The U.S.-based multinational General Electric, which points to a 100-year record of involvement in Africa, is one of the companies participating in the Power Africa initiative, announced during President Obama’s Africa visit, designed to double access to electricity across sub Saharan Africa. GE is expanding operations in several places, perhaps most aggressively in Nigeria. Last year, GE and the Federal Government of Nigeria signed three Memorandum of Understanding agreements (MOUs) outlining cooperation in the energy, healthcare and rail transportation sectors. Ground-breaking for a U.S.$250 million manufacturing facility in the port city of Calabar took place two weeks ago. Lazarus Angbazo, President and CEO of GE Nigeria, discussed the company’s growth strategy in an interview with Reed Kramer in Abuja last month. Excerpts:
Why has GE decided to enlarge operations in Nigeria?
This is a country where the GE portfolio – the full GE portfolio – fits perfectly in terms of the need of the country and the capabilities of the country.
You can’t get away from the fundamentals of this country – 170 million people with tremendous natural wealth [and] and an unbelievable entrepreneur spirit. There’s opportunity around the continent, but I have to say that the opportunity is of a different order of magnitude in Nigeria.
The company has been operating in some of the toughest places around the world, and Nigeria is probably one of the toughest. We’ve been operating here for more than four decades. Now top management starting with Jeff Immelt [the CEO], John Rice [vice chairman] and Jay Ireland [CEO of GE Africa] are making a commitment [to increase activities] based upon a sound understanding of the long-term fundamentals of the country. Their support has been amazing – in terms of resources but also in terms of their personal investment of time in the country. They’ve come here many, many times.
I am absolutely convinced that the investment is going to pay – not just in the power sector but in the oil and gas sector, the healthcare sector, the aviation sector or the transportation sector.
Tell us about the new plant being built in Calabar?
When Jeff Immelt came to Nigeria in January, one of the initiatives he announced was the commitment to invest in a multi-model service and manufacturing facility. This facility in the Calabar Free Trade Zone will provide local servicing capability for a full range of power-generating equipment in Nigeria – capability that we’ve never had – and make Nigeria a local hub for servicing GE turbine generating machines for all of Africa.
The facility is both servicing and manufacturing. On the manufacturing side there are a number of product lines in the oil and gas sub-sea exploration and production segment in order that we will be able to localize the manufacture and assembly of those product lines.
For example, regarding the ‘Christmas trees‘ used in the sub-sea area, we make well-heads for the deep sea. We have special connectors and pipes that help in transporting what is drilled to a central processing facility for gas or for crude.
This capability is second to none, and Africa will have that. It is really a demonstration of the long-term commitment GE has for developing and supporting both the power sector in Nigeria and the oil and gas sector in this country.
What is the scale of GE’s investment?
A billion U.S. dollars over five years – over U.S. $250 million in capital expenditure on this plant and anywhere upwards of U.S.$800 million, when you consider the supply chain, that will be required to support this investment. It is a huge investment on the scale that we have never seen in Nigeria by any company that is either not in oil and gas or in the telecommunications sector.
The country wants to be a top-20 economy in the next 20 years. When you look at the key enablers of that ambition, it’s got to be power. Without power, there is no future in Nigeria. And in that segment, our commitment is to help develop 10,000 megawatts of incremental power-generating capacity.
We’re on our way in terms of identifying projects that we can support with project development capability as well as with equity. Obviously, we would be able to sell a number of turbines as well.
As Nigeria privatizes the power sector, this opens new opportunities for GE to do business with the Independent Power Producers?
Absolutely. About 70 percent of the installed turbine base in Nigeria is GE. So we sold a lot of turbines. We expect to sell a lot more. As these assets move into private hands, they will be much more incentivized to operate and service these machines to be running at a very high level of reliability and availability. That means service opportunity for us, parts opportunities for us, and O&M [operations and maintenance] support opportunities as well.
