The pacemaker: Nigerian power plant sets new standards for construction
The new 461-megawatt Azura-Edo power plant near Benin City, Nigeria, already delivers up to 10 percent of the country’s on-grid power – a milestone in its own right. But its construction also set new benchmarks for excellence in speed, financing and safety – providing valuable lessons for future power projects in emerging markets.
by Janine Stephen
By the time Siemens handed Phase 1 of the Azura-Edo Independent Power Plant (IPP) over to its satisfied customer in May 2018 – over two months ahead of schedule and within budget – the project had clocked up a number of firsts. The milestones, however, aren’t technical. No, the firsts are more unusual than that.
This is Nigeria’s first large-scale project-financed IPP, developed by the young company Azura Power Holdings. Azura’s painstakingly negotiated contractual agreements with stakeholders, from gas supply and transportation to power purchasing, have set new market standards for the on-grid electricity supply industry in Nigeria. It was also the first such project known to provide a weekly public blog that emphasized transparency, performance and delivery over the course of the 28 months of building – and construction of the plant overcame logistical obstacles to set new benchmarks for speed and on-site safety.
The turnkey 461-megawatt open cycle plant is the fourth gas turbine power plant in Nigeria to be provided by Siemens. The plant boasts three Siemens SGT5-2000E gas turbines and three SGen5-100A generators, long proven to be reliable, robust components in tough environments. Over 600 of these tried and tested turbines already operate around the world, including at Gerugu I where last year Siemens carried out its biggest service project in West Africa.
Building bridges between communities
Construction on Azura-Edo began in January 2016. The engineering, procurement and construction (EPC) team for the project near Benin City, Edo State, was a consortium made up of Siemens and civil construction company Julius Berger Nigeria. Along with the turbines and generators, the scope of supply for Siemens included transportation and the complete electrical and high-voltage equipment, including switchyard, transmission lines and overhead towers as well as the extension of the Benin North Substation, says Siemens Project Manager Gert Landmann.
Azura-Edo was Landmann’s first African project. Despite unfamiliar challenges, from the 2016 recession that hit Nigeria to bureaucracy and security (all staff lived in a guarded camp alongside the construction site), progress was steady, but not without roadblocks. For example, to transport the heavy turbines and generators, the team chose to offload them at a small port 60 kilometers from Benin City rather than Lagos Harbor. This meant they could avoid miles of poor roads and intense city traffic, but it also required that the team first test the port’s landing facilities, improve local roads and reinforce bridges to withstand more weight.
No one had done a private sector power purchase agreement in Nigeria. Azura provided a pathway for others.Dr. David Ladipo, CEO of Azura Power West Africa Ltd
For part of this work and during the entire construction of the plant, locals were employed and trained on site, some without any prior experience. It was a challenging and continuous process, says Landmann. “We worked with the local communities,” says Landmann, “and we had to make sure that our local partners would meet our quality and safety standards, including our zero-harm philosophy.” The extensive training paid off. “We had about 4.8 million man-hours of construction without a lost-time incident – not a single accident. Another benchmark in the region.”
Landmann attributes the successful build to having an excellent team on site, the right “reliable and co-operative” partners in Azura and Julius Berger, as well as a good relationship with the local communities. “In Nigeria and perhaps in similar countries in Africa, it’s important that you convince the adjacent communities from the benefits that come along with such a project,” he says. “It’s a big success to have completed the plant more than two months ahead of schedule.”
Why speed matters
Speed matters for all sorts of reasons. Azura’s debt financing for the $900-million project was raised from 15 financial partners in nine countries, including Siemens Financial Services– an unusually high number of lenders and a sign that the Nigerian energy market is seen as more high risk. Despite being one of Africa’s largest economies, the country produces surprisingly little power. Although in 2017 Nigeria had an official available capacity of 6,317 megawatts, Azura Power West Africa Ltd CEO Dr. David Ladipo says it still only produces around 4,500 megawatts. The total installed capacity is higher with 12,522 megawatts, but the national grid is relatively small and unstable. Many of Nigeria’s 198 million people use generators for power as a result. Government privatized much of the sector in 2013 to help kick-start the industry, but the market for electricity is still developing.
Azura-Edo is the country’s first large-scale IPP. Raising debt and equity from third-party investors required a great “degree of contractual precision,” says Dr. Ladipo. Azura spent six years negotiating rigorous, “template-making” contracts for the Azura-Edo IPP before construction even began. And time is money: At a peak point prior to financial closure and before construction began, Azura calculated the all-in cost of delays at over US$250,000 per day. But the agreements were groundbreaking. “No one had done a private sector power purchase agreement in Nigeria,” Dr. Ladipo says. “Azura provided a pathway for others to enter into similar contractual arrangements that will unlock financing for more investments.” Unusually, the company made its development plan public to aid future industry growth.
In Nigeria and perhaps in similar countries in Africa, it’s important that you convince the adjacent communities of the benefits that come along with such a project..Gert Landmann, Siemens Project Manager
Completion of the plant ahead of schedule, then, is a boon for company and country. Millions of homes and businesses are benefitting. The Azura-Edo IPP provides 10+ percent of on-grid power at peak hours. In addition, the new plant meets World Bank air quality and noise level standards, and start-up time is limited to 23 minutes from – as Landmann puts it – “pushing the button to baseload.” “It’s a benchmark for anyone in the world,” says Dr. Ladipo. “An early delivery is rare enough anywhere and a fantastic testament to the quality of the EPC contractors.”
Fast power and future financing
In a crisis, however, even the 12-month standard construction time for a conventional simple cycle gas power plant can be too slow. “In fast-developing regions, such as Nigeria, power shortages can hinder the march of progress,” says Landmann. “Here Siemens’ fast power portfolio can bring power to the grid in six months or less.” The portfolio employs smaller turbines and mobile units using standardized configurations.
Even with faster solutions, financing independent power projects in emerging markets – as the Azura-Edo example shows – can still be one of the most complex aspects. Siemens is continuously developing alternative innovative financing models which means the company will have all capabilities in financing, erection and servicing power generating assets. In the end, this means more plants like Azura-Edo IPP could become a reality.
06, 28, 2018
Janine Stephen is a journalist based in Cape Town, South Africa.
Picture credits: Siemens AG, Azura Power Holdings
- 100 ha site
- 400+ containers of equipment delivered
- 1,400 people on site at peak time
- 4.8 million man-hours
- 0 lost-time injuries
- Phase 2 will add a second 461 MW plant to the site
- Phase 3 will convert both plants to combined cycle plants, bringing the total output to 1,500 MW
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