PHCN successor companies face fresh financial hurdles

One of Nigeria's NIPP*As 66 bids for 10 NIPP power plants

Oscarline Onwuemenyi

11 November 2012, Sweetcrude, Abuja – Fresh financial hurdles may be on the way for several power consortiums who recently acquired successor companies of the dissolved Power Holding Company of Nigeria, PHCN.

The new challenges became obvious on Monday in Abuja at the opening of technical, financial and bond bids of theNational Integrated Power Projects (NIPP) plants where it was revealed that the companies may need to part with about $100m if they are to emerge preferred bidders for any of the 10 NIPPs owned by the Niger Delta Power Holding Company, NDPHC.

Some of the firms who bided for the plants were Power ventures consortium, Ethiope Energy Limited, EEL Consortium, ENL consortium, Temple Energy consortium , Omotosho Electric Energy Company Limited, Atlantic energy and gas limited, Imperial Power Consortium, and African Consortium.

The NDPHC had received about 66 proposals for the acquisition of 80 percent of 10 power plants, with installed capacity of 4,700mw, which are still largely under construction. The proposals will now go into evaluation to ascertain the validity of the claims in them.

The evaluation is expected to last for at least two weeks. Alaoji plant got three proposals, Egbema, four; Ogorode, Omoku and Geregu got eight proposals each; Gbaran, seven; Benin/Ihobor, four; Olorunshogo, five; Calabar, six; while Omotosho had the highest proposals of 13. Speaking to at the opening, Managing Director of NDPHC, James Olotu explained that the extra burden placed on the winners of any of the PHCN companies is to ensure that the old companies are not abandoned for the new ones.

According to him, “Look at it this way a company bids for one the power generation plants, in our guidelines you must have a net worth of a certain amount of money ranging between $100m to $250m. Now if a company has already won a power plant before or one of the distribution companies before and is now attempting to another one again, it is allowed under the rules but we want to make sure the promises and the conditions for winning the first one are not in any way compromised.

“You know the last phased transaction was with old power plants and these plants we are not going to throw them away. We want them to be reactivated, expanded and brought back to life to the capacity they were before or expanded to a bigger capacity.

“Now if a man now agrees to this programme and suddenly the man now wins this new power plants, he abandons that one and diverts the money he want to invest into the old one to the new one. That is short changing Nigeria.”

Olotu added that, “First we make sure that first the person has the financial capability he claimed he had before he was declared the preferred winner of the transaction. We will add that to the financial capability we believe he should have before also winning this transaction.

“So that ultimately we do not sell a new power plant to somebody who will lose interest in the old power plan that he has acquired”. Olotu who also explained the process of acquiring the NIPP plants noted that “the evaluation committee has been set up and they start working from today for a minimum of two weeks, if they need more time, we will give them but the target is that within the next two weeks they will be doing the evaluation.”

According to him, “The parameters for what they are looking for they all know because they have them in hands. Basically the financial adviser had mentioned them earlier, and they will be looking for three things, one the competence of these companies to be able to operate and manage successfully the power plants with the capacity that they applying for.

“Nigeria will not want to give the power plants to someone who does not have that competence otherwise they just come in strip the assets, sell it and run away from Nigeria and Nigeria will be short changed”.

He explained further that the second point “is to ensure that they have the financial capability to actually invest. Some people will claim that they have money but when the time comes to pay you they can’t pay. So we want to make sure that from the beginning that they have the financial strength to pay for the plant of their choice.

“Lastly, to ensure that the consortium is actually good consortium and not one that will fall apart half way through the process. We want to make sure that when we privatized it must be for something better than it was before otherwise it does not make any sense to do that.

“Sixty-six companies bided and 66 were opened today and there was no immediate disqualification. One of the reasons for immediate disqualification would be that one of the important items is not there and then you immediately disqualify that company but most of them have met the primary objectives and so now go to proper evaluation,” he added.

Speaking earlier, Minister of Power, Chinedu Nebo who supervised the exercise said the process was one of the key mile stones in the privatization of the power sector

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