•As Federal Government seeks $10 billion from foreign investors

PLANS by the Federal Government to privatise the power sector, has attracted top Nigerian bidders, and foreign investors.

It was revealed at the weekend that AES Power, Oando Plc and MRS Holdings, among other local and foreign investors, are interested in the six power generation plants and 11 distribution companies, which are to be privatised before the end of June, next year.

The Nigerian Compass also learnt that the Federal Government wants the foreign investors, including Canada, Turkey, Saudi Arabia, China, and India, to put $10 billion into the Power Holding Company of Nigeria Plc (PHCN).

An industry source disclosed that AES, which has already built 270 megawatts in Lagos, would like to bid for one of the power plants, as the American electricity supplier would want to replicate what it did in Cameroon, where 10 years ago the company purchased a controlling stake in Cameroon’s entire electricity system.

The source said that to date, the purchase by AES was the only case of a single company taking over responsibility to supply electricity to the residents of an entire African country.

His words: “While the Americans brought cash and expertise, they were initially stymied by the endemic corruption in the electricity network. Not only were customers routinely looting the company by stealing electricity or hijacking equipment, employees were conniving with the crooks.

“When I visited Cameroon in 2005, expressly to study the privatisation, AES had installed a new local management that ultimately got its arms around the worst abuses of the old regime. Service vastly improved. Yet at a price: tariffs rose also. AES then faced a new problem: resentment at rising rates, without gratitude for the improvements brought by foreign investment expertise.

“Nigeria likely will follow a similar path, if indeed the privatisation occurs at all, or even if Nigeria sells off different pieces of its electricity network to different investors. After all, the electricity supplier touches the lives of everyone.

“Power outages in Nigeria are, of course, a symbol of the impotence of a government that controls mammoth oil reserves and permits vast gas flaring that might even be used to generate electricity for beleaguered locals.”

It was equally gathered that APTEC Engineering Technical Services (AETS), an international engineering consultancy group providing expertise in the West African sub-region, had already carried out a feasibility study on Egbin Power Plant.

The Egbin Power Plant, with an installed capacity of 1320 megawatts is the biggest power plant in Sub-Saharan Africa. It has been the main stay of power generation in Nigeria, supplying an average of 40 per cent of the country’s power generation capacity.

APTEC, according to a source, was contracted by a syndicate of domestic and international bank, which tried to review a financial proposal from a company that wanted to acquire one of the successor generation companies of the PHCN.

The source said that the syndicate required the services of an engineering firm to undertake an independent assessment of the power plant, to complete the bank’s Due Diligence requirements.

Oando Plc, which sources disclosed had also built its first Independent Power Plant (IPP), known as Akute Power, to supply stable electricity to the Lagos Water Corporation (LWC), would bid for one of the PHCN’s power plants.

The Akute 12.15 megawatt plant, which powers LWC’s main water intake facility, including two other facilities with a combined installed capacity of 125 million gallons of water per day, was financed by Fidelity Bank, one of Nigeria’s leading financial institutions, at a cost of $25.5 million.

An official of the company said Oando had not only planned to contribute several captive power plants to the Nigerian market this year, but also positions itself to become a major player in the Nigerian electricity industry and actively participate in the proposed power sector liberalisation.

MRS Holdings Limited, which is owned by Aliko Dangote and had already signed a Letter of Intent (LoI) with Hydro Alternative Energy Incorporation for the purposes of developing commercial hydrokinetic water power projects in West Africa, would also bid for one of the power plants.

In pursuant to the Letter of Intent, which MRS and HAE signed, the two companies would develop commercial hydrokinetic water power projects in Cameroun, Nigeria, Namibia, Angola, Benin, Togo, Ghana, Senegal, Liberia and Cote d’ Ivories.

The President of HAE, Mr. Mark Antonucci, said: “We are very excited about partnering with MRS, which relationship, we believe, will give us a high profile opportunity to participate in addressing the needs of West African countries’ electrical infrastructure.”

