The sale of Omotosho Power Plant has progressed further with the transmission by the Bureau of Public Enterprises (BPE) of an offer letter to CMEC-Pacific for a Power Purchase Agreement (PPA).
The sale transaction is through a debt-equity swap process.
National Council on Privatisation (NCP) had approved that CMEC-Pacific pays $217.5 million for the power plant. However, the net total amount accruable to the Federal Government for the plant would be $82.3 million given that $30.2 million would be deducted from the capital cost for the construction of a switch yard for the Transmission Company of Nigeria (TCN).
Acting director-general of the BPE, Benjamin Ezra Dikki, while presenting the offer letter to the chairman of CMEC-Pacific, Adeleke Adedeji, said that it was in fulfillment of the decision of the NCP which approved the sale at its last meeting of February 28, 2013.
It would be recalled that the phase one of Omotosho Power Plant which has a capacity of 335 megawatts was constructed in 2002. The total price under the turnkey contract was $166.7 million.
The Federal Government funded 35 percent of the cost while the balance of 65 percent was financed through vendor financing provided by China National Machinery and Equipment Import and Export Corporation (CMEC) at the interest rate of six per annum.
It was initially conceived that the power project, after completion, would operate commercially and the proceeds from the sales of electricity will be used for the repayment of the vendor financing and the interest payment.
However, the delay in the completion period coupled with limitation in gas supply and paucity of funds at Power Holding Company of Nigeria (PHCN) resulted to default in the payment of the debt leading to the accumulation of unpaid invoices to CMEC.
This responsibility was taken over by the Debt Management Office (DMO) which informed the BPE that it had paid approximately $104.3 million to CMEC for the plant as at September 30, 2012.
Consequent on the approval received by the Federal Ministry of Power from President Goodluck Jonathan on July 18, 2010 to proceed with the proposed divestiture of Federal Government’s investment in the plant, the bureau sought and received NCP approval for the divestiture of Omotosho Power Plc through debt-equity swap during its first meeting of 12th May, 2011.
