The International Chamber of Commerce tribunal in Paris has ruled in favor of Nigeria in the claim brought by Sunrise Power over the Mambilla hydropower project. The tribunal dismissed Sunrise Power's $2.35 billion claim and rejected its additional $400 million demand. Nigeria's energy expert, Kunle Odusola-Stevenson, shared his insights on the implications of the ruling. He emphasized that the victory is not just a legal win but also a fiscal and governance lesson for Nigeria.
The ruling removes a significant obstacle that had paralyzed the project, according to President Bola Tinubu. However, Odusola-Stevenson cautioned that legal clearance is not the same as financial close. The project needs to be redesigned and commercially repositioned without the shadow of the Sunrise dispute. The original concept was a 3,050MW project, but the Federal Government has since moved towards a 1,500MW configuration to make it more financially viable.
The next step is to structure the project as a commercially bankable power project. This involves sitting down with lenders, developers, EPC contractors, equipment manufacturers, transmission authorities, and credible off-takers. The goal is to answer the fundamental question of whether Mambilla can be structured as a commercially bankable power project. If the answer is yes, the arbitration victory becomes transformational.
Financing is a significant impediment to the project's takeoff. The original financing concept contemplated an 85:15 debt-to-equity structure, with Chinese lenders expected to provide the bulk of the financing. However, this historical financing structure should not be treated as automatically available today. The project needs a fresh bankability assessment, updated costs, risk allocation, and financing strategy.
Transmission is another critical issue that needs to be addressed. There is no strategic value in producing 1,500MW if the national grid cannot reliably evacuate and distribute it. Mambilla must be conceived as a generation-and-evacuation project, not simply a dam project. The transmission architecture should be designed, financed, and executed alongside the generation infrastructure.
The project also requires a structured public-private partnership, potentially through an IPP, BOOT, or another project-finance structure. Government should provide policy certainty, land, and rights-of-way, while private investors should bring capital discipline, project management, construction expertise, technology, operational capability, and commercial accountability.
Ultimately, the project's success depends on governance continuity. Mambilla has survived several administrations without becoming an operating power plant. The project needs an institutional structure capable of surviving political transitions. With the right approach, Nigeria can remain strategically invested in Mambilla without necessarily becoming the sole financier, project manager, and risk bearer.
Key points
- The ICC ruling is a significant step towards the realization of the Mambilla hydropower project, but the real challenge lies in making the project commercially viable.
- The project needs a fresh bankability assessment, updated costs, risk allocation, and financing strategy to move forward.
- A structured public-private partnership is necessary to ensure the project's success.