KEPCO Energy Resources, a joint venture company between South Korean and Nigeria’s Sahara Energy Group, was yesterday the Supplemental Share Purchases Agreement, SPA for the 70 percent sale of federal government’s shares in Egbin Power Plant at the cost of $407.3million.

The Bureau of Public Enterprises, BPE, which said it had transmitted the offer letter in a statement, said, KEPCO had 15 working days to raise 25 percent of the total sum for the 1,320 mega watt capacity plant, while it has another 90 days to raise the balance of 75 percent cost.

The SPA is the second offer to be given KEPCO since 2007 when the first offer was made, and followed approval for the sale of the shares by the National Council on Privatisation, NCP, in one of its meetings held earlier in the year.

Under the terms, the Council asked KEPCO to pay 51 percent of the plant’s shares at the 2007 valuation of $549.01million, and pay additional 19 percent of the shares at the current valuation of $670 million.

In the letter conveying the NCP’s approval to KEPCO, the Acting Director-General of BPE, Mr. Benjamin Ezra Dikki, said the NCP also directed that the BPE reserved 10 percent (of which three percent is for the workers) of the remaining 30 percent stake.
Nigerians will have the benefit of acquiring 27 percent of the remaining 90 percent of the 30 percent through Initial Public Offer (IPO) at a later date.

However, government has remained silent on what becomes of the balance 97 of the reserved 10 percent as well as the remaining 73 of the 30 per cent.

Recall that the privatisation of the power plant was earlier concluded with KEPCO Energy for the sale of 51 percent on n May 17, 2007 at a cost of $280 million.

An initial 10 percent of that bid price in the sum of $28 million was received at the time and an escrow agreement was entered into by committing the payment of a further 50 percent or $140 million of the purchase price within 90 days after the conclusion of due diligence by the investor in accordance with the terms of the sale.

However, since the initial payment of the 10 percent, the transaction could not be concluded for the following reasons:

* The non resolution of labour issues, which was a major obstacle towards the take-over of the plant;
* Non delivery of a Power Purchase Agreement and final off-take price; and
* Non execution of a Gas Supply Agreement.

It is not yet certain how KEPCO intends to overcome these challenges, but the BPE argued that “With the establishment of clear institutional framework by the present administration for the power sector as witnessed by the operational take off of the Bulk Trader, Nigerian Electricity Liabilities Management Company (NELMCO), and the Gas Aggregator; major progress had been achieved in addressing all the encumbrances that had hindered the transaction.”

Furthermore, given the need to generate sufficient revenues to enable Government address the large labour liabilities due to Power Holding Company, PHCN worker, CPCS Consortium, a team of transaction advisers to government recommended that 70 percent of the Egbin shares be sold to the core investor instead of the earlier 51 percent.