A Review of the Nigerian Energy Industry

BPE receives 25% of bid price for Afam Genco, Kaduna Disco

Acting-Director-General-BPE-Mr-Benjamin-Dikki12 February 2014, Abuja – The Bureau of Public Enterprises, BPE, Tuesday disclosed that two of the preferred bidders for the 726-megawatt Afam Generation Company and Kaduna Distribution Company have paid their mandatory 25 per cent initial down payment for the acquisition of the assets to it.

The Director General of BPE, Benjamin Dikki, told journalists of the new development at the sideline of a technical meeting convened by the Nigerian Bulk Electricity Trading Company (NBET) to address the extant issues pertaining to the eventual operationalisation of trading instruments in the emerging Nigerian Electricity Supply Industry (NESI).
Taleveras Group had emerged top bidder for the Afam power plant with a $260.05 million bid while North-west Power Limited emerged winner for the Kaduna Disco, having offered the highest aggregate technical commercial and collection loss reduction figure (ATC &C) of 29.26 per cent.
The meeting, which held in Abuja, was initiated by the NBET chiefly to clarify various provisions in the Power Purchase Agreements (PPAs) and Vesting Contracts (VC) executed by successor generation and distribution companies of the defunct Power Holding Company of Nigeria (PHCN) with it.
It was also meant to inform the contracting parties of key processes required for the administration of the contracts towards the commencement of the Transitional Electricity Market (TEM).
Dikki in response to a question on the status of the outstanding Afam and Kaduna privatisation exercise, said: “Kaduna and Afam, the preferred bidders have paid the 25 per cent on due date. They now have to pay the balance of 75 per cent in another six month or so.”
With regards to the federal government’s investment overtures to private sector financiers, Dikki said: “When we say we don’t want to leave the new owners alone, it’s to say that government still has a role in facilitation. A conference on international financing was held yesterday (Monday).
What government simply did was to create a forum where investors, financers from all parts of the world came together to provide an easy contact and interface with the financiers and the new owners of the successor companies. And not only those new owners of successor companies, but other sectors of the Nigerian economy that require financing. The key thing is that the invitation was from government.”
He also spoke of the agency’s readiness to commence its mandatory post privatisation monitoring of the activities of the new owners of PHCN successor companies with regards to the performance obligation signed by them.
“That will commence in May. The Share Purchase Agreement (SPA) gives a six-month period to allow the new owners to settle in. Already, we have commenced serious activities to prepare us for that purpose.
“The whole of the BPE staff went through a one-day workshop recently in order to familiarise them with the terms of the agreement and those ingredients to look out for in the monitoring exercise. As soon as the six-month period expires, we will move in and see exactly what these companies have done in terms of implementing the performance agreement and the Share Purchase Agreement,” Dikki stated.
The Managing Director of NBET, Rumundaka Wonodi, also stated that the meeting became necessary following requests from contracting parties for the adjustment of provisions in the PPAs and VCs.
He added that the NBET had insisted on adherence to extant provisions in the various agreements.
In another development, Dikki also disclosed that the power sector required as much as $23.9 billion in capital expenditure (CAPEX) within the next five years to bring stability to the sector.
According to him, the distribution companies (DISCOs) alone needed about $1.8 billion in CAPEX in the next five years for optimal performance while the Transmission Company of Nigeria (TCN) would gulp about 2.4 billion in order to increase power transfer capacity, make the network more stable and reliable, and improve efficiency of electric power transfer by reducing transmission technical losses.
Dikki told a gathering of stakeholders in a presentation at the International Conference on Private Sector Financing/Support of the Power Sector in Abuja that the capital injection would also enable TCN to increase transmission capacity to 16843MW by the end of 2018.
He put the CAPEX Funding Requirements for the privatised PHCN Successor Gencos at $11.7 billion to ramp up and expand their capacity.
This does not however, include the requirements of prospective green field and ongoing IPPs.
Giving a breakdown which was gleaned from the post-acquisition plans submitted by the investors, he said the Ughelli Power Plc would need $604 million in CAPEX, Sapele Power Plc ($394 million), Geregu Power Plc ($200 million) while Afam Power Plc needed $850 million.
In addition, Kainji Hydro would gulp $456 million, Egbin Power Plc ($1700 million) as well as Green Field IPP $ 7, 500 million.
He said: “Gas Industry sources estimate that $1.5 billion will be required annually for the next 5 years if we are to address gas challenges in the power sector. In other words a total of $7.5 billion is required in the next 5 years for gas infrastructure.”
He noted that the objectives of the Federal Government’s power reform program as was to reduce the cost of doing business in the country so as to attract new investments through provision of quality and dependable power supply to the economy for industrial, commercial and socio-domestic activities as well as improve the overall efficiency of the distribution, generation and transmission network.


– James Emejo and Chineme Okafor, This Day

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