The Nation Newspaper

Tag: Narrow gauge

  • Will GE’s withdrawal affect narrow gauge deal?

    Power giant General Electric (GE) has withdrawn from the railway narrow gauge concession one year after it ought to have rolled out new wagons on the tracks. What is the implication of its withdrawal for the project?ADEYINKA ADERIBIGBE writes

    The nation’s march to a modernised rail system, especially its centennial asset- the narrow gauge – appears halted as power giant General Electric opted out of the concession deal.

    GE’s action ended speculation about its preparedness to take over the assets which the Federal Government has been showcasing as one of its poster projects.

    GE said it was opting out of the concession because of its decision to remove transportation business from its portfolio. Its decision to drop transportation from its portfolio was to enable it concentrate on its core competence – healthcare and power generation.

    In May 2016, the government announced GE as the preferred bidder for the project.

    Under the agreement, GE was to inject $2.7 billion into the narrow gauge modernisation programme, including the tracks and provision of the rolling stock.

    It was to introduce 20 locomotives and 200 wagons within the first 12 months  of the takeoff of the temporary agreement. By the second year, it would strip the Nigerian Railway Corporation (NRC) of all its rail assets as it consolidates on the modernisation, while the corporation operate as the regulator.

    Initially, a roll out had been fixed for May last year. Rather, what commenced were series of meetings by the Transaction Advisory Committee (TAC), government appointed consultants with the new operator.

    The Minister of Transportation Mr Rotimi Amaechi changed the take-off date to December last year. Again it failed.

    Amaechi had insisted private investors into the railway was in line with global best practices.

    “While the government owns the rail tracks, investors are usually encouraged to own the rolling stocks, both passengers and cargoes.”

    With its links to the nation’s productive centres, the narrow gauge will assist in the rapid development of the agriculture, mining and steel sectors and link same directly to the sea ports for export.

    Again, the continuous rehabilitation of the narrow gauge network will no longer be at any cost to the government. Outside the 1,100 kilometres Western line, (Lagos-Kano narrow gauge track), regarded as the most lucrative route and the nation’s major rail backbone, which includes Lagos, Abeokuta, Ibadan,  Ilorin, Kano, Funtua, Zaria, and Kaura-Namoda, the GE would also take over the Eastern line – Port Harcourt-Maiduguri route, which includes Port Harcourt, Aba, Umuahia, Enugu, Makurdi, Jos, Gombe and Bauchi to Borno State.

    “The activation of the narrow gauge was meant to grow freight movement exponentially. We have over 30 million tons worth of freight on the Lagos-Kano route for which presently we are moving slightly above 1,000 tons. While the Port-Harcourt-Maiduguri route is currently moving nothing, we are anticipating 11 million tons on that route,” Amaechi had said.

    That was why GE had opted for cargo as its preferred choice of line of trade. It proposed to move one million tons of freight in the first year and outstrip as importers are explore the new deal.

    The new proposition is a departure from government’s projections, which had wanted to have more friendly passenger shuttle. Intercity shuttle, as presently run, is epileptic with the rusty coaches, driven by aging locomotives that take no fewer than 72 hours travel time between Lagos-Kano.

    “This is absolutely unacceptable. The railway system will not be able to attract any quality passenger traffic with such tradition. We must look at fast-tracking things at the railway,” Amaechi said.

    The journey of General Electric’s intervention in the nation’s rail sector started in 2009, when it signed a Country-to-Company (C2C) agreement with the Federal Government to support the financing, design and building of infrastructure and capacity across the rail, power and healthcare.

    This agreement was renewed for another five years at the Head of States conference in Washington, DC in 2014, a deal which was inherited by the Buhari administration in 2015.

    Under the agreement, company is to partner with the Ministry of Power to develop 10GW power over the next 10 years, assist the Ministry of Health to develop diagnostic centres across the country, and help the Ministry of Transportation in the modernisation and expansion of the nation’s locomotive assets.

