Power assets: New owners and the journey ahead

Some of the new owners of privatised power generation and distribution companies have announced investment plans for the expansion of the plants, DAYO OKETOLA writes

The electricity sector reform, which started in 2000 with the issuance of the National Electric Power Policy to unbundle the sector and develop a competitive electricity market, has made significant progress with the final acquisition of 13 power assets in the country.

It’s no longer news that 13 consortia beat the August 21 deadline for the preferred bidders to pay the 75 per cent balance of the bid prices for the 15 successor companies of the Power Holding Company of Nigeria.

The  Bureau of Public Enterprises and the ministry of power confirmed that payments were made by West Power and Gas, the preferred bidder for the Eko Distribution Company; NEDC/KEPCO, Ikeja Distribution Company; 4Power Consortium, Port Harcourt Distribution Company; Vigeo Consortium, Benin Distribution Company; Aura Energy, Jos Distribution Company; and Kann Consortium, Abuja Distribution Company.

Others who met the payment deadline, included Integrated Energy Distribution and Marketing Company, the preferred bidder for both the Ibadan and Yola Distribution Companies; Sahelian Power, Kano Distribution Company; Transcorp/Woodrock Consortium, Ughelli Power Plc; Amperion, Geregu Power Plc; Mainstream Energy Limited, Kainji Power Plc; and CMEC/EUAFRIC Energy JV, which made part-payment for the acquisition of Sapele Power Plc.

But what is most striking in the recent development in the power reform programme, according to analysts, is the fact that private companies backed by power individuals will, perhaps, for the first time in the history of Nigeria, play a major role in the country’s power sector. Many of them are successful businessmen that have been around and well known in the country.

For instance, Amperion Power Company Limited, the preferred bidder for the 414 megawatts Geregu Power Plant located in Kogi State, is a subsidiary of Forte Oil, and businessman, Mr. Femi Otedola, is its main promoter.

Forte Oil Plc currently owns 57 per cent of Amperion’s equity while its technical partners; BSG Resources Limited, owns 38 per cent. The Shanghai Municipal Electric Power Company has a five per cent stake.

The Group Chief Executive Officer, Forte Oil PLC, Mr. Akin Akinfemiwa, who commented on the acquisition, said the company planned to increase the capacity of the power plant by about 50 per cent to over 600MW in the short to medium term.

He considered this investment necessary to optimise Forte’s revenue drive through multiple income streams.

He said, “We are not only poised to establish ourselves in power generation sector but to also carve a niche by increasing the capacity of the plant by about 50 per cent to over 600MW in the short to medium term, in demonstration of our commitment to help bridge the current power deficit in Nigeria.”

West Power and Gas, which has completed payment for Eko Distribution Company, is being promoted by the trio of Dr. Tunji Olowolafe, Mr. Charles Momoh and Mr. Ernest Orji.

Momoh, who is WPG chairman, put the total transaction value of the Eko Disco at $135m.

He said his consortium had raised close to $500m in equity and debt financing to fund the acquisition of the power asset.

Expansion and rehabilitation project for the Eko Disco, according to him, will gulp another $259m.

He added that this had become necessary in order to improve distribution network infrastructure and operations within the area being covered by the Disco.

Momoh said another $48m had been earmarked for a power purchase agreement with NBET.

 “As well as securing the finance to complete the acquisition, WPG has brought together a world class team of local and international industry experts to implement the rehabilitation and expansion programme,” he noted.

Transcorp/Woodrock Consortium, which won the bid for 972 megawatts Ughelli Power Plc and is being promoted by a former Managing Director, United Bank for Africa Plc, Mr. Tony Elemelu,  plans to increase the power generation capacity of the plant from 300MW to over 1,070MW in the next five years.

This is expected to gulp a huge fortune in fresh investment before the new company can begin to make good returns on investment.

Elumelu, while commenting on the successful acquisition of the power plant by Transcorp/Woodrock Consortium, a subsidiary of Transcorp Plc, confirmed that $225m had been paid to the Bureau of Public Enterprises.

The amount, according to him, represents 75 per cent of the $300m bid price for the power plant.

 Vigeo Consortium, the preferred bidder for the Benin Distribution Company, is fronted by Chief Victor Osibodu; the Chairman of Vigeo Holdings. The consortium paid $96.75m as 75 per cent balance for its bid.

Vigeo Holdings, a major stakeholder in the consortium, has been running a company called Global Utilities Management Company founded in 1999 as a utility infrastructure management company providing services to improve the efficiency in the downstream sector of the electric power industry.

GUMCO has, in the past few years, been involved in the National Prepayment Metering Programme in partnership with the Benin Electricity Distribution Company.

According to Osibodu, the Vigeo Consortium plans to invest an additional N40bn into the Benin Disco for infrastructure over the next five years.

While more of the new investors are expected to announce capacity expansion investment plan, particularly the financial outlay, the questions that have, however, arisen include whether they have the capacity to transform the country’s power sector riddled with a lot of challenges such as infrastructure deficit and inadequate technical manpower, among others.

Another problem ahead of the new power generation company owners is inadequate gas supply.

Nigeria currently generates less than 4,000MW of power amid huge capacity constraint and aside from persistent system failure, inadequate gas supply to the power plants has been a major challenge.

This, experts say, simply brings to mind the $25bn gas-to-power infrastructure shortfalls in the country.

Experts have on several occasions reminded all stakeholders that the $25bn investment must be pumped into gas-to-power infrastructure for the country to sustainably up its power generation.

The Chairman, Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, Mr. Mark Ward, at a recent conference, re-emphasised the $25bn gas-to-power infrastructure deficit amid the call for the Petroleum Industry Bill to be properly reviewed for the benefit of investors that will put money into many gas projects in the country.

Of the $25bn, experts say $10bn should be invested in the development of gas fields, as well as processing and transportation network. Another $12bn would be required for power generation and $3bn for transmission and distribution.

The country, however, requires an estimated $60bn investment in order to attain 40,000MW of electricity in the nearest future.

With new players expected to man power generation and distribution in the country, experts say Nigerians should not expect a tea party and should be ready for a long journey to stable power supply.