Proceeds from the sale of NIPPS to be ploughed back into power secto – Olotu

on   /   in Sweet Crude 11:01 am   /   Comments

Mr. James Olotu, Managing Director, Niger Delta Power Holding Company Limited, NDPHC, was in Lagos recently where he commissioned some NIPPs built by NDPHC. He spoke to some journalists on the NIPPs and the interface with the new owners of generation and distribution companies. SEBASTINE OBASI was there. Excerpts

Can you tell us the significance of the commissioning ceremony?

We of the Niger Delta Power Holding Company Limited are very happy to see that there are more additional projects being delivered in Lagos State generally. We are also happy that since the handover of the privatized distribution companies to the new owners, we are joining them hand in hand to work together to achieve the objectives of Mr. President through his transmission agenda for power, driving back darkness by bringing light.

We were at Eko Electricity Distribution Company. We met with the new owners, West Power and Gas Company. Our relationship and association during that meeting showed that they are people of focus. They are determined to improve the power efficiency we have in Nigeria. They are prepared to invest more by buying the right equipment that will ensure that power gets to the people they want to provide power to.

We were able to join hands with them to commission four power injection sub-sections in those locations. Those four gave us about 105 MVA added to the sector.  That is about 90 megawatts. Some four stations are doing very well. Some of them have two transformers. Three of them have two transformers, while the other one has one transformer. Each of the transformers has 15 MVA capacity.

Already customers are feeling the impact. We have been to Magodo, where we commissioned  an extension of an existing sub-section by adding 15 MVA transformer to the station and improving and updating the equipment in the control building, from the old technology to the new technology, making them state-of-the-arts, making it easy for the operators to manage them.

Formerly, when they were using the old equipment, there was risk that sometimes it could blow up. We are happy we are contributing equipment that are new and that have high stake steel standard and that improved the power delivery system to the people of Lagos.

We also commissioned another 15 MVA transformer at Ogba Ijaiye. In these locations, the new majority shareholders, Sahara Energy were also with us. We went round together. We held a meeting also with them. The meeting introduced a lot of wonderful interface relationship between us. Coming out with us made them see practically what is obtainable in the field and the challenges that they have to worry about and to bring solutions to.

When the private sector comes into a place what they look at is the business models, they look at performance and to the private sector, the customer is always right. We are looking for eminent customers around them who are willing and ready to pay for quality and sustainable power delivery. And then they will have to assess how much is that estate or how much is that group worth. And how much do we need to invest to make that group happy.

When there is a balance in that equation that makes them feel it is a profitable venture, they will surely invest. But before now, no matter how profitable a place is to the business, as long as it does not meet any political agenda, it might give them the power. Today things are different. We are happy that government privatized. We are happy the privatization is ongoing. Even the NDPHC has joined the fray. We also want to privatize the 10 plants we are building, two of which you all know were commissioned by Mr. President some weeks ago – Geregu and Omotosho.

We have seen other stations that were commissioned. Everything was ready before your arrival. We expected this one to be commissioned by now. Giving that you have been checking off these projects across timelines, what measures are you deploying against non compliant contractors?

You notice that at Oworonshoki, where we went first, the Lagos state government demolished the building three times. We had to meet them and let them know that this project is for the people of Lagos before they allowed us to resume work. How do you blame such a contractor for not finishing a project at the right time? So there are many situations like that.

There was another location where the contractor started work and it was demolished for not meeting one standard or the other. He had to start all over again. Some people had the freedom to start their project and finish them, while some had difficulties on the way and we had to tackle those difficulties and then worked together to achieve the needed result.

The important thing is that we delivered the projects to Nigerians. Yes, I agree with you that some contractors are slow. There are very few of them. If for example you put Julius Berger on a project and you put Olotu on the same project, you will not get the same result. And you will not pay me the same amount you will pay Julius Berger. All fingers are not equal. Truly, some of them are slow and we invited them to several meetings. We are taking punitive measures against them. Some of them who are very slow, we have taken part of the projects away from them and gave to others who have finished their own.