    On its website www.ge.com/africa the firm said “Its milestones in the transportation sector in the last five years include the modernisation and expansion of Nigeria’s locomotive fleet. Right now, GE is working with private sector participants to develop a locomotive assembly facility. That facility would modernise 30 old locomotive engines and assemble 170 new locomotives. The company is also acting on the order to supply locomotives to the Nigerian Rail Corporation (NRC) as part of the country’s fleet renewal programme.

    GE however said its decision to walk away from the sector would have no adverse effect on the ambitious move to modernise the almost moribund narrow gauge sub-sector of the rail business which is already plagued by rotted fixed asset – rail tracks and aging rolling stocks -locomotives, coaches and wagons.

    It claimed its exit would not affect the concessionning plan, as other consortia of firms in the agreement would continue the assignment. In a terse response to The Nation‘s enquiries, Yewande Thorpe, of GE Global stated: “GE will be transitioning leadership of the International Consortium, selected to execute the Nigerian narrow-gauge railway concession, to Transnet. This development is in line with GE’s decision to exit the Transportation business from its portfolio. Transnet has been a trusted partner of GE for several decades.  We have confidence in their ability and that of the other Consortium members to execute on the rail concession project successfully. We will continue to offer our utmost support to the team as we remain committed to the sustainable development of Nigeria.”

    In order words, GE would be transferring the concessioning to Transnet International is a member of a four- firm consortia led by GE, which had been holding series of meetings with FG’s Transaction Advisers over the take-over model of the narrow gauge. Other members are: APMT Ltd, and Sino Hydro.

    While Transnet handles the modernising of the tracks, APMT handles the container cargoes, while Sino Hydro handles the operationalising of the locomotives that would be provided by the principal partner – General Electric.

    But the process until this present impasse had been fraught with perceived irregularities. Twice last year, Amaechi had publicly complained about “GE’s inconsistencies,” alleging that the conglomerate had “been less than transparent in its dealings with the government.”

    The GE swiftly denied such allegations, claiming it remained committed to changing the ugly narrative in the rail subsector of the transportation system. Its Executive, Business Development, (Transportation, Nigeria) Mr. Eyo Ekpo, told The Nation that the consortium was still “actively engaged in negotiations with the Federal Ministry of Transportation.

    Ekpo, however, disclosed that in the last one year, GE and its consortium partners – Transnet, SinoHydro &APM Terminals, have not only negotiated in good faith, but have invested significant resources. “We have been transparent and diligent in meeting all requests from the government at no cost to the Federal Government,” Ekpo said.

    According to him, both parties – GE (and its consortia) and the Federal Government, are at a critical juncture of the project and it expects all contractual agreements to be finalised and fulfilled by the parties before commencing project execution.

    A top NRC source hinted that long before GE divested from transportation, it had thrown a number of hurdles before the transaction advisory committee which led to an impasse.

    The source which preferred not to be mentioned, said: “While the concession agreement had covered Lagos to Kano, GE had insisted on shuttling between Apapa and EBJ (Ebute Metta junction). Again, while the Nigerian government would want full bouquet of services -passenger and cargo services, GE had insisted it would only run freight services. These are issues that are still being negotiated before GE threw in the towel,” the source added.

    GE’s withdrawal may however have thrown the window open for fresh negotiations for new bidders. Mr Patrick Adenusi saw this possibility when he said, GE’s withdrawal might thrown spanner into the nation’s march into a modernized narrow gauge system.

    According to him, when the picture becomes clearer, the National Assembly might pass a resolution requesting the executive government to begin the process for the award of the concession again in view of GE’s withdrawal from the deal.

    Though Amaechi seemed to have foreclosed this possibility last week when he disclosed that the government would be willing to continue negotiation with the other parties to the concession agreement. But even if this is accepted would the consortia be willing to accept the government’s terms, or would they be insisting on working within Lagos alone or interested only in freight services as being championed by GE?

    The reality: Nigerians may just have to wait much longer for the modernisation of the narrow gauge to materialise.

     

  • Will GE’s withdrawal affect narrow gauge deal?

    Power giant General Electric (GE) has withdrawn from the railway narrow gauge concession one year after it ought to have rolled out new wagons on the tracks. What is the implication of its withdrawal for the project?ADEYINKA ADERIBIGBE writes

    The nation’s march to a modernised rail system, especially its centennial asset- the narrow gauge – appears halted as power giant General Electric opted out of the concession deal.

