Politics of the power sector

(By Favour B. Afolabi)

Then there is also the group that does not know that the power companies have already practically been fully privatised and that government control in the sector will soon be reduced to that of transmission and regulation of the sector thereby ushering us into the sort of improved services that we currently enjoy within the Telecommunications industry; they would also tell you that these companies have been dashed to some cabals even though these companies fought through very competitive processes to win their bid in the full embrace of the international business community.

I HAVE noticed that those that love to use this issue as a convenient political excuse to always lampoon the current administration are actually largely ignorant of what is going on in the sector – and I have decided to discuss these developments under the following categories A-H as described below:

(A) State of Current power delivery:

There is the group of those who would never believe that any progress is being made in the power sector irrespective of what you tell them; irrespective of them enjoying improved power supply in their homes; they are the folks that would suggest that the Power Minister, Prof. Nebo did not say the truth when he mentioned that we would be losing about 1,112mws of power to some maintenance at a Chevron plant for a few days, they claimed rather that “the reason for the drop was because rainfall had subsided resulting in a fall of what we were getting from the hydro plants.” These folks of course do not know that Hydro sources only accounts for less than 30 per cent of what the nation currently uses to provide power to its population well!

Well, now that power has returned to what it was before the subject of maintenance exercise and even possibly improved beyond what it was before the repairs, they have gone quiet about this their “Rain theory” and they, of course, will be too proud to tell those they misled that they were wrong neither will they admit that power has improved in their own homes since then even as the current installed available generation capacity within the sector has risen to 6,000mw while generation capability is currently at 5,228mw with peak generation above 4,500mw.

(B) State of the privatisation process & PHCN labour issues:

Then there is also the group that does not know that the power companies have already practically been fully privatised and that government control in the sector will soon be reduced to that of transmission and regulation of the sector thereby ushering us into the sort of improved services that we currently enjoy within the Telecommunications industry; they would also tell you that these companies have been dashed to some cabals even though these companies fought through very competitive processes to win their bid in the full embrace of the international business community.

At the beginning of the privatisation of the DISCOS and GENCOS in 2011, the Bureau of Public Enterprises (BPE) received 301 Expression of Interests (EOIs) and later short listed 207 firms that met the minimum qualification standards set. Interestingly, only 163 firms purchased bid documents.

This process produced 10 preferred bidders for Distribution Companies (Discos) and five preferred bidders for Generation Companies (Gencos); these companies are buying 51 per cent shares in these companies while the Federal Government will still hold on to the other 49 per cent – they have already made 25 per cent down payments on the transaction to the government on these transactions and have executed initial contracts to this effect. Here is the definitive list of these transactions:

Discos:

1. Kann Consortium for Abuja Successor Company at $164 million;

2. Vigeo Power Consortium for Benin at $129 million;

3. West Power & Gas for Eko at $135 million;

4. Interstate Electrics Ltd for Enugu at $126 million;

5. Integrated Energy for Ibadan at $169 million;

6. NEDC/KEPCO for Ikeja at $131 million;

7. Aura Energy Ltd for Jos at $82 million;

8. Sahelian Piwer SPV Ltd for Kano at $137 million;

9. 4Power Consortium for Port Harcourt at $124 million;

10. Integrated Energy Distribution & Marketing for Yola at $59 million.

For the Gencos, the preferred bidders are:

11. Amperion for Geregu Plant at $132 million;

12. Mainstream for Kainji Plant at $50.76 million plus commencement fee of $237,870,000;

13. North-South for Shiroro Plant at $23.60 million plus commencement fee of $111 million;

14. Transcorp/Woodrock for Ugheli Plant at $300 million;

15. CMEC/Eurafric for Sapele Pant at $201 million.

And the success of this process has made even more firms to jostle for Afam Power Plc and Kaduna Electricity Distribution Plc; both processes which were earlier truncated because none of the bidders scored the required minimum 75 per cent to progress to the financial bid stage which was later re-opened now having 20 companies being pre-qualified for this process while the Enugu Disco is being resolved under some other arrangements bringing the total of these companies to 18!

Well, the sensational analysts would tell you “until we see the power in our houses, we won’t believe.’’ No problems. Thomas said the same thing about our Lord Jesus Christ until HE showed Himself to him in person. These guys will undoubtedly see the power in their homes very soon as well yet this should call into question the intelligence level of these analysts concerned.  Why should even half-educated people choose to reason like this – how can they be suggesting that 18 privately managed companies with international partners and exposure who would have invested billions of dollars in acquiring and re-investing in these assets  would all fail in one single swoop? Why should anyone submit himself to such levels of unimaginable self-inflicted ignorance?

Aside from these, 70 per cent of Egbin Power Plc, Lagos, has also been to KEPCO of South Korea for $407.3 million.

Some have also expressed concerns about labour issues within the industry. Well,  under a deal with PHCN workers, the Federal Government has accepted to pay a total of N384 billion to the staff of PHCN, and this is in addition to the N57 billion which was paid out in 2011 as monetisation arrears. The demand of the workers meant a payout of over 97.5 per cent of the power privatisation proceeds. The workers will receive payment for redundancy, gratuity and arrears of payment into the retirement or pension accounts of the about 45,000 workers.

It is expected that all workers of PHCN will be fully evaluated by the new owners of the privatised assets and those found to be incompetent will not be retained in their posts. They will collect their compensation and then go on to restart their lives elsewhere. The competent ones will be retained and they will get only part of the compensation, the one to be linked to their pension account.

(C) State of the NIPPs and related projects:

The National Integrated Power Project (NIPP) was conceived in 2004 as a fast-track government funded initiative to stabilise Nigeria’s electricity supply system while the private-sector led structure of the Electric Power Sector Reform Act (EPSRA) of 2005 took effect; NIPP was originally designed around seven medium-sized gas fired power stations in the gas producing states, and the critical transmission infrastructure needed to evacuate the added power into the national grid. A commitment to connect electricity to host communities in the vicinity of the power stations and major substations gave rise to the distribution component of the project; these assets are listed thus:

Calabar – 561mw; Egbema – 338mw; Ihovbor – 450mw; Gbarain – 225mw; Sapele – 450mw; Omoku – 250mw; Alaoji – 1,074mw; Olorunsogo II – 750mw; Omotosho II – 500mw; Geregu II – 434mw; Ibom Power – 190mw, Total: 5,222mw.

These projects is expected, of course, to come online at different times in the course of the next couple of months leading to 2014 and would naturally be able to help the sector achieve the target of 10,000mw as promised by the Power Minister even as some of them would eventually be privatised as well just as the Federal Government has just recently sold the Omotosho Power Plant I to China National Machinery and Equipment Import and Export Corporation (CMEC) under a debt-equity swap arrangement in a transaction worth USD$217.5 million. 80 per cent stake in each of these companies have already been advertised for sale by the Niger Delta Power Holding Company of Nigeria (NDPHC) for which 44 companies have already expressed interests in acquiring same.

TO BE CONTINUED

• Afolabi is president at Viva Real Estates Company and a consultant to several infrastructural development projects.

“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”

RISE NETWORKS

"Nigeria's Leading Private Sector and Donor funded Social Enterprise with deliberate interest in Technology and its relevance to Youth and Education Development across Africa. Our Strategic focus is on vital human capital Development issues and their relationship to economic growth and democratic consolidation." Twitter: @risenetworks || Facebook - RISE GROUP || Google Plus - Rise Networks