At Ijesha, where we have 2×15 MVA injection sub-station, it was handled by Messrs Pivot. By the delivery of that project yesterday, they became the second EPC contractor to finish their project in the NIPP distribution team. That is a fantastic accolade for such a contractor. Such a contractor knows that in the books (In our green, red, yellow and black book), his name is recorded somewhere. If tomorrow comes and we are looking for contractors that delivered projects, we know where to look at.

Those ones who slowed us down for reasons that are not caused by things that are beyond them, we marked them. They are going to be on the red register. Those ones can never get projects from us again. It is their own problem. Let them work the way they work. Those who want to remain in business of working for us, especially where I am involved, they must make sure they deliver their projects on time. Those who do not, will not get another projects again.

After the close of bids, what follows?

The close of the receipts of bids is not the close of the transaction. After the close of bids, the bids are opened. The bids would be given to an evaluation committee, which includes technical people, such as engineers, lawyers, accountants, EFCC and SSS officials, World Bank and other members of the international community represented. It will be monitored by Nigerian Electricity Regulatory Commission, NERC, Ministry of Power, as well as staff of NDPHC.

We will lock them up somewhere, quiet, safe and they will be working for the next two weeks to do the evaluation. It is after the evaluation, that the report will be submitted, which will be taken to the board and the owners of the company. Upon their approval, we announce the results. Then we open the financial bid. The technical bid is to ensure that the people have competencies technically to be able to run efficiently and effectively a power plant of the size of which they themselves said they want to buy.

This is to safeguard Nigeria from people who are just coming in to buy, strip the assets and then take away the money. Having been satisfied that the people who want to buy are technically competent and effectively able to run the kind of power plant they are talking about, we now look at their financials. Again, sometimes somebody may be technically good but he does not have the money to pay. We look at the financials and see that they have the clout to do so. Then we announce the financial results.

That hopefully according to our agenda will finish by January next year. Thereafter, the preferred winners and the runners up would be made known. Then we give them a period of six months to be able to gather all the money they need to gather. By June or July next year, all the payments would have been made. Do not forget they are investing in 80 percent shares in the individual power plants that are existing.  It is not as if we are selling the assets. They are buying into a growing concern. What they are buying is the ability of that growing concern to make money by giving power efficiently into the grid.

You had discussions with the investors, both in Eko and Ikeja. What was the kernel of your discussions?

The meetings we held with them was to first of all let them know, because what they purchased, what they bought into does not include anything that NIPP is doing. They did not include NIPP facilities. I let them know that in Ikeja, we have 33 or 34 projects being done by NIPP for the distribution company that they have bought into. The equipment were provided by the three tiers of government. They are not part of what they bought, but this is what these equipment and facilities can do for them and are already doing for them.

I did not come to demand for any payment. We will discuss those things later. First of all, know that we are taking inventory of these items. Incidentally, I discovered that what we are doing for Ikeja is about 100 percent of what they had before in terms of the aggregate value of the MVA that we are putting into the system.

Secondly, the board of NDPHC has agreed that we should take inventory of the facilities and as we commission, we handover the inventory sheet to the new owners. Somebody would do the evaluation, not necessarily contract evaluation. Then the regulator would look at what that valuation is, so that you don’t inflate the value unnecessarily. If you put too much value, it will translate to what the price of the tariff will be. If you put too less value, I lose.

The regulator therefore has to balance it. Then we give them the financial statement, based on the equipment and their value and demand a cheque. Then we negotiate. However, the board has given the new owners a period of 10 years to recover and pay us that money. The board has also approved that even when we get the money, we are not going to give it to the governors and the states to share. It will still be ploughed back into the power sector, in certain areas of the sector where we currently know there are still bottlenecks. Nigeria must continue to invest in the power sector.

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