A Review of the Nigerian Energy Industry

Electricity: Can NIPP privatisation make any difference?

Power transmission11 March 2014, Abuja – With the privatisation of 10 thermal plants progressing into the payment stage, the Niger Delta Power Holding Company (NDPHC) is expected to reap a total of $5.8 billion (N959.3billion) while adding about 5,454 megawatts of electricity into the national grid.

The Minister of Power Prof. Chinedu Nebo recently said that this year’s 10,000mw target of Federal Government in the power sector would be realised by December, with the commissioning and privatisation of the 10 NIPPs expected to generate additional 5,454mw to the current estimated 4,500mw.

The thermal plants, constructed under the National Integrated Power Project (NIPP), is an initiative of the federal, state and local governments that was started in 2010 as part of the intervention in the Nigerian power sector.

This interventionist measure is being handled by NDPHC with most of the projects reaching completion stage.

The NIPP, although started in recent times, was conceived in 2004 as a fast-track public sector funded initiative that would add significant new generation capacity to Nigeria’s electricity supply system along with the electricity transmission, distribution and natural gas supply infrastructure required to deliver the additional capacity.

Government then incorporated the NDPHC in 2005 to serve as the legal vehicle to hold, manage and operate the utility developed and built under the NIPP, using private-sector best practices.

The Director General of the Bureau of Public Enterprise (BPE), Mr Benjamin Dikki, at the financial bid opening described the NIPP privatisation as a historical landmark.

He said: “This NIPP privatisation process will usher in the last step of the session. At the conclusion of this, all the Generation companies (Gencos) will now be in private hands and it is a historical landmark.”

Privatisation of the plants began in earnest last year with the opening of the technical bid, just a month after President Goodluck Jonathan commissioned two of the NIPPs, Geregu and Omotsho plant in Kogi and Ondo states.

During the technical bid opening, 66 bidding firms emerged out of the over 100 firms that submitted their Requests for Proposal (RFP) for the ten power utilities.

The board of the National Council on Privatisation (NCP) led by Vice President Namadi Sambo alongside the NDPHC then constituted the Joint Transaction Technical Committee (JTTC) chaired by Governor Gabriel Suswam to evaluate the technical bids and recommend for the financial bids subsequently.

Following this, 42 bidders were identified to be technically qualified to proceed to the financial bidding stage having met the set criteria in the RFP while passing the due diligence verification conducted on technically qualified bidders, NDPHC and its transaction advisers, CPCS Transcom International Limited disclosed few days before the bid, last Friday.

However, an insider source said the previous list had about 52 qualified firms, including AITEO and Bresson Consortia, but the final list according to sources was later screened to 42 during the joint meeting of the board of the NPDHC and the NCP in Abuja, two weeks ago.

A source privy to the transaction process hinted that the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, allegedly made some observations on the corporate character of some of the bidders, noting that it was instrumental to cut-down in the final list.

At the financial bid opening, the JTTC Chairman and Governor of Benue State Governor Gabriel Suswam led the proceedings alongside the Minister of State for Power, Hon. Mohammed Wakil.

Suswam said the process transparent and would continue to be so. Suswam said the financial bids will be ratified in few weeks by NDPHC board along with the JTTC, after which the preferred bidders will be invited to make their payments.

Suswam disclosed that the next stage would be making payment of bid prices and the execution of agreements between bidders and the NDPHC within an established NIPP transaction deadline.

It was observed at the transaction time, that none of the new owners of the successor five Gencos and ten Distribution companies (Discos) of the defunct Power Holding Company of Nigeria (PHCN) was shortlisted to participate in the NIPP privatisation exercise, but information is vague on whether any of them is part of the pre-qualified bidders or had initiated moves to bid at the inception.

The emerging bidders include AITEO Consortium which was the sole bidder for the 1,131mw Alaoji power plant, the largest of all the NIPPs.

AITEO placed a bid price of $902 million for the plant it, however, forfeited a $1 million bid bond for opting out of the bid for Olorunsogo late in the process.

ENL Consortium Ltd bided $751,240m for the 754mw Olorunsogo NIPP, the second largest.

Seoul Electric Power Ltd won its $690.200million bid for the 506mw Geregu plant, Omotosho Electric Power Ltd won 513mw-Omotosho NIPP with $659.999 million; EMA Consortium got Calabar 634mw plant with $625million, and 508mw-Ihovbor, Benin power with $580 million.

More so, Daniel Power Consortium got Ogorode-508mw power for $531.777,777 million bid, Dozzy Integrated Power Ltd bided $415,075 million to win the 381-Egbema power; for the 254mw Gbarain, KDI Energy Resources won with $340 million, and Shayobe International Consortium Ltd won the 265mw-Omoku power after biding with $318.710,840 million.

Following this, the NDPHC which is a joint venture of the three tiers of government, is expected to reap about $5.814, 002,617 billion from privatising the 10 thermal power plants.

The Managing Director, Mr James Olotu, said in December 2013 that a significant percentage of the proceeds would be divested to commence the second-phase NIPP on developing hydro electric power.

Equally, government said it would seek a $10 billion worth of investments in collaboration with power sector private investors to build the new hydro power stations in the phase-two NIPP. Mr. Olotu also said in January that the new projects have been approved by the Federal Government for implementation.

A recent publication by the company said the second phase will involve the construction of two large and one medium hydro power plant and the construction of hydro power plants on 13 existing medium and small dams in various parts of the country.

It hinted that the third phase would involve capacity building for the NDPHC project management team, adding that sales proceeds from the 80 percent privatisation of the 10 NIPP plants should be realised by June for divestment in the second-phase project.

A major challenge of these NIPPs remains gas supply constraint. Inadequate supply has almost crippled the two already commissioned plants which solely depend on gas to fire the plants, following a recent spate of coordinated vandalism of gas supply infrastructure in the Escravos – Western Axis, and parts of the Eastern trunk line.

Although Geregu and Omotosho plants were commissioned since October 2013, Olotu hinted in December that four other plants were ready for commissioning early in January 2014 before the sabotage struck; he noted that others are in various stages of completion.

Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr Sam Amadi, at a function in Enugu, early this year, stated that gas supply constraints have grounded the NIPP stations and threatened the Federal Government’s N10 billion initiative to generate over 5, 000 mw additional power.

Amadi said: “The case of the NIPP comes to mind. Government invested over N10 billion to procure over 5,000 megawatts in the Niger Delta area without proper planning about gas supply and transmission facilities.”


– Michael Echewofun Sunday, Daily Trust

In this article

Join the Conversation