    GE’s action ended speculation about its preparedness to take over the assets which the Federal Government has been showcasing as one of its poster projects.

    GE said it was opting out of the concession because of its decision to remove transportation business from its portfolio. Its decision to drop transportation from its portfolio was to enable it concentrate on its core competence – healthcare and power generation.

    In May 2016, the government announced GE as the preferred bidder for the project.

    Under the agreement, GE was to inject $2.7 billion into the narrow gauge modernisation programme, including the tracks and provision of the rolling stock.

    It was to introduce 20 locomotives and 200 wagons within the first 12 months  of the takeoff of the temporary agreement. By the second year, it would strip the Nigerian Railway Corporation (NRC) of all its rail assets as it consolidates on the modernisation, while the corporation operate as the regulator.

    Initially, a roll out had been fixed for May last year. Rather, what commenced were series of meetings by the Transaction Advisory Committee (TAC), government appointed consultants with the new operator.

    The Minister of Transportation Mr Rotimi Amaechi changed the take-off date to December last year. Again it failed.

    Amaechi had insisted private investors into the railway was in line with global best practices.

    “While the government owns the rail tracks, investors are usually encouraged to own the rolling stocks, both passengers and cargoes.”

    With its links to the nation’s productive centres, the narrow gauge will assist in the rapid development of the agriculture, mining and steel sectors and link same directly to the sea ports for export.

    Again, the continuous rehabilitation of the narrow gauge network will no longer be at any cost to the government. Outside the 1,100 kilometres Western line, (Lagos-Kano narrow gauge track), regarded as the most lucrative route and the nation’s major rail backbone, which includes Lagos, Abeokuta, Ibadan,  Ilorin, Kano, Funtua, Zaria, and Kaura-Namoda, the GE would also take over the Eastern line – Port Harcourt-Maiduguri route, which includes Port Harcourt, Aba, Umuahia, Enugu, Makurdi, Jos, Gombe and Bauchi to Borno State.

    “The activation of the narrow gauge was meant to grow freight movement exponentially. We have over 30 million tons worth of freight on the Lagos-Kano route for which presently we are moving slightly above 1,000 tons. While the Port-Harcourt-Maiduguri route is currently moving nothing, we are anticipating 11 million tons on that route,” Amaechi had said.

    That was why GE had opted for cargo as its preferred choice of line of trade. It proposed to move one million tons of freight in the first year and outstrip as importers are explore the new deal.

    The new proposition is a departure from government’s projections, which had wanted to have more friendly passenger shuttle. Intercity shuttle, as presently run, is epileptic with the rusty coaches, driven by aging locomotives that take no fewer than 72 hours travel time between Lagos-Kano.

    “This is absolutely unacceptable. The railway system will not be able to attract any quality passenger traffic with such tradition. We must look at fast-tracking things at the railway,” Amaechi said.

    The journey of General Electric’s intervention in the nation’s rail sector started in 2009, when it signed a Country-to-Company (C2C) agreement with the Federal Government to support the financing, design and building of infrastructure and capacity across the rail, power and healthcare.

    This agreement was renewed for another five years at the Head of States conference in Washington, DC in 2014, a deal which was inherited by the Buhari administration in 2015.

    Under the agreement, company is to partner with the Ministry of Power to develop 10GW power over the next 10 years, assist the Ministry of Health to develop diagnostic centres across the country, and help the Ministry of Transportation in the modernisation and expansion of the nation’s locomotive assets.

    On its website www.ge.com/africa the firm said “Its milestones in the transportation sector in the last five years include the modernisation and expansion of Nigeria’s locomotive fleet. Right now, GE is working with private sector participants to develop a locomotive assembly facility. That facility would modernise 30 old locomotive engines and assemble 170 new locomotives. The company is also acting on the order to supply locomotives to the Nigerian Rail Corporation (NRC) as part of the country’s fleet renewal programme.

    GE however said its decision to walk away from the sector would have no adverse effect on the ambitious move to modernise the almost moribund narrow gauge sub-sector of the rail business which is already plagued by rotted fixed asset – rail tracks and aging rolling stocks -locomotives, coaches and wagons.

