A Review of the Nigerian Energy Industry

Ughelli Power firm gets N13b AFC, banks lifeline

Electric-power-plant26 August 2013, Lagos – To boost electricity supply in the country, the Africa Finance Corporation, AFC, in conjunction with UBA Bank Plc, as co-arrangers, and FCMB and Fidelity Bank as co-financiers has provided a N13 billion debt financing facility for the acquisition of Ughelli Power Plc. The aggregate commitment of AFC for the acquisition is N8 billion.

Meanwhile, there is intense lobby at the Bureau of Public Enterprises, BPE, to extend the payment deadline for Enugu Electricity Distribution Company, which could not be paid for when the deadline ended last Wednesday.

In a related development, Eastern Electric, the reserve bidder for Enugu Electric Distribution Company, has made overtures to the BPE to respect the law and immediately allow it make payment following the inability of the preferred bidder to meet up.

Besides, an indigenous firm – Forte Oil Plc, said Sunday that its subsidiary, Amperion Power Distribution Company Limited (Amperion Power) has completed the acquisition of a majority stake in the 414MW Geregu Power plant with payment of $99 million.

Nigeria began restructuring and reform of its electricity sector in 2000 with the issuance of the National Electric Power Policy, NEPP, to unbundle the sector and establish a regulator, with a mandate to create and develop a competitive electricity market.

The provisions of the NEPP were subsequently enacted in the Electric Power Sector Reform Act 2005 (EPSR Act), providing the key legal and regulatory framework for the reform, including the establishment of the Nigeria Electricity Regulatory Commission (NERC), paving the way for private sector participation in the power sector.

Ughelli Power Plc is one of six power generation limited liability companies established under the provisions of the EPSR Act following the unbundling of the vertically integrated PHCN.

Ughelli Power Plc is a gas fired thermal power plant acquired by Transnational Corporation of Nigeria Plc (Transcorp) in the first round of the Federal Government of Nigeria’s privatisation of power generation assets formerly owned by the Power Holding Company of Nigeria, PHCN. Ughelli Power Plc was incorporated in 2005, is situated in Delta State and has an installed capacity of approximately 900MW. It currently generates approximately eight per cent of the total electricity within the Nigerian national grid.

Transcorp is the lead sponsor in the Transcorp Ughelli Power consortium, which will be purchasing 100 per cent of the shares in Ughelli Power Plc. Transcorp, incorporated in 2004, is a diversified conglomerate with strategic investments and core interests in the hospitality, agribusiness and energy sectors.

AFC, a multilateral finance institution, was established in 2007 and has a current capital base of US$1.2 billion. It was established to be the catalyst for private sector infrastructure investment across Africa. AFC fills a critical void in providing project structuring expertise and risk capital to address Africa’s infrastructure development needs, and is increasingly being seen as the benchmark institution for private sector investment in the core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications.

President and Chief Executive Officer of the AFC, Andrew Alli stated: “AFC’s long-term vision is to help address Africa’s infrastructure deficit and ensure sustainable economic growth for the continent. Growth of the Nigerian economy cannot be fully realised without an efficient and functioning power sector. Power is one of AFC’s high priority sectors for investment, and arguably Africa’s most significant need.

To this end, AFC stands as both an advocate and support of privatisation of the power sector in Nigeria, and has partnered with the U.S. government through United States International Development Agency (USAID) in the USD7 billion U.S. Presidential “Power Africa Initiative” to accelerate investment in Africa’s power sector over the next five years and increase access to clean, geothermal, hydro, wind and solar energy. AFC’s investment in Ughelli power will contribute towards reducing Nigeria’s chronic power deficit, foster economic growth and create employment.

AFC was created to address the infrastructure investment deficit and is privileged to be providing an African private sector investment solution, to drive economic growth and industrial development in Nigeria.”

At the close of the official deadline on Wednesday, all the preferred bidders for the nation’s utilities for privatisation had paid up except Interstate Electrics, which was unable to pay the remaining 75 per cent of the bid price for Enugu Electricity Distribution Company.

