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News & Press Releases

N12 billion Government Debt Stalls Power Projects

THE GUARDIAN, Monday, March 24, 2008

Contrary to widespread information that all contractors handling the National Integrated Power Projects (NIPPs) have been paid, one of the contractors, Rockson Engineering, stated at the weekend that the Federal Government was actually owing them about N12 billion for the job done so far.

The Managing Director of the Port Harcourt based engineering firm, Sir Johnson Arumemi, at the weekend, insisted that the company had not defaulted in its contractual obligations to the government since the completion date for all the four power stations being handled by the company is 2009.

Arumemi said that lack of payment for the job done so far on the various projects handled by the company and administrative bureaucracy in the Ministry of Energy (Power), Power Holding Company of Nigeria (PHCN), Niger Delta PHCN, the Central Bank of Nigeria (CBN) and other related ministries such as the Ministry of Transportation has held back the pace of work and may ultimately affect the delivery date for the plants.

Arumemi stated this at the weekend after the company had taken some journalists on a tour of all the power projects being handled by it and the consignment stacked at Onne Port in Rivers State.

He explained that though Letters of Credits (LCs) were opened for some of the projects, indicating that government had guaranteed the funding of the projects, such LCs did not translate to cash or payment.

Rockson Engineering is handling four of the nine power projects initiated by former President Olusegun Obasanjo located in Alaoji in Abia State, Omoku in Rivers State, Gbarain/Ubie in Bayelsa State and Egbema in Imo State.

In all, the total cost of the projects is about $1.2 billion (N141.6 billion). The Managing Director stated that the contracts were structured in such a way that the contractor must complete the job in stages to be able to draw from LCs after approval by the government's consultant to the projects and other agencies.

He said that Rockson Engineering had not been able to draw from the account because the CBN and Ministry of Energy (Power) have refused to sign the relevant documents for the release of funds.

According to him, over 125 containers of power plant equipment in respect of Alaoji Thermal Plant in Abia State, Egbema Thermal Power Plant, Gbarain/Ubie and Omoku Power Station are still lying at the Onne Port, yet to be cleared due to bureaucratic bottlenecks.

He added that the Gas and Steam Turbines for Alaoji Power Station were also stacked at Onne Port in Rivers State because government had failed on its part of the contract to upgrade the Imo River bridge before the equipment weighing over 260 tonnes could be transported to the site and installed.

He also pointed out that payment for additional jobs such as relocation of transmission line in Alaoji, conversion to combined cycle plant instead of single cycle plant as well as civil works for phase two of the Alaoji projects had not been paid by the government. He put the demurrage on the imported equipment lying at Onne Port at over 600 million euros (about N106.8 billion)

The chairman of the company, Senator Aniete Okon, said warranty on the equipment supplied by General Electric (GE) was running out as they were supposed to have been cleared at the ports and installed since the last quarter of 2007. Okon said all attempts to get the Ministry of Energy (Power) and PHCN to facilitate the process of clearing the equipment even with the intervention of the House of Representatives Committee on Power and Steel in December last year with the Minister of State for Energy responsible for Power, Hajia Fatima Balarabe-Ibrahim, failed to produce the desired results.

Also speaking with journalists on the issue at the site of one of the projects in Alaoji, Site Manager, Mr. Graham Jubb, said without gas and steam turbines coming out of the port, there was nothing the contractor could do, adding that if the equipment were moved to site this month, in another nine months the Alaoji Power Plant would supply power to the national grid system.

"It is frustrating that we can't install the gas turbine (GT) and the steam turbine (ST) because they are held up at Onne Port. I think they have done well considering the amount of work so far completed on site," Jubb stated.

PHCN Site Manager at Alaoji, Okey O. Udeh admitted that since the commencement of the project, no PHCN official or the Ministry of Energy (Power) has visited the site, pointing out that with the level of work at the site if the GT and ST were moved to site on schedule it would facilitate the early completion of the project.

Arumemi said his company had severally invited the House Committee to visit all their sites but it was only Egbema they visited during which the company was commended for the job done, adding that it was therefore embarrassing to hear that the money had been paid and no work was done.

According to him, even after signing the contract it could not have been effected immediately because in such Engineering, Procurement and Construction contract (EPC), 75 per cent of the funds will go into offshore procurement since those machines cannot be obtained off the shelf. He, therefore, urged the committee that before concluding its assignment, it should visit all the sites being handled by Rockson Engineering and tell Nigerians what it actually saw on ground.

Another crucial issue raised by Arumemi was gas to power the project, noting that the natural resources were available and hoped that the relevant agency would commence work early enough to supply gas to the plants.

The Managing Director said before all the equipment were shipped into the country, officials of PHCN and NIPP were at the factory overseas to witness the factory tests and were satisfied with the results before moving into the country. "As we speak now some PHCN officials are still abroad on this factory test on the gas and steam turbines for these projects," Arumemi said.