August 21, 2013, marks a watershed for Nigeria and the electricity sector. It is the date set aside for the final payment of the remaining 75 percent of the bid sum for the 15 generation (Gencos) and distribution (Discos) assets of the Power Holding Company of Nigeria (PHCN) by the 14 buyers.
The country is expected to realise about $2.5 billion (N402.5bn) from this final phase of the exercise that began February this year.
“It will be a major seismic shift in the Nigerian economy,” said Abiodun Oni, head, power and infrastructure at Stanbic IBTC Bank.
“Payment being made means there is traction in the power sector reforms and shows government commitment on improving power supply. It is fantastic. More power will be generated as a result. It bodes well for all the players in the power sector and consumers at large. It will help in meeting the electricity target and we as meter manufacturers will be able to get our meters out to the consumers,” said Chantelle Abdul, manager of Mojec Meter Company.
According to one analyst, who spoke with BusinessDay, the success of the exercise will bring renewed focus on how the sector is regulated as well as on the regulators themselves.
“It also means that the Discos and the Gencos will be under constant scrutiny for performance,” he said, “all of these will potentially have a great influence on the direction of the country’s economy in the long run.”
Analysts said the conclusion of the privatisation process would open up vistas of opportunities and bring about enormous investment into the nation’s emerging power sector, which would impact positively on the nation’s power supply.
The August 21 deadline for the payment of the balance is in line with the agreement with the bidders, which require them to pay up six months after the payment of 25 percent of the value in February 21, BusinessDay gathered.
September 21, 2013, had been widely speculated in some investors’ quarters as the deadline for the payment of the balance, but industry sources said it was slated for this month.
A top official in the National Council on Privatisation (NCP) told BusinessDay that “the deadline is August 21. No rule has changed. It remains six months after first payment deadline of February 21. We expect most of the bidders to pay. At the last meeting of the Technical Committee, the matter was clarified.”
Sam Amadi, chairman, Nigerian Electricity Regulatory Commission (NERC), confirmed that the original deadline for the payment was August 21, and not September 21, adding that there might be need to shift it.
NERC is an independent regulatory agency inaugurated October 31, 2005, as provided in the Electric Power Sector Reform Act 2005. The commission is mandated to carry out the monitoring and regulation of the electricity industry, issuance of licences to market participants, and ensure compliance with market rules and operating guidelines.
In what is an indication of what to expect in the coming days as the expiration of the deadline for the payment of the remaining 75 percent itches closer, investors who won the bids are making aggressive moves to raise funds to meet the deadline.
It was gathered that many of the investors had concluded discussions with banks and financiers for the bankrolling of the balance of the bid price.
Last week, the Africa Finance Corporation (AFC) provided a $170 million debt financing facility in conjunction with Guaranty Trust Bank plc to the Mainstream Energy Solutions Limited consortium for the acquisition of Kainji Power plc, one of the generation companies.
The payment of the balance of the offer value by the buyers of the assets would lead to the conclusion of the first round of the Federal Government’s privatisation of power generation and distribution assets and the handover of the assets to the investors.
According to analysts, the completion of the payment and the handover of the plants would bring about higher generation capacities through the provision of more efficient and cost effective power stations and improvements in the distribution sector in the areas of billing and collection, and distribution networks.
The Bureau of Public Enterprises in March had disclosed that 14 bidders for the 15 PHCN firms paid a total $559.446 million to the government, covering the 25 percent of the bids value for the successor companies.
Following the approval of the National Council on Privatisation chaired by Vice President Namadi Sambo late last year, the preferred bidders had paid a total of $335,854,986.15, which the transaction process required them to pay as bid guarantees.
The distribution companies and preferred bidders are Abuja Distribution Company, Kann Consortium; Benin Disco, Vigeo Power Consortium; Eko Disco, West Power and Gas; Enugu Disco, Interstate Electrics Limited; Ibadan Disco, Integrated Energy Distribution and Marketing Limited.
NEDC/KEPCO Consortium for the Ikeja Disco; Aura Energy Limited for Jos Disco; Sahelian Power Limited for Kano Disco; 4Power Consortium for Port Harcourt Disco, and Integrated Energy Distribution and Marketing Limited for the Yola Disco.
For the power generation companies, North-South Power Limited, Shiroro Hydro Power plc; Mainstream Energy Solutions for Kainji Hydro Power plc; CMEC/EURAFRIC Energy Limited for Sapele Power plc; Amperion Power Distribution Limited for Geregu Power plc, and Transcorp Consortium Ughelli Power plc.
The privatisation journey began in 1999 with the constitution of the Electric Power Sector Implementation Committee by NCP to undertake a comprehensive study of the electricity power industry.
By: FEMI ASU