    It claimed its exit would not affect the concessionning plan, as other consortia of firms in the agreement would continue the assignment. In a terse response to The Nation‘s enquiries, Yewande Thorpe, of GE Global stated: “GE will be transitioning leadership of the International Consortium, selected to execute the Nigerian narrow-gauge railway concession, to Transnet. This development is in line with GE’s decision to exit the Transportation business from its portfolio. Transnet has been a trusted partner of GE for several decades.  We have confidence in their ability and that of the other Consortium members to execute on the rail concession project successfully. We will continue to offer our utmost support to the team as we remain committed to the sustainable development of Nigeria.”

    In order words, GE would be transferring the concessioning to Transnet International is a member of a four- firm consortia led by GE, which had been holding series of meetings with FG’s Transaction Advisers over the take-over model of the narrow gauge. Other members are: APMT Ltd, and Sino Hydro.

    While Transnet handles the modernising of the tracks, APMT handles the container cargoes, while Sino Hydro handles the operationalising of the locomotives that would be provided by the principal partner – General Electric.

    But the process until this present impasse had been fraught with perceived irregularities. Twice last year, Amaechi had publicly complained about “GE’s inconsistencies,” alleging that the conglomerate had “been less than transparent in its dealings with the government.”

    The GE swiftly denied such allegations, claiming it remained committed to changing the ugly narrative in the rail subsector of the transportation system. Its Executive, Business Development, (Transportation, Nigeria) Mr. Eyo Ekpo, told The Nation that the consortium was still “actively engaged in negotiations with the Federal Ministry of Transportation.

    Ekpo, however, disclosed that in the last one year, GE and its consortium partners – Transnet, SinoHydro &APM Terminals, have not only negotiated in good faith, but have invested significant resources. “We have been transparent and diligent in meeting all requests from the government at no cost to the Federal Government,” Ekpo said.

    According to him, both parties – GE (and its consortia) and the Federal Government, are at a critical juncture of the project and it expects all contractual agreements to be finalised and fulfilled by the parties before commencing project execution.

    A top NRC source hinted that long before GE divested from transportation, it had thrown a number of hurdles before the transaction advisory committee which led to an impasse.

    The source which preferred not to be mentioned, said: “While the concession agreement had covered Lagos to Kano, GE had insisted on shuttling between Apapa and EBJ (Ebute Metta junction). Again, while the Nigerian government would want full bouquet of services -passenger and cargo services, GE had insisted it would only run freight services. These are issues that are still being negotiated before GE threw in the towel,” the source added.

    GE’s withdrawal may however have thrown the window open for fresh negotiations for new bidders. Mr Patrick Adenusi saw this possibility when he said, GE’s withdrawal might thrown spanner into the nation’s march into a modernized narrow gauge system.

    According to him, when the picture becomes clearer, the National Assembly might pass a resolution requesting the executive government to begin the process for the award of the concession again in view of GE’s withdrawal from the deal.

    Though Amaechi seemed to have foreclosed this possibility last week when he disclosed that the government would be willing to continue negotiation with the other parties to the concession agreement. But even if this is accepted would the consortia be willing to accept the government’s terms, or would they be insisting on working within Lagos alone or interested only in freight services as being championed by GE?

    The reality: Nigerians may just have to wait much longer for the modernisation of the narrow gauge to materialise.

     

  • GE’s exit ‘ll not affect concessioning of narrow gauge, says Fed Govt

    THE Federal Government said yesterday that the exit of American industrial giant, General Electric, from the concessioning agreement on the narrow gauge will not affect modernisation of railway.

    It said GE’s exit was borne out of the firm’s decision to divest from transportation business into health and environment sectors of the economy.

    Minister for Transportation Rotimi Amaechi, who said this in Lagos yesterday, added that the GE’s exit would not affect the Federal Government’s commitment to modernise the railway.

    He said the concessioning of the narrow gauge is irreversible.

    GE, by the concessioning, ought to have injected $2.7 billion into the narrow gauge system to overall and modernise the narrow gauge.