Information released from Ministry of Power indicates that apart from the preferred bidder for Enugu Disco which failed to make payment that of Sapele Power Station had made ‘substantial part-payment’. It is not immediately clear if ‘substantial part-payment’ also qualifies as beating the deadline.

But it was learnt at the weekend that spirited attempts to get Vice President Namadi Sambo, who is the chairman of the National Council on Privatisation, to make a special case for Interstate Electrics were unsuccessful.

A source said the promoters of the defaulting firm have been told in clear terms that international development partners like the USAID and the Department of International Development, DFID, of the British government, which are involved in the bid process as observers, would not accept it.

“This was why the bids from Dangote and Rockson Engineering for two generation firms were disallowed in July, last year; both bids arrived only a few minutes late.

Interstate Electric was also given the example of Mike Adenuga, who could not be awarded a GSM licence in 2001 when MTN, NITEL and Airtel received theirs because of a mistake,” The Guardian was told.

Meanwhile, Minister of Power, Prof. Chinedu Nebo is getting set to formally declare the Transition Electricity Market, to enable the new investors commence business in earnest and further drive the process.

He said in Abuja, “The completion payment now entitles the preferred bidders to take full possession of the 15 PHCN unbundled entities (10 Distribution companies and five Generation companies).”

Nebo reassured of government’s resolve to pursue the transformation agenda to the end, and monitor the emerging transition market, in order to protect the interest of both the citizenry and the investors.

He said the stability of the national grid was being enhanced to ensure effective transmission of any quantity of power being generated in the new dispensation.

He said efforts were also on to provide more electricity off-grid, especially for the rural areas, while also sustaining subsidy for low income electricity consumers in the nation’s tariff structure.

It was learnt that the promoters of the consortium have gotten their lawyer to formally write BPE on the need not to drag the privatisation process into unnecessary litigations.

Eastern Electric had on Wednesday `declared preparedness to pay $126 million for the takeover of the company which provides power to the southeastern part of Nigeria, following the failure of Interstellar Electric to do so.

The consortium was formed by the five Southeast state governments: Nestoil, a major indigenous operator in the upstream sector of the Nigerian petroleum industry; Aba Power Ltd and Geometric Power Ltd, and Diamond Bank and members including NRECA of the United States and the NETGroup of South Africa.

The firm’s statement read: “We shall not have difficulty raising the funds. The BPE is still holding on to our $10 million bank bond raised when we were bidding for the Enugu Disco.”

The BPE had on Monday announced that it would not extend the Wednesday deadline for the payment of the outstanding 75 per cent of the bid prices for successor companies of the Power Holding Company of Nigeria by the preferred bidders.

BPE said if they failed to pay by 5 p.m. last Wednesday, they would lose the bids, while the reserved bidders would be invited to take over the assets.

A source at the BPE said that the agency has to give some period of grace to Interstate Electric Limited to make payment and also to CMEC/EUAFRIC Energy JV, the preferred bidder for Sapele Power Plc, which had earlier paid a substantial amount of the 75 per cent balance.

Interstates, which is promoted by businessman, Emeka Offor, was preferred to acquire the Enugu Disco and like others, it had initially paid the mandatory 25 per cent bid price but was unable to meet up with the 75 per cent balance at the expiration of the deadline set by the BPE.

Also, a source said: “We are making frantic efforts to ensure that we make the payment in the next few hours. There is still hope for Interstate Electric Limited to take over the Enugu Distribution Company. Though, the BPE gave us up till Friday, August 24 to make the final payment, we were not able to pay. But I assure you that in the next 24 hours, the company would have fully paid for the power firm”, he said.

A source in BPE confirmed that the agency was trying to relax the rule contained in the Request for Proposal (RFP) to give opportunity for Interstate Electric Limited pay their outstanding balance.

Head, Brand and Corporate Communications, Odion Aleobua, said in a statement yesterday, that Amperion Power completed the acquisition of the power plant ahead of the Wednesday, August 21, 2013 deadline with the payment of $99 million to the BPE representing 75 per cent balance for the power generation asset.

This, the company said was in addition to the $33 million mandatory down payment made on February 21, 2013 to the BPE by the group to complete the required bid sum of $132 million.

– The Guardian

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