Power investors to commit $1.8bn to distribution companies

ERERA Power lines07 November 2013, Lagos – The 10 private investors that acquired the 11 electricity distribution companies unbundled from the defunct Power Holding Company of Nigeria (PHCN) have expressed their commitment to invest a total of $1.8 billion in the companies at an average of $357.663 million yearly over the next five years.

This is coming as a new tariff structure will be put in place after the first three months to enable the investors make investment in metering; Health, Safety and Environmental (HSE) practices; reduction in number of customer interruptions due to network faults; roll out new customer connections and network expansion programmes.

Speaking in Lagos, at a Regional Conference for Financing Infrastructure for Sustainable Development in West Africa, the Director General of the Bureau of Public Enterprises (BPE), Mr. Benjamin Dikki, said an average yearly investment of $357.663million would be made in all the 10 distribution companies for the next five years, starting from 2013.

Dikki listed the new investors and their commitment to include Kann Consortium Utility Company Limited, which plans to invest $183.03million in Abuja Disco from 2013 to 2017; Vigeo Holdings, $121million in Benin Disco; Interstate Electrics, $136million in Enugu Disco; Integrated Energy Distribution and Marketing Limited, $219million in Ibadan Disco and $65million in Yola Disco; Aura Energy Limited, $113million in Jos Disco and Sahelian Power SPV Limited, $151million in Kano Disco.

Others include West Power & Gas Limited, $225million in Eko Disco; KEPCO/NEDC Consortium, $293million in Ikeja Disco; and 4Power Consortium, $127million in Port Harcourt Disco.

He stated that an investment of $149million would also be made in Kaduna Disco, which has Northwest Power Consortium as the preferred bidder in yet-to-be concluded privatisation exercise.

Dikki said the power sector would require several billion of dollars over the next five years, adding that this investment would be needed in order to achieve the goals of the power reform programme.

He said the government had made bidders contractually required to bring in this investment, stressing that BPE and the government and BPE would be following up on this continuously “One of the largest challenges in any privatisation is ensuring that necessary investments are made by the private sector. Many countries experience disappointment when private sector partners fail to make investments as promised, whether for legitimate reasons or due to excuses,” he said.

He attributed the success of the privatistion exercise to the political will of President Goodluck Jonathan and Vice-President Namadi Sambo. Dikki said the interest shown by investors was an indication that the government got the reform initiative right.

“If it wasn’t correct, investors would not come in. The distribution companies submitted bids based on reduction of technical losses. They were not based on price. There is so much under-investment in distribution network. So, the bidders were committed to indicate at what rate they were going to reduce these technical losses and this was imputed into the Multi-Year Tariff Order (MYTO), which gives a guarantee of returns based on the assessment of the cost of doing business,” he added.

Dikki said a new tariff would be worked out and dedicated to improving the transmission infrastructure. According to him, transmission is seen by some private sector participants as the “weak link” between generation and distribution.

“While we have brought a reputable three-year management contractor in place, we still need to ensure this management contractor is fully empowered to do its work. We also will need to be sure that the transmission sector is adequately supported by the government through funding so that it can make the investments to be able to wheel the increased generation capacity,” he said. “We believe that once the tariff is reviewed after the first three months, a more cost-reflective tariff will be in place,” he added.

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