It’s win-win. Our role is to accelerate these projects. In exchange for that support we get to sell equipment. We’ve got capability. We’ve got technology. We’ve got the experience, and we provide the operators a very compelling proposition value that allows them to generate real cash flow from assets that have been operating at very low levels of reliability.
Is it realistic to project that Nigeria can more than double boost electricity output in a decade to 10,000 megawatts?
I am very confident that it is achievable. The supply curve for power in Nigeria is well-documented. Estimates range from 40 gigawatts to 80 gigawatts for a country of 170 million people growing at 7 to 8 percent. All the essential elements for a real stampede of investments in Nigeria in the power sector are there. I have no doubt that the country can absorb another 10,000 megawatts very easily.
Power outages remain a major challenge. There are areas – in the northwest, for example, where there has been no electricity for many weeks – and a lot of that has to do with poor transmission infrastructure. How would you characterize the challenges?
We are learning how complicated it is to build a power plant in Nigeria. It’s not like building a house which – if you’ve got money and concrete and blocks – you can get it done. There’s so much still undone on the regulatory side. There’s so much on the financial side still to be done, and there’s human capital development that is required to make these investments sustainable.
But this country has never come this far and towards understanding what it takes to address power issues in Nigeria. As complicated and as overwhelming the challenges are, there is a strategy, and there is commitment.
What involvement does GE have in solving the transmission problems?
Our focus has been on the generating side, as it is with most original equipment manufacturers here. The transmission and distribution business represents an opportunity. We are beginning to have a better understanding of what the constraints are and what investments are going to be needed to build the required capacity.
As excited as we are about the opportunity to sell turbine equipment for generating power, we have opportunities in transmission that we haven’t really done a good job of capitalizing. Whether it’s generating stations, substations or power converters, there’s so much we haven’t focused on, and the country hasn’t focused on it either. It’s a huge, huge challenge for the country but that’s what we see as the opportunity for us.
In what other sectors is GE expanding?
Today, you’ve got about 100 million metric tons of freight that goes on the road, and another 75 million metric tons of weight of freight that goes through the ports. So the essence and the intention of both Mr. President [Goodluck Jonathan] and our chairman was, how do we provide that additional capacity in the logistics rail segment to increase the freight that goes on rail. Currently, only an estimated one percent of freight goes on rail, which is tragic.
We will be localizing the assembly of locomotives in Nigeria in exchange for a guaranteed off-take of about 200 locomotives over five years. If you look at the economy here in Nigeria again, the second key-enabler is the logistic system. Without a strong and viable rail system, it’s impossible to see how a lot of the natural wealth of Nigeria can be commercialized.
In the healthcare sector, again, the goal is to build many diagnostic centers, and then hospitals as well. We are working with private medical entrepreneurs as and with government agencies as well. This is not charity. It is economic development that is in alignment with the development strategy of the country.
Your role is to develop hospitals not operate them?
We are working with medical entrepreneurs and with the government. GE’s role is usually to provide development expertise and – to the extent that it is required – a little bit of catalyst equity. We will not invest if there is no pull-through for GE equipment. The extent of our investment is limited by the amount of equipment pull-through that we see for a company here.
GE is clearly a world leader in power, in transport. Do you face real competition here?
Everybody has discovered the power opportunity in Nigeria, so I am mindful of the competition. I’m not sitting here and saying, “we’ve got the largest install-base and therefore we are home-free”. We are not.
It’s a constant battle everyday. I feel like the underdog here – not because of fear of competition, but because there is so much to do. We are very careful to make sure that we execute and deliver based upon our commitment. We are not resting at all. We are proactively searching all those opportunities and competing in terms of delivering our market value proposition to all of the players.
The more power that comes online, the better it is for GE because it means that GE technologies are working in Nigeria and helping the country grow. It means the GE brand in technology is seen as being a great enabler for the economic growth of the country.
This interview was originally published on AllAfrica