17 September 2013, Lagos – Until last week, analysts were sceptical about the success privatisation of the nation’s 15 electricity Generation Companies, GENCOs, and Electricity Distribution Companies, DISCOs.
The scepticisms arose because prior attempts by past governments to unbundle and sell off assets of the defunct Power Holding Company of Nigeria, PHCN, had failed.
But ABC predicts a bright future as the President Goodluck Jonathan-led administration has reached an irreversible point in the privatisation of the firms, as under private ownership, Nigeria’s power situation is about to change.
Why government held on
For about 53 years of independence, the Federal Government was the only investor that regulated, generated, distributed and marketed electricity in the country. This is because until now, government was the only entity that had the financial capacity to invest in the capital intensive sector. Also, there is the conception that electricity was assumed to be directly tied to national security and should not be left in the hands of private investors.
Furthermore, inconsistent policies by past administrations made it unattractive for local and foreign investors to invest in the sector, even when it became obvious that government had failed.
Accordingly, from generation to transmission, and from distribution to marketing, there were glitches, which were compounded with systems collapse. To the effect that generation hovered largely between 1,000 megawatts, MW and about 2,000MW for over 150 million Nigerians.
It was also difficult to transmit and distribute the limited supply of electricity to consumers in different parts of the country because of insufficient infrastructure and other challenges. These resulted in frequent blackouts and instabilities that impacted negatively on consumers and the economy at large.
At the advent of the President Jonathan’s administration, power generation was a little over 2,000MW, while many parts of the country groaned under chronic darkness.
Time for a change: Determined to change the situation, the Federal Government established the Presidential Action Committee on Power, consisting of ministers and heads of agencies that have important roles to develop policy and grant instant approvals for critical decisions.
The government also established the Presidential Task Force on Power, which draws its membership from a number of agencies. These are the Federal Ministry of Power; the Bureau of Public Enterprises, BPE; and the Nigerian Electricity Regulatory Commission, NERC.
Others include the Nigerian National Petroleum Corporation, NNPC; the Bureau of Public Procurement, BPP; the Accountant General of the Federation; and the PHCN to drive the reform.
The government thereafter, produced and publicly launched a Roadmap for the reform of the sector, in demonstration of its willingness to change the course of history, and deliver on power.
The momentum of implementing the Roadmap heightened with the appointment of Prof. Chinedu Nebo, as Minister of Power, as shortly there was the signing of contract agreements with the preferred bidders for the PHCN companies who had paid the initial 25% of their bid costs.
Subsequently, government embarked on road shows to selected locations with high concentration of potential investors including London, New York, South Africa, and Dubai, for the sale of completed NIPP power projects. These policies, structures and bold steps generated more interests in the privatisation process by both indigenous and foreign investors.
The new power managers: The indigenous investors, who had no prior experience in power, had to enter into joint ventures with a number of foreign companies to provide the requisite technical backups to run the unbundled companies.
With the formal announcement by the Presidency that all the preferred bidders met their bids obligations, below are the new managers of the 15 GENCOs and DISCOs approved by the National Council on Privatisation, NCP:
•Kann Consortium – Abuja DISCO $164m
•Vigeo Power Consortium – Benin $129m
•West Power & Gas – Eko at $135m
•Interstate Electrics Limited – Enugu $126m
•Integrated Energy – Ibadan $169m
•NEDC/ KEPCO – Ikeja $131m
•Aura Energy Ltd – Jos $82m
•Sahelian Power SPV Ltd – Kano at $137m
•4Power Consortium – Port Harcourt $124m, and,
•Integrated Energy Distribution and Marketing – Yola $59m.
For the GENCOs are:
•Amperion – Geregu Plant $132m
•Mainstream – Kainji Plant $50.76m with commencement fee of $237,870,000
•North-South – Shiroro Plant $23.60m with commencement fee of $111m
•Transcorp/Woodwork – Ughelli Plant $300m, and,
•CMEC/Eurafric – Sapele Plant $201m.
No going back: Despite the initial fears over the ability of the preferred bidders to complete their payments, which was heightened with their demand for extension a few days to the August 21 deadline, government remained resolute to move ahead.
Federal Government’s insistence to collect the balance of 75 per cent cost on the due date forced bidders to comply. By the close of work on August 21, 13 of the consortia were able to beat the deadline.
The Minister of Power, Nebo had announced that Government recorded substantial compliance in payments for the sale of the GENCOs and DISCOs under a globally acclaimed power privatisation programme.
He had said: “By the close of transaction by 5pm on Wednesday, all the bidders had paid up, except for the Enugu DISCO, while the preferred bidder for Sapele Power Station had made substantial part-payment.
Thereafter, efforts were made by the relevant government agencies, including the NCP, Ministry of Power, and BPE to get the remaining two bidders to complete their payments. Besides, there were also the outstanding issues in the sector, including the completion of severance benefits to electricity workers; increased metering of consumers; and the testing of the market operators’ settlement systems and processes.
Also in view are the constitution of a dispute resolution panel to settle grievances; and declaration of the Transition Electricity Market, TEM.