BY CLIFFORD NDUJIHE
The joint effort of the three tiers of government to increase power generation, transmission and distribution capacities on a significant scale through the National Integrated Power Projects (NIPP) enters its final lapse as the government offers the 10 power generating plants built by the Niger Delta Power Holding Company Limited (NDPHC) for sale to investors.
Set in motion with the Electric Power Sector Reforms Act of 2005 and the incorporation of the NDPHC in that year as a limited liability company to serve as the legal vehicle to build, hold and manage NIPP’s assets using private sector-based global best business practices, the process has delivered 10 new power generating plants as mandated by the Act.
Currently, the NIPP generation portfolio comprises 10 gas-fired plants with a combined design capacity in excess of 5,453 megawatts (mw) at International Standard Organisation (ISO) conditions and 4,774mw (Net), all of which are now on offer to private operators for effective management via competitive bids as announced by the government through the NDPHC in collaboration with the Bureau of Public Enterprises (BPE).
To handle the sale of the power plants in line with due process and laid down procedure, the three tiers of government have set up three committees namely, the Joint Evaluation Committee, whose work is to evaluate the expression of interest for the power plants; the Joint Transaction Committee of the NDPHC headed by the Managing Director, NDPHC, Mr. James Olotu; and the Joint Technical Committee, headed by Benue State Governor, Gabriel Suswam. A final approval of what the three committees would do shall be given by a board of NDPHC and National Council on Privatisation (NCP).
Towards this all-important last leg of this power reform phase, the NDPHC, alongside the BPE and other stakeholders in the power sector, recently launched a road-show in Lagos, which train also moved to London, Hong Kong (one of the Asian Tigers) and New York, United States, to provide needed information to potential investors on the 10 power plants.
200 investors jostle
The road-show appears to be yielding dividends as about 200 foreign and indigenous investors are reportedly jostling to buy the NDPHC plants.
Expression of Interest (EoI) for the power plants closed by 5pm on Friday, July 19, 2013 and 110 private investors’ companies beat the deadline. The BPE is expected to announce a shortlist of successful bidders for the power plants on August 8, 2013. And barring hitches, the power plants would be transferred to successful bidders between June and July 2014.
Said Olotu: “All the plants are in top condition and have gone through pre-commissioning and reliability tests to ensure optimal performance in the hands of the operators, who would be selected through a rigorous process to ensure that the full objectives of the NIPP projects are realised.”
The exercise, he said, would draw lessons from the privatisation of the Power Holding Company of Nigeria (PHCN) successor companies and introduce improvement in the auctioning of public sector assets in the country, adding that President Goodluck Jonathan would soon commission the comprehensive NIPP projects while Vice President Namadi Sambo, who heads the NCP, lauded the NDPHC management over “the manner it handled the successful completion of the 10 power plants.”
What is on offer?
On the auction block are the 80 per cent shares belonging to the three tiers of government in the 10 power plants. During the road-show, Mr. Olotu explained that the three tiers of government have agreed “to divest 80 per cent stake in each power plant as valued by our financial advisers/valuers. We will retain 20 per cent in order to assure potential investors of our confidence in the plants we are selling.”
For the particulars of the facilities on offer, Mr. Olotu said the Alaoji Power Plant in Aba, Abia State has four gas and two steam turbines with current capacity of 1,131.4mw (ISO) and 961mw (net). It is designed as a combined cycle gas turbine (CCGT) facility with duct firing its heat recovery steam generators (HRSGs). 831.3mw (ISO) and 706mw (net) of the Alaoji Power Plant are anticipated by its date of sale to private investors.”
There is also the Ihovbor Power Plant in Benin City, which has four GE Frame 9E gas turbines of 507.mw (ISO) and 451mw (net) capacity. It is an open cycle plant built to accommodate future conversion to combined CCGT configuration.
Prospective investors can also buy into the 634.5mw (ISO)/562mw (net) capacity Calabar Power Plant, which is also an open cycle plant built to accommodate future conversion to combined CCGT configuration. The Egbema Power Plant near Owerri, Imo State has three GE Frame 9E gas turbines capable of 380.7mw (ISO) and 338mw (net) power generation output. It is designed and built to accommodate three additional gas turbines and future conversion to combined CCGT configuration. Near Yenegoa, Bayelsa State is the 253.8mw (ISO)/225mw (Net) Gbarain Power Plant. With two GE Frame 9E gas turbines, this open cycle gas turbine power plant is also built to accommodate future conversion to CCGT configuration.
