In a couple of months from now, it would be one year since the successful sale of the assets of the defunct Power Holding Company, PHCN assets to private investors.
However, Micheal Eboh, writes that attempts to replicate similar success with the National Integrated Power Project, NIPP plants is being frustrated by the mistrust of Federal Government.
Specifically, Sweetcrude learnt from some of the successful bidders that mistrust of the Federal Government and doubts over the transparency of the process are responsible for the delay in the conclusion of the sale of the power plants. This may not be unconnected with the post-privatisation experiences of investors who acquired the PHCN assets.
Already, bidders are sceptical of some of the clauses in the Sales Purchase Agreements, SPAs, and have resorted to proper scrutiny of the agreement to avoid being shortchanged, even as the bids for three of the plants are being contested in courts.
The privatisation of the 10 NIPP plants was initially slated for conclusion by June 2014, but with about four months to year end, nothing has been heard after the announcement of successful bidders for some of the plants.
A number of other factors were identified for causing the delay in the conclusion of the process, ranging from delay in the completion of the power plants to various litigations by aggrieved parties in the bidding process.
The 10 power plants with a combined capacity of over 5,000 megawatts, MW, are Calabar, Egbema, Ihovbor, Gbarain, Sapele, Omoku, Alaoji, Olorunsogo II, Omotosho II, and Geregu II.
Despite these drawbacks, the Bureau of Public Enterprises, BPE, responsible for executing the sales is optimistic that the process is on course, while the stated objectives will be achieved.
According to Benjamin Dikki, Director-General, BPE, privatisation of the PHCN Successor Companies is indicative of a strong demand for private sector participation in the generation and distribution sectors of the electricity industry.
He said a precedent has been set in terms of developing sector agreements and obtaining finance for the sector. This, he said is evident in the fact that strong investments are being made by the private sector to reduce losses and increase liquidity at the distribution end.
He said a management contractor has been put in place to improve functionality of the transmission sector, while a capital programme has been established for large scale investment in transmission.
Notwithstanding the distrust and scepticism, the Niger Delta Power Holding Company, NDPHC, owners of the NIPPs, expressed the hope that the transactions will be concluded within the next one month.
Spokesperson for the NDPHC, Mr. Yakubu Lawal, in an exclusive chat with Sweetcrude, disclosed that the current delay is caused by the agreements which the parties are expected to sign.
According to him, the delay is due to the fact that all the parties are reviewing the documents and all the clauses in the agreement to ensure that that they are signing the right thing.
He added,“Another reason for their extreme carefulness is due to the involvement of financial institutions, especially the foreign banks. The successful bidders have to put the interest of the banks into consideration before signing the agreement.”
Recently, the NPDHC commissioned the Omotosho II and Geregu II power plants, claiming that the two plants have been technically completed, while the rest are at various stages of completion.
However, despite the delays, Mr. Patrick Okigbo, Principal Partner, Nextier Capital Limited, noted that the fact that the bidders have made their initial down payment is a good sign that the transaction is still on track.
He disclosed that he is aware that the government and the bidders are in the process of negotiating the transaction agreements and the plan is to conclude that process by September 25th.
He said, “It is unfortunate that the deadlines have been missed. However, I am not sure it would significantly impact the privatisation process.
Both the bidders and the government appear to understand the causes of the delays and are working towards ensuring that the issues raised with the transaction agreements are fully addressed.
“As for the impact on the economy, the sooner we can complete the process, the sooner we can get the plants on line. We need every megawatt of power that can be added to the grid. However, it is best to resolve all these contractual issues at this point than later in the life of the transaction.”
On ways to fast track the process and also ensure the removal of bottlenecks to the speedy conclusion of the process, he said, “The BPE, which is the government agency in question, is improving its capability and competence with every privatisation effort. Unfortunately, transactions such as this one take time to complete.”
In the bid rounds conducted a couple of months ago, the BPE declared the preferred bidders as follows:
Aiteo Consortium for Alaoji Generation Company with $902 million;
EmaConsortium Benin Generation Company, and Calabar Generation Company with $580 million and $625million respectively;
Dozzy Integrated Power Limited for Egbema Generation Company with $415.075 million;
KDI Energy Resources for Gbarain Generation Company with $340 million;
Yellowstone Electric Power Limited for Geregu with $613.111 million;
Daniel Power Consortiumfor Ogorode Generation Company with $531.778 million;
ENL Consortium Limited offered $751.24 million Olorunsogo Generation Company;
Shayobe International Limited Consortium for Omoku Generation Company with $318.711 million; and,
Omotosho Electric Power offered $659.999 million for Omotosho Generation Company.
However the transactions forAlaoji, Gbarain, and Omoku, are subjects of litigation at different courts across the country, as confirmed by the NDPHC.
Stakeholders argue that investors’ confidence in the privatisation process in the power sector will be boosted if the Federal Government showed increased transparency and commitment to the needs of the sector.
Accordingly, they expect subsequent agreements to be crafted in a transparent manner that can be easily understood and which will