The privatisation of the power sector seems to have run its course with the opening of bids for the 10 thermal plants belonging to the National Integrated Power Project on March 13. The Joint Technical Committee will meet soon to take a final decision and announce the eventual winners. A total of 19 companies were shortlisted after the bidding. However, the current abysmal level of electricity supply, due to pitfalls in the transactions that unbundled Power Holding Company of Nigeria last November, need not be repeated.
Ironically, the bids for three of the plants – Alaoji, Omoku and Gbarain – have run into troubled waters, as an Abuja High Court on Monday stopped the Bureau of Public Enterprises from going ahead to consummate the transactions of March 13. A firm, Ethiope Energy Limited, which was shut out of the final bidding on whose behalf the court issued the injunction, had alleged bias, prejudice and manipulation of the technical bids against it.
The power plants under the NIPP are Alaoji, 1,074 megawatts; Olorunsogo, 750MW; Geregu, 434MW; Ogorode, 450MW; Egbema, 338MW; Omoku, 250MW; Omotosho, 500MW; Calabar, 561MW; Ihovbor, Benin 450MW, and the 225MW Gbarain plant. They are expected to fetch about $5.8 billion revenue; about half the cost of the plants.
Initiated in 2004 as a tripartite venture involving the federal, state and local governments, the project was originally set up to increase the country’s abysmally-low generation capacity. But, from generation, its scope was expanded to transmission and distribution in order to solve the power nightmare. Unfortunately, this was not to be. The ongoing privatisation of the projects will see the government cede 80 per cent of its holding to private firms. While the Federal Government owns 47 per cent equity stake, states and local governments have 53 per cent.
When the new owners of the NIPPs begin operations, about 5,454MW are expected to be added to the national grid, plus the estimated 4,500MW from the GenCos unbundled from the PHCN. Buoyed by this prospect, the Minister of Power, Chinedu Nebo, believes the Federal Government’s target of generating 10,000MW by the end of December 2014, is achievable.
This can only work if the Federal Government gets it right in this last phase of the power sector privatisation. How thorough was the due diligence carried out on the technical and financial competences of the 19 companies shortlisted after the NIPP’s bid rounds? Do the companies that will emerge have the track record needed to breathe life into the firms that will be ceded to them; or are they just “special purpose vehicles” – hurriedly coupled corporate entities by some of those in the corridors of power to hijack the transaction?
Only the Federal Government can assuage these concerns, given the immediate post-PHCN privatisation national experience. Instead of more efficiency in electricity supply, Nigerians have been thrown into the abyss of darkness and exploitation through the estimated billing system. The backgrounds of the NIPPs bidders are sketchy. One of them, AITEO Consortium, is said to be a full-spectrum, integrated energy firm, which has operated since 1999 under the name – Sigmund Communnecci Limited – but changed to its present name when it rebranded. KDI, another firm, is the parent company of a group of companies. There are also Seoul Electric Power Limited, Daniel Power Consortium, Ema Consortium, Omotosho Electric, Dozzy Integrated Power, etc.
What the country needs at this time are companies that have track records, financial capacity and technical expertise, and which will respect contractual obligations. Lack of these and the incompetence of the regulator have seen the government making excuses for the privatised GenCos and DisCos for their under-performance. The Chairman of Nigerian Electricity Regulatory Commission, Sam Amadi, said in February that “financing to facilitate further improvement, especially with regard to the distribution companies,” was one of the long term challenges facing the power sector.
Amadi’s comment is a ringing indictment of the transactions that transferred the public firms to their new owners. These private companies reportedly owe about $2.45 billion to Nigerian banks that funded the power assets acquisition last year. Had due diligence on the wherewithal of the companies been meticulous, Nigeria would not have been entangled in the current power mess.
Consequently, before the NIPPs transactions are finally sealed, the gas supply enigma that incapacitated the plants needs to be resolved. Nebo should not be excited yet about the possibility of having 10,000MW by December. He should do the first things first – tackle the corruption that has made it impossible for the country, a major global oil producer, not to have gas to generate its electricity. And how about transmission capacity?
This infamy explains why Global Business Intelligence, a research group, reported that Nigerians spent about $455 million on generators in 2011.