 months your loan becomes classified, and at that time you have not earned money. So it’s a major challenge under the present scenario. Government should be able to have a long term financial arrangement from between 24 to 36 months, and this would be available for people doing contracting businesses, especially infrastructure projects.
Another challenge is at the point of commissioning, where you’ll need to have professional hands from the manufacturers because they have to send their personnel to witness and confirm what has been done that it’s well done. But due to the level of insecurity in some of these project areas they are normally concerned about the security of their personnel, so we have to now provide assurances for them by providing additional security measures and this also require lots of funds.
With the current cash squeeze in the economy, and with the kind of projects you are handling, how would a normal contractor driving such project break even if this kind of investment is going to be commercial?
It is difficult! For example I’ll use the facility that government is providing, it states that there’ll be up to a maximum of N5 billion, that N5 billion is not even sufficient to purchase one of the turbines. So you now find that when you are doing a huge project like transformer, to even start is difficult. Aside from this, all overseas suppliers now want a hundred percent of their money, letter of credit, cash fast, when all these bank crises happened. They even ask of 115 percent, so you find out that you’ll have to look for an additional 15 percent to borrow and then keep it for 24 months. So government should do something to bring down the cost of financing and the eventual costs of the projects because it adds up.
You are involved with a number of NIPP projects, and from the picture you just painted it appear the project is not going as smoothly as expected. What is the problem with it?
When the crises came one of the things we were doing was to use the finance details on our letters of credit, this was turned away, so we now have to use money and push to the bank overseas form the bank in Nigeria so that they can keep on paying. We are trying to be innovative with financing, we’ve moved on, but these may not be applicable to every contractor. But in our own case thank God we’ve been able to progress on most of the project. For example you said you met me at Alaoji, if you go back to Alaoji now you you’ll see that much of work has been done, another challenge we have is with getting materials to site, customs and shipping gives a lot of delays. We have materials that have been there for two years and all the original documents have not come through the banks or the NIPP, but we’re constantly putting resources there in order to expedite it and reduce the delays, but it is a major constraint. The government has put in fast track methods to customs but they need to get involved with the shipping companies as well so they can understand what the government is trying to do. A case where you are having 180 days to get the materials to site and in the project you are only allowed for 30 days is not encouraging.
Another factor is the host communities, you’ll find out that government has a policy of not paying for land, but just the crops on it, and that area brings about a lot of disagreement between the communities and project owners. This agreement makes it impossible for the project owners, NIPP, in this instance to hand over that site, and if a site is not available to the contractor the n he can commence construction of any type. So we’ve had delays of two years before sites are handed over to us. And most times when the sites are even handed over it could fall into mid year when the rains would have started, and as such we may not be able to do anything until that season is over as the rains disturbs construction work.
Aside from this you also discover that Federal government contract is based on minimum wage, but if you go to all our sites we pay a minimum of 50 to 60 thousand.
But it’s a loss, and they insists that we come up with end of contract bonus and so on which we can not accommodate on our own, so it’s a major challenge, and the communities always look at government projects the same way they view oil and gas projects and we have to consistently tell them and enlighten them that government is putting something in your community and its of benefit to the indigenes as well, so that has also been quite challenging for us.
The power minister recently told Nigerians that a major part of the power problem has been gas, as some of these power plants have no access to gas to power them, now being the project contractor, do you consider alternative project for gas supply alongside the plant’s construction?
We have no control over location or distance of the power plant from the source of gas. That is done by the owner during initial planning. But when we have opportunity to advice we do based on our professional knowledge and technical capacity. You mentioned Trans-Amadi which has been delivered; there is Omoku, Which doesn’t have the same proximity to the source of gas. The one in Trans-Amadi is situated close to gas source form Shell, and Shell uses the same gas for their own power generation in Trans-Amadi, if you go to Alaoji for Instance, it is not part of our contract but that is being handled by either Nigerian Gas Company or NIPP, similarly at Egbema, at Gbarain it is close to the gas source. So you can see that wherever possible the project owners tries to make it easy, but they may not be in control because when they want to look for a land in a community, the leaders may come up and say these are the ones available that we can give, and they may end up giving out the worse and most difficult lands.