    Under the agreement, GE was meant to inject 20 locomotives and 200 wagons into the narrow gauge, which was meant to breath a new lease of life into cargo traffic.

    Amaechi said with GE’s exit, Transnet Logistics Ltd. (which based on original agreement, was handling tracks), would now be the lead partner to drive the process.

    Transnet Logistics Ltd. would be leading other consulting consortium that includes AP Moller Terminal Ltd (APMT), which is in charge of containers, Sino Hydro, in charge of logistics.

    GE had  been awarded the concessioning of the nation’s narrow gauge, the major railway asset, by the Muhammadu Buhari administration in 2016, with the aim of modernising cargo and passenger operations on the narrow gauge.

    Under the agreement, GE was to operate the system for 30 years.

    The concession, however, ran into stormy waters, as series of controversy overtook its operations, forcing the Federal Executive Council (FEC) to set up a transactions advisors committee.

    The committee drew up an interim roadmap for the eventual takeover of the entire railway asset of the corporation after a 12-month period.

    The committee had initially proposed that GE begins the operations of the acquired asset in May 2017, it later shifted to December of same year, which again had to be shifted to first quarter this year.

    Early signs that the concession agreement might have been botched, however, reared its head as the GE refused to takeoff.

    The Federal Government had intended the new owners to run full operations – passenger and cargo along the corridor. But GE had its eyes exclusively on cargo business.

     

     

     

  • Narrow gauge: A concession gone awry?

    Seventeen months after its expected take-off, the narrow gauge is still in limbo, raising fears that it may never materialise. The question whether the narrow gauge concession to General Electric (GE) will ever materialise has been boggling the minds of many since May, last year, writes Yinka Aderibigbe.

    Seventeen months after its proposed take-off, the railway concession, which is meant to inject $5.5 million into modernising the rolling stock of the Nigerian Railway Corporation (NRC) has remained on paper.

    If it had taken off, the General Electric (GE)  in accordance with the interim agreement which was meant to run for the first 12 months, would have injected 20 locomotives and commenced the takeover of NRC’s assets and liabilities  in line with the concession agreement.

    The concession initially had all the trappings of being the biggest signature project of repositioning conceived by the Buhari administration for the corporation.

    However, the administration was almost at a loss to convince the world that concessioning the obsolete narrow gauge to the GE was the best after all.

    Burdened by the need to secure funds to help modernise and run the corporation, the Buhari administration had thought of concessioning the railway. According to Transportation Minister, Rotimi Amaechi, the government is primed on delivering a standard gauge and premium railway transportation to Nigerians for goods and services movement.

    At a roundtable last year, the Minister had disclosed that the GE was actually poised to begin operation with 100 locomotives.

    Asked last month on the current status, Amaechi was at a loss for words, avoiding any matter relating to the narrow gauge concession.

    According to him, under the administration, railway has received unprecedented attention.

    The administration’s adoption of a new funding paradigm, which is to bring renowned investors such as the American leading corporation into a critical sector like the railway, promises to overhaul the nation’s transport architecture.

    This is aimed at creating hundreds of primary and secondary job opportunities for the transportation industry. But that was as far as hope could go. Right now, the hope of creating jobs dims by the day.

    The over-concentration of the country’s transportation on road mode has badly impacted on the economy. Nigeria was ranked 182nd of 189 countries on trading across borders by the World Bank in its last year’s “Doing Business” report.

    The cost and time taken to import and export are well above the average for sub-Saharan Africa and the Organisation for Economic Cooperation and Development (OECD) high-income countries.

    Amaechi had disclosed that the GE was also committed to the establishment of a Transportation University to train qualified personnel for the sector.

    “One of the conditions we gave  the GE was for them to come here and build a Transportation University and they agreed,” Amaechi said.

    The good thing about concession is that the mode saves the government a lot of money, which is put to other use to create more jobs.

    To NRC workers, however, the delay is a welcome development as it postpones the rationalisation, that must of consequence follow the concession agreement.

    A top official of the Nigeria Union of Railway (NUR), who spoke on condition of anonymity, said the union is keeping watch on the development and will respond adequately in defence of its members anytime the concession agreement takes off.

