$1bn to be generated from sale of Gencos
The Federal Government is expected to generate $1,001,654,534 from last Tuesday’s sale of the five generation companies (gencos) unbundled from the Power Holding Company of Nigeria (PHCN) but the entire sum must be paid by the various successful bidders before the assets are handed over to the new core investors.
Chairman of the Technical Committee of the National Council on Privatisation (NCP), Mr. Atedo Peterside, who made this clarification to THISDAY, also described as erroneous the various amounts being bandied around by newspapers.
Peterside stated that Amperion Power Distribution Company Limited would pay $132,000,000 into the Federal Government’s treasury for the acquisition of the Geregu power station, while Transcorp and its partners – Woodrock, Symbion, Medea, PSL and Thomassen – would pay $300,000,000 for Ughelli Power Station.
For Sapele Power Station, Peterside disclosed that CMEC and Eurafric JV would pay $201,000,000, while $257,000,000 would be paid by Mainstream Energy Solutions Limited for Kainji Power Station.
He further stated that the Federal Government would earn $111,654,534 from the concession of Shiroro Power Station to North South Power Company.
“Based on the above, you will agree that the correct total for upfront payments due from these five bidders, if approved by NCP, will be $1,001,654,534 and these monies must be received in full before any handover,” he said.
However, unlike the gas-fired power stations, the transaction for Kainji-Jebba hydro power station is a 15-year concession and not an outright sale, he said.
Also, for the Shiroro hydro power plant, North-South Power Limited will manage the station under a concession.
Peterside, however, noted that in addition to the monies to be paid before the investors take over the assets, successful investors for Kainji and Shiroro would pay $50,760,665.18 and $23,602,484.87, respectively, as the “fixed annual fee” each year from the beginning of the sixth year of operations.
Based on the 15-year concession, Peterside said the sum of the “fixed annual fee” for Kainji from year six to 15 would be $507,606,651.80, while for Shiroro from the sixth year to the 15th year would be $236,024,848.70.
He further disclosed that other than the commencement fee and the fixed annual fee from the beginning of the sixth year, the successful bidders for Kainji and Shiroro would also be making annual royalty payments every year of operations.
The royalty payments, which he said would commence from the first year, would be equal to 5 per cent of the revenue generated by each station.
The NCP on Tuesday, in Abuja, opened the financial bids submitted by local and foreign investors that are seeking to acquire the state-owned power generation companies.
Speaking at the opening of the financial bids, Peterside, who has overseen the process, cautioned the jubilant successful companies to be mindful of the fact that their emergence as preferred bidders was still subject to the approval of NCP.
He noted that the successful bidders could still be denied the companies if they failed to pay their fees or if they were found wanting in documentation during post-bid assessment.
In a related development, the Nigerian Electricity Regulatory Commission (NERC) has disclosed that it will commence due diligence of the preferred bidders shortlisted to acquire assets of the Power Holding Company of Nigeria (PHCN) in the ongoing privatisation exercise.
Chairman of NERC, Dr. Sam Amadi, said Wednesday in Abuja that the commission was going ahead to subject the preferred bidders that emerged from the competitive bid for PHCN generation and distribution assets to a thorough assessment of their technical capability to revive PHCN’s ailing assets, adding that it would not consider the status of promoters of shortlisted bid winners in this regard.
He spoke to journalists when NERC convened experts and stakeholders to review the bulk electricity procurement guideline for the power sector saying: “We were all there and the process was transparent. Let the matter speak for itself, but we are going back to do due diligence. What that means is that except for any major outcome, the winners bided.
“We are not concerned about those who won but the quality and capacity of the winner. They are coming to face regulatory rigour and for us, we don’t care about the identity of who won.
“We care about their technical capacity to revive the ailing industry and to put it on the path of sustainable growth. The bulk trader is also working on its timeline for the Power Purchase Agreements (PPAs) with generation companies.”
He stated that the sector had hitherto operated without real regulation but would henceforth be subjected to strict regulations under the new framework to sustain growth and as well as engender investment.
According to him, “The framework is to guide investment in the sector post-privatisation and open the sector for greater competition. Today, we are having public consultations on the new power procurement guidelines.”
Amadi acknowledged that the market was now moving towards a competitive one where everything is procured at the least possible cost, which in turn would make power cheaper for the citizens and engender transparency.
“What we have done is to first of all develop a guideline that clearly states how each of the actors: bulk trader, system operator and market operator, power generation companies and discos (distribution companies) will operate. We now will be able to interface in procuring power,” he said.
Amadi explained that the emerging market structure is different from the past “where people used to apply to build power plants in different locations and subsequently negotiated with the various actors in the sector.
“Those things will not happen in this arrangement. The market was weak in the past without a regulator,” he said.