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Cablegate: Nigeria: Usg Supports Hydroelectric Power Plant Feasibility

VZCZCXRO3376
PP RUEHMA RUEHPA
DE RUEHUJA #2098/01 2981245
ZNR UUUUU ZZH
P 241245Z OCT 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4259
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 0127
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 002098

SENSITIVE
SIPDIS

DEPT PASS TO USTR- AGAMA, USTDA - FITTS/MARIN AND EXIM - JRICHTER
DEPT OF ENERGY FOR CAROLYN HAYLOCK AND GEORGE PERSON
USAID AFR/SD FOR MICHAEL CURTIS

E.O. 12598: N/A
TAGS: ENRG EPET ECON PGOV EAID EINV NI
SUBJECT: NIGERIA: USG SUPPORTS HYDROELECTRIC POWER PLANT FEASIBILITY
STUDY

REF: A. ABUJA 1082

SENSITVE BUT UNCLASSIED - PROTECT ACCORDINGLY

1. (U) SUMMARY. In an October 17, 2008 ceremony at the Adamawa State
Government House, the Ambassador and Adamawa State Governor Murtala
Nyako signed a grant for commencement of a 35 megawatt (MW)
hydroelectric power plant feasibility study at the existing Kiri Dam
site. The grant was provided by the U. S. Trade and Development
Agency (USTDA) in the amount of $467,000. The Governor thanked the
Ambassador and USTDA for the grant. The estimated cost to build the
hydro-plant is $44 million, with U.S. export potential estimated at
between $11-22 million. Financing sources for the proposed hydro
project appear feasible. Poverty is a major problem in Adamawa
state and a substantial increase in electricity would help develop
local industry. In a subsequent briefing on the project with
Nigeria's Power Holding Company (PHCN), the Vice Chairman commented
that it would be very beneficial to the integrity of the national
grid to have reliable and sustainable hydro generation in the
northern part of the country. He reported that in 2007 the national
grid had experienced 18 total system collapses, with 16 so far in
2008. End Summary.

2. (U) The Ambassador and Governor Nyako signed the $467,000.00
grant agreement in the State House Chambers on October 17, 2008. In
her remarks, the Ambassador emphasized the importance of energy and
power in the development of the economy. Nyako commented that
Adamawa was just cited by the World Bank as being the second poorest
state in Nigeria, and the state primarily relies on agriculture and
power supply from the national power grid. Nyako said that the
grant will potentially increase electricity in the state which will
lead to industrialization, more jobs, higher wages and a reduction
in poverty. He reported that the per capita electricity consumption
of Adamawa residents was very low, almost immeasurable.

3. (SBU) Adamawa State is located in the remote north-eastern region
of Nigeria with an estimated population of 3.7 million. It is a
picturesque mountainous area traversed by big river valleys that
form its undulating landscape. The main occupation is farming with
cash crops of cotton, groundnuts, coffee, tea and food crops of
maize, yam, cassava, guinea corn, millet and rice. Infrastructure
and electricity are major challenges. EconOff traveled on the main
road, which is in disrepair and fully collapsed in many areas. A 50
mile drive from the state capital Yola to the Kiri Dam took an
embassy four-wheel drive vehicle nearly two and a half hours
one-way.

KIRI DAM CAN BE MORE THAN AN IRRIGATION TOOL
--------------------------------------------

4. (U) The Kiri Dam was originally built in 1982 and with the
purpose to support the irrigation of farms and the growth of
sugarcane in the area. As an agricultural water storage dam it
provided water to the Savannah Sugarcane factory located eight miles
downstream of the dam. Experts contend that the dam could be
converted easily to a hydro-power plant that will boost much needed
power generation to the electricity grid. Since the dam has been in
existence for more than a quarter century any reconstruction will
not result in the displacement of local people.

5. (U) According to available water flow data, the plant will have a
capacity of 35 to 50 MW. The dam itself is an earth-filled dam and
the top of it is used as a bridge connecting the two banks of the
Gongola River. The overall cost of the project has been estimated by
USTDA consultants at $44 million. The potential for U.S. exports to
support construction of the plant is estimated by USTDA analysts at
$11-22 million.

FINANCIAL BACKING LOOKS GOOD
----------------------------

6. (U) According to USTDA's Request for Proposal (RFP) document, the
development of the Kiri power plant as an independent power plant
(IPP) or public private partnership (PPP) is the preferred outcome
of the study. If a U.S. partner steps forward, or if significant
U.S. equipment is purchased for the construction, various bilateral
and multilateral funding sources may be available to support private
investor's funding needs. The African Development Bank, the World
Bank, and the European Bank for Reconstruction and Development are
important multilateral sources for funding. USTDA has consulted
with the U.S. Overseas Private Investment Corporation (OPIC) and the
U.S. Export-Import (Ex-Im) Bank and both have agreed to provide
assistance.


ABUJA 00002098 002 OF 002


BOOST TO ELECTRICITY SUPPLY
----------------------------

7. (U) EconOff met with the Vice Chairman of PHCN Bello Suleiman on
October 20, 2008 to discuss the Kiri project. Suleiman noted that
Nigeria's transmission and distribution networks are characterized
by single circuit radial lines, overloaded transformers, obsolete
substation equipment, and inadequate coverage. He noted that
Adamawa is almost at the end of the national transmission line,
which is rated at 132 kilovolt-ampere (KVA). The line experiences
poor voltage as a result of long transmission spans from power
plants far to the south of the country. EconOff asked about the
proposed construction of a new line with upgraded voltage to 330 KVA
and Suleiman responded that Adamawa is part of the budgeted upgrade
of the transmission and distribution projects and was happy to hear
about the possibility of new electricity generation so far north.
He indicated that it would be very beneficial to the integrity of
the national grid to have reliable and sustainable generation in
that part of the country. Suleiman reported that in 2007 the nation
experienced 18 total system collapses, with 16 so far in 2008.

8. (SBU) COMMENT. The Governor, other officials and the local
residents expressed deep gratitude to the USG for funding the
feasibility study. Several national news outlets reported the
ceremony. Poverty is endemic in Adamawa state and if the Governor
can marshal the necessary resources to build the dam, there will be
a substantial increase in electricity to promote industrial
development in the state. END COMMENT.

9. (U) This cable was coordinated with Consulate Lagos.

SANDERS

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