China warns that it will not proceed with Mambilla power project until all legal battles are resolved

CHINA has warned Nigeria that she has to settle an ongoing legal dispute over the $5.8bn Mambilla power project or it would not provide funds for continuation of the project in furtherance of an agreement entered into by President Muhammadu Buhari.

In September last year, President Buhari secured the backing of Chinese premier Xi Jinping to build a 3,050 MW hydroelectric power plant on the Mambilla Plateau in Adamawa State in a bid to solve Nigeria's chronic electricity supply problem. Conceived in 1982, the Mambilla power plant was a planned hydro-electric facility which when completed will be connected to three dams across the Donga River in Taraba State.

However, since then the project has lurched from one crisis to another but eventually, on November 7, 2012 Nigeria signed a memorandum of understanding with China's Sinohydro Corp to build the Mambilla Power Station. Completion of the project was anticipated in 2018 but this has not happened despite Nigeria spending an estimated $16bn on the project.

In December 2013, the Nigerian Federal Ministry of Power said that the contract with Sinohydro had been cancelled while the ministry is currently working on firming up the cosy of the project cost. Subsequently fresh discussions were opened with several other Chinese firms interested in providing funding for the project.

As a result, in 2006, the China Gezhouba Group Corporation of China (CGGCC) and China Geo-Engineering Group Corporation (CGGC) won the bid for a joint venture to execute the hydropower project with a proposed capacity of 3,050 megawatts in 2006. However, in 2003, the Federal Ministry of Power had awarded the contract to build and operate the project to Sunrise Power and Transmission Company (SPTCL) , a local content partner.

 In November 2012, a general project execution agreement was signed with SPTCL. Then, in November 2017, the ministry signed another engineering, procurement and construction contract with Sinohhydro Corporation of China, CGGCC and CGGC to form a joint venture for the execution of the project, excluding SPTCL.

As a result, SPTCL filed a suit against the federal government and its Chinese partners at the International Chamber of Commerce in Paris, France, over an alleged breach of contract. SPTCL chief executive Leno Adesanya, claimed the company had spent millions of dollars with financial and legal consultants to raise about $6bn for the execution of the project and the company has suffered a lot over the years through improper administrative interruptions and interventions.

Due to the ongoing legal tussle, Nigeria risks incurring a $2.3bn fine over the proposed 3,050-megawatts facility. In a letter dated September 18 and addressed to Nigeria's minister of power,  Sale Mamman,  He Yongjun, the project manager for the Chinese partners, said the China Exim Bank, which is expected to provide 85% of the joint funding, will not finance the project until the legal issues are resolved.

Mr Yongjun said.“The Chinese government is showing a positive attitude towards the Mambilla Project. However, according to financing policy of China, the Export-Import Bank of China cannot provide loans to a project with legal disputes, which is the main reason why the project has not entered into substantive financing negotiations so far.

“On 5th September, 2019, Yang Jiechi, the special representative of President Xi Jinping informed Nigeria's President Muhammadu Buhari,  that unless the legal dispute is resolved, confirming an out-of-court settlement funding for the loan will not be accessed. A meeting shall be organised by the ministry of power for negotiation between the relevant authorities of the Nigeria government, Sunrise and the joint venture contractor to resolve the legal disputes through amicable negotiations so as to let the plaintiff withdraw the lawsuit.

“Should such negotiations fail and if the Nigeria government considers that the arbitration result is beneficial, it is suggested that the judicial department of Nigeria issue a formal legal paper to the Chinese authority confirming that  the legal dispute has no effect on the Mambilla Project. Then the Nigeria government should request that China starts the project financing negotiation as soon as possible, as financing of the Mambilla Project cannot be stagnant due to legal disputes."