The Chief Executive of the Africa Finance Corporation (AFC), Andrew Alli, while commenting on this development, said: “There is a lot of interest; we are certainly seeing that from a number of foreign investors.

“First of all there are large companies that specialise in the power space, who have several billion dollars available to invest; and we have seen a number of those companies pass through Nigeria and express some interest in coming in. We believe that if the environment is right, they will come in and invest.”

The power generation plants, which would be privatised, include the Kainji Hydro Electric Plc, Shiroro Hydro Electric Plc, Afam Power Plc, Egbin Power Plc, Ughelli Power Plc and Sapele Power Plc.

The 11 power distribution companies, that would also be privatised, include Abuja Electricity Distribution Plc, Yola Electricity Distribution Plc, Ikeja Electricity Distribution Plc, Eko Electricity Distribution Plc., and Port Harcourt Electricity Distribution Plc.

Others are Kano Electricity Distribution Plc, Kaduna Electricity Distribution Plc, Enugu Electricity Distribution Plc, Ibadan Electricity Distribution Plc, Benin Electricity Distribution Plc and Jos Electricity Distribution Plc.

The Managing Director of PowTechnologies Limited, Mr. Goody Duru-Oguzie, told the Nigerian Compass that power reform would be the best thing that would happen to Nigeria, as it would help to improve the power situation in the country.

Duru-Oguzie said: “This is the most pragmatic and transparent step taken by the Federal Government. Everything done so far showed that the government is honest in addressing the power problem of this country.”

The Managing Director of Powercap Limited, Mr. Biodun Ogunleye, though agreed that privatisation of PHCN would tackle the electricity problem in the country, he doubted if the exercise would be completed before the end of June, next year.

Ogunleye, who disclosed that his company with its foreign partner would bid for one of the power plants, said: “We are just waiting for the regulatory guideline. Obviously we will bid for one of the successive companies. But the issue is: the government may not finish the exercise within 12 months.

“The issue of settlement of claims of the workers is still there. This will take about three months before the workers will open the books for the firms that will evaluate the assets of the PHCN. The opening of books will take at least six months. It is after that that the investors will assess the facilities, which will take at least one month, before the investor will start compiling their bid. So, the timeframe is short.”

Another industry expert, Dr. Bunmi Awoyemi, urged President Goodluck Jonathan to adopt the United States of American approach of issuing Sovereign Guarantees/Irrevocable Standing Payment Orders (ISPO) to companies, which express their readiness to invest.

According to him, not one cent of the U.S. government’s treasury funds came into the hundreds of power projects that sprung up from this deliberate policy.

He explained that all the U.S. government did was to guarantee the debt finance or loans that these power companies got from both the country’s banks and foreign banks.

He added that because of this policy, the banks were bullish about lending to the owners and sponsors of the projects, pointing out that in order to protect itself, the U.S. government ensured that the companies that received the benefits of these guarantees were capable of carrying out and implementing the projects.

Awoyemi said: “I am part of a consortium of European companies that have 3,000 megawatts gas turbines. Our firm still has it in its possession as a result of the failure of the original consignee to take the consignment in Europe as a result of the bankruptcy of that company.

“Typically turbines take one to two years to fabricate. Fortunately these turbines are in storage and on ground in Europe and are brand new. With your full support we can bring these turbines and deploy them in Akwa Ibom State, because of its high level of gas infrastructure and get them up and running within maximum of nine months.

“If we can get expression of interest from you directly and your full weight and support behind the project I can assure you that we will implement it 100 per cent without a dime of Federal Government money.

“What we will need is the Sovereign Guaranty of the Nigerian Federal Government and a Power Purchase Agreement that takes all the things I discussed above into consideration. We will raise the funds 100 per cent and execute the project within nine months, and add the power to the national grid for the enjoyment of Nigerians.”


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