In a time when the business environment in Nigeria is faced with huge operating cost arising from epileptic power supply from distribution companies, Uraga — a power solutions company and subsidiary of Honeywell Group — has developed solutions to solving these problems. The Managing Director, Seun Faluyi, in this interview with BusinessDay analyst, Michael Ani, speaks on how the firm is helping companies and industries in providing power that is environmentally friendly.
What has been the focus of your organization in the area of economic sustainability?
We refer to ourselves as a power solutions company because what we provide is a comprehensive energy solution to customers. We are able to take over the complete spectrum of our customers’ energy requirements. UPSL will finance your solution from conceptualisation through development, and eventually into construction. And we make concerted efforts to deliver power in an environmentally friendly manner.
When it comes to the environment, an important aspect to note with regards to power generation is the type of fuel you use to generate power. This has a major impact on the environment. Coal, for example, has a very big carbon footprint while gas, on the other hand, has a lighter carbon footprint. For solar or renewable energy alternatives, the footprint is much lighter. For us as a power solutions company, we are helping companies to transit from the use of heavier fuels to lighter fuels with less carbon footprints. We believe that by doing this, we are helping our customers to generate power efficiently and in a more sustainable manner.
For instance, gas-based generation is more efficient than diesel-based generation. The reason is because gas has a higher energy content which means you use less gas to generate more power than diesel would. Also, it is a cleaner source of energy with less emission; so the impact on the environment is reduced. But more importantly, not only are we transitioning customers from heavy fuel-based generation to lighter fuel-based generation, we are also adding solar power solution to the services we offer. Solar panels had previously been expensive but the prices are coming down so what we are doing is that we are offering to customers our hybrid solutions instead of the conventional energy sources. What this means is that we are migrating customers so that they can be more environmentally friendly in their operations.
Your services cut across power generation, sales, operation and maintenance; consultancy services; power distribution, emergency power solutions and renewable energy solution. In all these, where lies your core competence?
What we provide is power; not just power as a commodity but as an energy solution for commercial and industrial users. A power company may say that they provide electricity but what we offer is energy solution. So we don’t see ourselves as just a commodity company, we see ourselves as a comprehensive energy solutions company which is what we specialize in. We are not saying that we want to solve the power problem in Nigeria; what we are saying is that we want to help commercial and industrial customers attain reliable power, so they can be more productive. By being reliable, we mean predictable power which will be available at levels they require. That is more efficient, reliable and cost-effective power.
In terms of your clients, do you service the high end or the low-end consumer or you cut across all?
We have a strategic approach to our offerings. Our focus for now are commercial and industrial customers. We decided to focus on customers in the commercial and industrial space for now because of the greater advantage to the economy when industrial and commercial concerns can run efficiently because of reliable power. Power is a major input in production, and when factories and industries are able to secure reliable and cost-effective power, then they can produce cheaper. When they produce cheaper their products can also be reasonably priced and consumers are also able to buy these products. The economic cycle will therefore be better for it.
For how long have you been in business?
We have been in existence for 12 years and we have gathered consummate experience. However, even though we have been in operation for that period of time, we were incorporated as a power solutions company three years ago. Twelve years ago, we started as a utility business. The experience from that time has been very valuable. We were able to understand the real challenges of the power industry. Our grasp of the key issues is what informed the present approach to our business; we have been able to develop solutions to power challenges for industrial and commercial users; which is what we now offer today.
How do you assess the purchasing power of your industrial customers?
Since 2016, there has been a meltdown in the economy that has put many companies on life support because things have been difficult for them. That is why we develop solutions to offer affordable and reliable power to clients. How we offer our services is that for any of our commercial and industrial customers, we don’t just say they must pay this amount. What we do is to work closely with customers to determine their energy requirements. This knowledge is what we bring to bear in developing practical solutions for them. We are development partners with our clients. Our focus is the growth of their respective businesses; and we partner with them to harness power as a critical input to the productive process.
You focus more on commercial and industrial customers skipping residential customers. What is the reason for this?
It is a strategic decision based on our understanding of the market. The market can be segmented into commercial, industrial and residential users. The residential users make up about seventy-percent of the users, but in terms of the actual energy that they use, residential users only consume about twenty to thirty percent of generated power, which we believe can be supplied by the public utilities. But the most important consumers for Nigeria’s growth at the moment are commercial and industrial concerns, given their impact on the larger economy. So it is not the case that we are ignoring residential consumers. We are just focused now on making the greatest impact in a short time.
Do you hope to service that segment later in the future?
We have plans for residential customers. What we are targeting now are estates where they can aggregate large demand. That way we can deliver energy solutions in bulk to them. But we also believe that if we are able to take the burden of power needs for commercial and industrial needs off the distribution companies, they would be able to serve residential customers better and, ultimately, everybody will be happy for it.
How cost reflective is your tariff compared to what these industrial companies get from the discos?
What we do is that we partner with commercial and industrial customers to define what the appropriate price will be hence, it is not like a tariff. A tariff is like a table that says this is just what it is. Our engagement with these companies is just like a bilateral agreement and what we do is that we ask how much power these companies need. What we are going to do for you is that we will invest the money but you need to guarantee us that you are going to take power from the asset which could be for fifteen years or more. We will charge the customer an energy charge which is based on the fuel that they consume but in addition, the customer will pay a capacity charge which is meant to recoup the money invested in placing the power assets there. The capacity charge will re-assure us that we will be able to recover the cost of investment over the fifteen-year term. We discuss a capacity charge with the customer based on the load they take.
What are the opportunities that you see in the Nigerian power industry?
