Local and foreign investors renew confidence in Nigeria’s power sector reform; meet deadline for payment of 25 percent of bid value offered for distribution companies
| By Maureen Chigbo | Apr. 1, 2013 @ 01:00 GMT
THE power reform of the federal government is gaining momentum. On March 21, all the preferred bidders for the 15 Power Holding Company of Nigeria, PHCN, successor companies met the deadline for the payment of the mandatory 25 percent of the offer value of their bids. This means that when the full payments for the companies are made, the government will rake more than $3 billion dollars into its treasury. This will be the first time that the Bureau of Public Enterprises, BPE, the agency handling the privatisation process, will record such an amount in a transaction in its 25 years of existence. So far, the BPE has received a total of $559,445,573.96 from 14 bidders for 15 successor companies.
A breakdown of the payments showed that the BPE received $31million from four Power Consortia as the mandatory 25 percent of the bid value for Port-Harcourt Distribution Company; $31.5 million from Interstate Electrics Limited being the mandatory 25 percent of the bid value for Enugu Distribution Company; and $27,913,633.50 from North-South Power Company being the mandatory 25 percent of the bid value for Shiroro Power Plc.
Earlier, Vigeo Consortium, the preferred bidder for Benin Distribution Company, had paid $32.25million; Transcorp/Woodrock Consortium, the preferred bidder for Ughelli Power Plc, paid $75 million while CMEC/EUAFRIC Energy JV, the preferred bidder for Sapele Power Plc, paid $50,249,965. Others were Kann Consortium, the preferred bidder for Abuja Distribution Company, which paid $41 million; Aura Energy, the preferred bidder for Jos Distribution Company, paid $20,464,968.15; Mainstream Energy Ltd, the preferred bidder for Kainji Power Plc, paid $59,467,500; while Sahelian Power SPV, the preferred bidder for Kano Distribution Company paid $34.25 million.
Also, Amperion Power Company Limited, the preferred bidder for Geregu Power Plc, paid $33 million; Integrated Energy Distribution & Marketing Company, the preferred bidder for Ibadan and Yola Distribution Companies, paid $42,.25 million and $14,.75 million for Ibadan and Yola Discos, respectively; NEDC/KEPCO, the preferred bidder for Ikeja Distribution Company, paid $ 32.75 million; and West Power & Gas, the preferred bidder for Eko Distribution Company paid $33.75 million.
The final approval of the preferred bidders by the National Council on Privatisation, NCP, and its announcement for the successor companies were done on October 23, 2012. The Nigerian electricity industry has been unbundled into generation and distribution companies and a single transmission company with a view to encouraging private sector participation and attracting foreign and local investment into the Nigerian power sector. This new policy will ensure economic and reliable electricity supply.
With this development, the reform of the power sector has entered the most decisive stage of the privatisation of PHCN assets. As the Preferred bidders of 15 out of the 17 firms created out of the PHCN have paid up, preferred bidders will soon emerge for both the Afam Power Plant and the Kaduna Electricity Distribution Company. According to Chinedu Nebo, minister of power, the impressive response from both local and international investors to the sale of the PHCN assets demonstrates the robust investor confidence in the Nigerian power sector and in the integrity of the process.
Building of investor confidence came with the efficient regulatory framework that government had put in place to ensure best global practices in the Nigerian power sector. The investments also came at a time of a global economic downturn and declining foreign direct investment in Nigeria. As the minister said, this development shows the restoration of both local and international investor confidence in Nigeria, especially in the power sector.
The present government took a number of measures which have given the investing public hope. They include the establishment of the Presidential Action Committee on Power which meets every Tuesday with the President presiding and the launch of the Road Map for Power Sector Reform on August 26, 2010, the establishment of the Presidential Task Force on Power headed by Bart Nnaji, former minister of power, and a globally-acclaimed authority on engineering who, in 2001 built the 22-Megawatt Abuja Emergency Power Plant which, for three years, efficiently supplied electricity to State House, the NNPC headquarters, the International Conference Centre and the Central Business District.
Nnaji has since built a 140-MW Integrated Power Project in Aba, Abia State. Unlike former governments which chose people with no experience in the industry to run the power sector, the Jonathan administration is guided considerably by competence and merit in making key appointments in this critical sector. The huge interest shown thus far in the ongoing power sector by both local and foreign investors is a vote of confidence in the power sector reform and the caliber of people driving it.
However, as much as $10billion investment is needed annually for the next decade so that Nigeria can generate about 40 000MW, the quantum of power currently produced by South Africa which has since 2008 proved inadequate for the country.
As Nebo said recently, “government is a continuum. Therefore, the ministry under my leadership will continue to implement the provisions of the Electric Power Sector Reform, EPSR, Act of 2005 and The Roadmap For Power Sector Reform of 2010. There will be adjustments here and there, where necessary. I am pleased that the Presidential Task Force on Power, PTFP, has taken the lead in identifying areas which need fine tuning.”