    Besides the gray issues of rationalisation, the workers said the concession agreement might have run into stormy waters over the scope of operational coverage of the agreement. While the GE insisted on working only on the Lagos axis of the freight business, shuttling between Apapa to Ebute Metta, thus ensuring that cargoes that leave the ports end up at Ebute Metta, the Federal Government has insisted that the new investor do not only run freights on the entire spectrum of the 1200 kilometres Lagos-Kano narrow gauge, but include passenger traffic as its flagship offering.

    According to the government, the injection of new and modern locomotives will undoubtedly increase freight traffic between the ports and inland dry cargo terminals, especially in the Northern part of the country.

    The NUR had at several fora insisted that none of its members should suffer or be sacked unjustly when the concessioned agreement fully rolls off. They also insisted that the concession agreement should not cover the NUR property, which spread across virtually all the states of the country.

    In spite of the delays in concession take-off, the GE International Operations (Nigeria) Limited Transportation Business Development Executive, Mr. Eyo Ekpo, praised the Federal Government for demonstrating the political will to end to the rot in the rail sector.

    He said the determination to run the two spectrum of the railway – narrow and standard gauges under the concession initiative, is aimed at creating new funding formula that will ensure that the system continues to be modernised at no cost to the government.

    “The GE had resolved not to cut corners in helping Nigeria fix all issues on the development of its rail system. We prefer to go through a process that produces outcomes that are, ultimately, sustainable. There is political will, there is process and there is a plan, all put together by the government and if you combine that with what the GE consortium is bringing to the table, what you’ll expect is an outcome that is actually credible and sustainable, one that will be beneficial to Nigerians,” he said.

    Ekpo lamented the decay in the rail system and wondered how the nation with population of over 180 million had survived almost exclusively on road mode of transportation, with the rail playing virtually no role in the transport plan.

    According to Ekpo, the GE’s plan was to resuscitate and expand the narrow gauge rail infrastructure along the railway value-chain across the country.

    Giving more insights into the concession objective, Ekpo said the Federal Government was looking forward to the American firm setting up local production capacity for locomotives and wagons in the medium term, while the long term is the establishment of a Transportation University.

    “The government set out objectives for the rail construction; it was not just about completing a railway line. There was also the other bit, which set up local manufacturing capacity both for locomotives and wagons, within the country.

    “The second is the training of human resources, which is not just only a university, but a post-graduate training centre and the GE are fully  committed in writing to achieving it,” Ekpo said.

    Though transportation and logistics experts have continued to express fear about “some unreliability of the terms of the contract,” Amaechi again assured that the government was committed to the sanctity of contracts on concession of projects.

    He said the government would not only guarantee its concession agreements, partnerships and contracts, but implement those it inherited and safeguard them from being truncated.

    The involvement of the private sector, especially in railway system, is the outcome of the amendment of the Nigerian Railway Act 1954, which removed the exclusivity of financing the system hitherto vested on the Federal Government.

    Despite the hitches, the Transportation Minister insisted that attracting the private sector into the rail system was the best way out if the nation must join the rest of the world in deploying modern train systems to resolve mass transit challenges facing the country.

    Citing the GE’s bold moves to revolutionise activities of the narrow gauge, he said, if one considers that it was coming at no cost to the government, then it ought to be supported and the government praised for discovering willing partners in putting new impetus to the moribund rail system.

    NRC Managing Director, Mr. Fidet Okhiria, said the GE’s participation remained the only way by which railway could fulfill its mandate of providing cheap, affordable and reliable mass transit services to Nigerians.

    He said Nigerians have the requisite experience and exposure to drive a very efficient and effective railway. He welcomed the bold step to see the government develop local capacity for repairs and production of essential components and hardware needed to run an efficient railway services.

    With the coming of the GE, there may be improvement in the NRC’s operations with passengers getting a fair deal.

    The other leg of the argument is that GE’s involvement will stimulate active participation of other corporate players. But how far can this argument be sustained with the GE’s continued absence in the nation’s railway sector? Will the government be disposed to ensuring competition on a turf that has almost become extinct in the transportation mode?