There are a lot of challenges in the power industry. Liquidity is a major challenge which is what Discos are facing. Consumers are facing supply constraints. There are also structural, regulatory and legacychallenges in the industry. But we have identified opportunities even in the midst of these challenges, especially with commercial and industrial customers. What is it that they need? They need reliable power. Because we understand this, we are able to help them take advantage of economies of scale by aggregating demand of multiple commercial customers in industrial clusters. We are helping them transit from heavy fuel-based power generation to lighter-fuel based generation facilities, which are even more efficient and with lower environmental impact.
What are the challenges you faced in proffering this solution?
There are challenges we face whilst trying to provide solutions to customers. Truth is the industry is still evolving. Reforms are taking shape gradually. New regulations are being introduced. For many people, their view is that we are connected to public supply, however, there needs to be a paradigm shift from on-grid to off-grid so you can have full control of how you access power whenever you need it for your commercial or industrial process. Generally, the challenges now are some of the things we expect to see when a power market is trying to be more dynamic and competitive. Mindsets have to start changing to how we access, utilize and pay for power.
What activities have you embarked on in the last few years and what has been the social impact?
Because we are a power generation company, we are trying as much as we can to switch fuels and we have a number of our customers that have switched from diesel to gas. We also have a number of customers that we are putting on solar since the prices are coming down and so with this, we are helping to move the needle in the direction of environmental sustainability. But in addition to environmental impact, we are also contributing to the development of the communities where we operate.
What do you think Lagos state can do to achieve full environmental sustainability?
For environmental sustainability from an environmentalist’s perspective, the issue is not just about collection but also generation, transportation and logistics, processing and then we can talk about disposal. Also, for environmentalists, there are three Rs; it is Reduce, Re-use or Recycle. It is now being extended to include recover before you dispose. To do this effectively, you need to look at the nature of your waste and how you can treat or handle them. So, the 3Rs is what the environmentalist would explore. There also needs to be a deep understanding of what the eco-system is like. In Lagos for example, the type of waste that is generated are of two types. There is the organic waste and there is inorganic waste. But at the end of the day, environmental sustainability concerns all of us. We all have a duty to reduce impact of our commercial, industrial and even domestic activities on the environment. We need to keep our environment safe and healthy. We can’t leave everything to government. We all must play our respective parts.
June 5th was environmental day. What does this mean for Uraga Power Solutions?
For Uraga Power Solutions and for the Honeywell Group as a whole, it is a day where we can stand with other people who are enthusiastic about the environment to raise awareness and consciousness. All around the world, people are talking about the environment but not everybody is seeing it. In Nigeria, for example, some people still believe we are immune from the impact of environmental degradation. But we should know that the environment affects us. Global warming is affecting the whole world. Global warming is making flood waters and ocean levels to rise. And, in Lagos, for example, there are a lot of low-land areas. Ikeja, for instance, is just about 40 meters above sea-level despite the fact that it is on the mainland. So, if the sea rises, many parts of the state will be submerged. And it is not just in Lagos but most coastal areas. Now all these means that everybody should be concerned. Everybody needs to be aware. For us we feel it is an opportunity to raise awareness that we shouldn’t just think we are living in isolation from the rest of the world. We shouldn’t think that we are immune to what is happening in the world and the environment. We need not only be aware, we all need to take action and in our own little way, we are doing that. While we are in the power business, we are trying to move businesses and factories to more environmentally friendly energy sources.
How well have you been subscribing to Green Bond issuance for environmental projects by the Federal Government
As a power solutions company, we have access to other financing sources. And since power is something that is a big deal, there are both domestic and international finance institutions ready to invest in bankable power businesses. For us, we have the experience, we have the technology, we have the partners, we have the capabilities; so our business is bankable. We therefore believe that we are well positioned to attract funding even beyond the Green Bond issuance.
The whole world is transitioning to a process whereby power solutions are moving to off-grid. How well is the Nigerian economy following that direction?
I will say when it comes to the electricity sector, the reforms started way back in the early 90s’ but it had legal effect in 2000/2003. So, we have been moving and we haven’t stopped. We also haven’t finished. We are making gradual progress. It is a journey; and it is a pivotal journey because we are moving from what used to be strictly government-controlled to a market that has multiple participants and that is private sector led and one that commercial transaction dominates. So, we are moving along with the rest of the world. It may appear that the process is slow, but I am convinced that we are making progress.
What can you say is your biggest achievement in terms of power projects since being consolidated for about three years?
We have a flagship project going on right now in Shagamu. It is a flagship project because it is going to cause a significant impact for factories along the Lagos/Ibadan expressway around the Shagamu/Benin expressway interchange. There are many industries around there. We have developed a power-plant to serve as many industries as possible in that industrial corridor. For us, it is an achievement that we have started something that is working. We are through with the phase one and we are going into the phase two and for us, it is exciting to see that we will have customers in that area that can access reliable, efficient and environmentally friendly power. For us, that is a major achievement
In terms of corporate social responsibilities, what are you doing in that regard?
Uraga Power Solutions Limited is a member of the Honeywell Group. So as a leading business Group in Nigeria, Honeywell, as a whole, is focused on promoting entrepreneurship by building local talentsand building capacity. The Group recently launched an innovation hub where we are investing in technology-based start-ups. The innovation hub provides seed capital, mentoring and training in business management, and we are providing them access to our vast network of finance and development partners. We are investing so much in start-ups so they can scale their businesses. Uraga Power Solutions Limited is a proud member of a leading Nigeria conglomerate, Honeywell Group, which is contributing to Nigeria’s economic growth in more ways than one.