Also up for sale is the Geregu II Power Plant at Ajaokuta, Kogi State. An open cycle gas turbine power plant built to accommodate future conversion to CCGT configuration, Geregu II has three Siemens V94.2 gas turbines with 506.1mw (ISO) and 434mw (net) capacity.
The fully operational Sapele II Power Plant is the seventh facility the NDPHC has put for sale. It has four GE Frame 9E gas turbines of 507.6mw/451mw (net) capacity and is located in Sapele, Delta State.
Investors may also wish to buy into the Olorunsogo II Power Plant in Olorunsogo, Ogun State, which has 754mw (ISO)/676mw (net) output capacity, provided by four GE Frame 9E gas turbines and two GE Steam Turbines.
There is also the Omoku II Power Plant, near Port Harcourt, Rivers State. Designed and built to accommodate two additional gas turbines and future conversion to combined CCGT configuration, this plant is powered by two GE Frame 9E Gas Turbines of 264.7mw (ISO) and 225mw (net) capacity. Lastly, there is the Omotosho II Power Plant in Okitipupa, Ondo State. The four GE Frame 9E Gas Turbines at the heart of this sprawling facility have the capacity to generate 512.8mw (ISO) and 451mw (net). It is also an open cycle gas plant built to accommodate future conversion to combined CCGT configuration.
With Nigeria’s population of over 160 million people, the country is without doubt the largest market for investors in Africa. To be sure, the meteoric rise of hitherto unknown telecommunications company in global reckoning following their entrance into the highly rewarding Nigerian telecoms sector has put both indigenous and foreign investors on the alert for any investment opportunities in Nigeria. It is against this backdrop that over 200 investors have indicated interests in acquiring the NDPHC plants.
The investors are seeking to capitalise on the growth opportunities in the Nigerian electricity market where demand far outstrip current supply and the potential for strong economic growth is high.
Moreover, some foreign investors are interested in the plants because they want to establish a strong presence in West Africa, using Nigeria as a platform for acquiring further assets in the region.
The NDPHC plants are also being sought after since they are all newly constructed and as such are fuel efficient with low operating costs, thereby relieving investors of pressure from construction-cum-commissioning costs.
Investors are also expected to benefit from a Multi-Year Tariff Order (MYTO) designed to be a cost-reflective tariff that accounts for operating cost and capital recovery. They would benefit from a Power Purchase Agreements (PPAs) with the Federal Government owned entity – the Bulk Electricity Trading Plc (NBET) – which will act as the bulk buyer of electricity in the early stages of market liberalisation.
Equally, there is the opportunity to benefit from the 10-year term Gas Supply and Aggregation Agreements with Nigerian oil producers.
Recouping costs for NIPP Phase II
At the Hong Kong road-show, Governor Suswam disclosed that the three tiers of government have, so far, invested well over $8 billion in the building of the 10 power plants on offer for sale. However, the government expects over $6 billion (about N936 billion) in revenue from the on-going moves to divest 80 per cent of public sector interests in the 10 new power stations.
The revenue receipt, according to officials of the Ministry of Power and Mr. Olotu, would be ploughed back into the sustained capacity development in the power sector, specifically to build a number of hydropower dams across Northern Nigeria in line with the aspiration to drive the country’s economy up to the biggest 20 in the world by the year 2020.
Also during the road-show, Minister of Power, Prof. Chinedu Nebo, stressed that “the power sector will thrive in the hands of the private sector and drive the Nigerian economy. We will give maximum support to investors to take over the sector.
“The entire process of privatisation of the power sector is irreversible and what happened in the telecoms sector is about to repeat itself in the power sector. We expect that the achievement in the power sector will dwarf the telecoms sector. We expect this to revive our economy and revive our SMEs, which are currently moribund.”
Speaking in the same vein, Chairman, Presidential Task Force on Power, Mr. Dagogo Jack, stated: “This project is consistent with government’s policy to push the plants to the private sector, which can manage it better. Government will create incentives for investors in the power sector.”
Also during the road-show, Director-General, BPE, Mr. Benjamin Dikki said the sale of the power plants fell within the context of President Jonathan’s Transformation Agenda, “which seeks to create a conducive atmosphere for private capital inflows.”