Nigeria’s Federal Government hopes to conclude the final sale of Afam electricity Generating Company by mid-2018 and also Yola Distribution Company, later same year, BusinessDay has gathered.
The Federal Government’s third attempt at privatsating Afam power plants 1 to 5 as well as Yola which it is optimistic would now be successful was announced by the presidency in September following an approval by the National Council on Privatisation the previous month.
“We have actually started the process of appointing transaction advisers, once that process is concluded, the actual bid process will commence and we can begin to call for request for proposals and all the other transactional process that will then lead to the emergence of the preferred core investor in both plants,” Director-General of the Bureau of Public Enterprises (BPE), Alex Okoh told BusinessDay in an exclusive interview.
“We think that Afam will be relatively easier than Yola. Afam we should be able to close in six months, beginning from January next year. We hope to get the final approvals for the financial advisers by the end of this month or early December. But the transaction process itself should start in January. For Yola, we think it will take a bit longer, maybe about eight months,” Okoh said.
The Afam Power station which was first built in 1962 and later expanded has an installed capacity of 1000mw but only produces about 100mw. Okoh said the strategy being deployed in the privatisation of the assets would make them successful, and hopefully Inject additional power into the national grid and improve electricity nationwide.
Giving an update on the process, Okoh said “Afam actually went through two failed privatization attempts, the last being the one done during the genco successor companies’ privatization. But that ended up with the refund of the payment that was made by the preferred bidder for various issues.
“There is a part of Afam that is being developed for fast power that has the capacity to generate close to 240 megawatts. That is what is called the Afam 3, so it is under development. We think this adds value to the entire plant in terms of the attractiveness to investors which wasn’t there when the Televeras group pulled out.”
Okoh explained that Yola Disco privatisation failed because the core investor declared a force majeure obviously due to security issues there.
He said government has to be a little bit more creative in terms of how it approaches the privatization and that the plan is actually to break the plant into smaller manageable business units, to make it attractive to prospective investors.
“I think that attempting to privatize Yola as one geo-commercial area may not be feasible. It is just a simply vast space to cover administratively and also monitoring and deploying the distribution infrastructure, feeders, sub-stations and all of that, it is just so huge,” Okoh noted.
Okoh said that there is no basis for the issuance of notice to declare force majeure by the electricity distribution companies (Discos) following the policy directive on Eligible Customers and the Eligible Customer Regulations by the Nigerian Electricity Regulatory Commission (NERC).
In a letter to the Discos, he challenged the assertion by the Discos that there has been a change in law and political force majeure event pursuant to certain clauses in the Performance Agreement the core investors of the Discos signed with the BPE. As such, he rejected the notice to declare force majeure by the Discos.
The Discos had claimed that the policy directive on Eligible Customers and the Eligible Customer Regulations have resulted in a change of law which prevents them from fulfilling their obligations under the Performance Agreement.
But Okoh countered that pursuant to the Electric Power Sector Reform Act 2005, it is obvious that the Minister of Power, Works and Housing is empowered to issue the policy directive specifying the class or classes of end-use customers that shall constitute Eligible Customers. In the same vein, NERC is similarly empowered to issue Eligible Customer Regulations.
Okoh said: “as you are aware, this is the same Act which midwifed the process whereby the power assets were privatized to the core investors. Given that the Declaration and the Regulations were lawfully and validly issued by the Minister and NERC, and that there has been no change in the law giving rise to a political force majeure event, we are unable to see the basis for the issuance of the notice.”
Okoh added that the BPE, as the contracting party on behalf of the Nigerian government to the agreements which governed the privatisation of the power assets to the core investors, rejects the notice to declare force majeure.
Meanwhile, the Federal Government has also commenced the evaluation of all privatsed entities, beginning with the power sector successor companies to determine how far the companies have lived up to expectations and whether the terms of agreement as contained in the contracts are being adhered to.
Okoh also told BusinessDay that the post-privatisation review which the BPE, under him, intends to follow vigorously became critical for government to determine where there are issues and what kind of intervention action would be necessary.
“Our assessment so far, shows that about 63 percent of all the enterprises that have been privatized, commercialized are satisfactory in terms of the performance relative to the privatization, and about 37 percent of them are really not meeting up to expectations,” Okoh said.
“We want to start with the power sector entities and see how we can, escalate it to the other ones that have been privatised, commercialized or reformed in one way or the other. So if there are issues, we can proactively determine what those issues are and determine what kind of intervention action would be necessary.”
ONYINYE NWACHUKWU, Abuja
