Tony Elumelu, chairman Heirs Holdings, bares his mind in this interview on how to unlock investment and growth in the West African power sector
What power projects is Heirs Holdings involved in that you are most excited about?
The Power Africa Initiative is an amazing opportunity to democratise access to power for Africans, and the $2.5 billion investment commitment we have made reflects exactly how excited I am about it. The present administration made a bold decision when it decided to effect the changes envisaged by the Power Sector Reform Act — legislation that had been on the books since 2005. And that bold step was reinforced during President Barack Obama’s last visit to Africa. We felt more strongly than ever, the need to help power Africa. Our experience so far at Ughelli power plant is testimony to the size of the opportunity; our amazing team has taken that plant from 150MW capacity when we took over inNovember 2013, to 450MW today; we expect…to achieve 1000MW by the second quarter of 2015. At that rate, we’ll be contributing 20 per cent of Nigeria’s total power generation. To push the possibilities further, we are working on a greenfield project that will expand the capacity of Ughelli by an additional 1000MW in the next three to five years and we’ve signed an MOU with GE and Symbion Power to facilitate this.
I must add, however, that gas is an integral part of power generation and we are pleased that our oil assets in the Niger Delta will eventually produce gas to meetour gas needs at Ughelli. At current production projections, by the end of 2015, 150mmscf per day will be produced and that will meet about 40 per cent of the gas demands forUghelli.
As you can imagine, working to literally power Africa is truly exciting.
What, in your view, are the main challenges in Africa’s power industry? If you could change three things today, what would they be?
Locally, the major challenges we have are: 1) unreliable transmission infrastructure; 2) access to uninterrupted gas supply, and 3) timely settlement of invoiced payments.
In Nigeria, one of the biggest challenges to power generation is transmission and in fact, while Ughelli Power Plant generated at full capacity for the first time in July, we’ve been asked to scale down generation because of the outdated transmission systems; for every 100MW generated and sent to transmission companies, 40 per cent is lost, in part because of this infrastructure issue.
And the challenges go beyond transmission. Many plants in the country can produce more than they currently do, but the limited availability of gas makes it difficult to produce according to the companies’ individual capacities, which affects the total supply and explains why the average Nigerian hears reports of increased capacity which is yet to be translated to increased power availability in homes and places of work.
Also, power generation is capital intensive and as it stands, we send the power we generate to the transmission company as soon as it’s generated and we count on the government to pay in a timely manner, but that has posed a bit of a problem.
What’s more, while regulation isn’t a key challenge, it is an issue within the sector that if addressed, has the potential to speed sector growth exponentially. We need pragmatic regulation that recognizes that within Nigeria, the sector is nascent and so policies must be designed to encourage growth. In fairness, the federal government is confronting these challenges head on. It has introduced incentives for gas producers so that they can invest more in production; it is improving the gas pipelines and planning a transmission market for October. The federal government is also making ongoing investments in upgrading the transmission infrastructure and that will make all the difference. So while the challenges exist, one must continue to plod on in anticipation of the changes to come.
What is your vision for this industry?
I believe the power industry is a catalytic sector and the development of our country and our continent cannot happen without fixing it.
Our Group has the ambition to generate at leasta quarter of Nigeria’s power consumption needs in the next five years. I realise that as we steadily increase our output, the base will change, but we are committed to keeping pace.
I am an avid believer in the capacity of the private sector and the discipline it can bring to bear. I know that we will deliver on the promise of abundant power, which in turn will help address the pent up demand for access to electricity that our vibrant economy needs to keep growing at an even faster pace. A healthy, well regulated, and largely private power sector is possible and will form one of the cornerstones of true economic development.
What surprises you about doing business in Africa?
It’s less about surprise and more about what spurs me to do more and invest more. For perspective, we are invested in oil & gas, agribusiness, hospitality, real estate, health insurance, medical services and power. We do this because of the attractiveness of returns in these focus sectors and the opportunities that can be created for the people of Africa. The size of the opportunities in Africa is big and that may be surprising to others, but not to us.
What has recently brought a smile to your face while doing business in/for Africa?
I am a big believer in Africa and Africans. I often look back in amazement when I think about the progress that has been made in recent years and the pace of that change. The fact that I believe we are at a tipping point is a constant source of happiness as I look forward to what I expect will be a very exciting and rewarding future for the continent and its people.
Your philosophy of Africapitalism, where did it originate and how has it changed the way you do business?
My years of living and working in Africa and learning from each success and failure has helped to shape my business outlook and my operating philosophy.
That philosophy is encapsulated in what we call Africapitalism. Africapitalism is an economic philosophy that places more weight on long-term investments in key sectors that drive growth. My personal experience also suggests that sustained economic prosperity must be inclusive and must createsocial wealth. Our group and those we partnerwithare building thriving businesses that generate healthy returns and transforming the lives of ordinary Africans on the continent.
So, Africapitalism is my attempt to advocate and promote what has worked for me. We as Africans are uniquely qualified to take the lead and develop Africa. I think we need to be more self-confident in order to create the sort of future our children deserve. All the ingredients for success are here in Africa and investing for the long term in key sectors, our people, and processes, will help to solve our problems and retain wealth within the continent. This is what underpins Africapitalism— by creating jobs and improving livelihoods, we are creating social wealth.