Nigeria is on the verge of realizing some $5.74 billion from sale of its ten National Integrated Power Plants (NIPPs) as investors show keen interest to pick up 80 percent stake in the plants which the federal government has put up for sale.
The government wants to sell these power plants to enable it fund budget as low revenues deal a great blow at developmental plans. BusinessDAY had reported that the sale will begin this year with Calabar, Geregu and Omotosho Power plants to fund the over N8.6trilion proposed for 2018.
A source close the deal confirmed to BusinessDay that government is putting in efforts to close the transaction as quickly as possible but that the investors were still discussing on a new schedule to make the required payments.
“We are working tirelessly to close the privatisation, we have negotiated all the agreements, and ready now and I think as at mid-December, that agreement was submitted but, the price offered has not changed and we are not changing it, but it is just the payment terms because of the market situation which the investors are now raising because those situations were not there when they bided and therefore not of their own making,” the source said.
It was learnt that negotiations are still ongoing with the investors, and according to reliable details gotten on the deal, Aiteo Consortium is offering $902m to buy Alaoji Generation Company (Genco), EMA Consortium has offered $587m and $625m for Benin and Calabar Gencos repectively.
Dozry Integrated Power Limited has offered $415.075m for Egbema Genco; KD4 Consortium expressed intension to buy Gbarain Genco for $340m, Yellowstone Electric Power limited offered $613, 111, 113 for Geregu; Daniel power Consortium, says it will pay $531, 777, 777 for Ogorode Genco; ENL Consortium limited, offered $751.740m for Olorunsogo Genco; Shayoba International limited Consortium, offered $318,710,540 for Omoku Genco; and Omotosho Electric Power which has offered $659.999m to buy Omotosho Genco.
The federal government, years ago, expressed intention to sell the ten plants following huge issues around transmission and gas supply.
But it could only commence negotiations in June 2014, with seven of the preferred bidders due to litigations on Alaoji, Gbarain, and Omoku. However, with the resolution of the litigation in 2016, negotiation commenced for Gbarain in March 2017.
Market liquidity challenges, macroeconomic issues affecting the country’s electricity market as well as inadequate gas supply were key challenges that stalled plans on concluding that deal.
In recognition of these problems, a decision was taken to phase the completion of the transaction beginning with the fully operational power plants.
Consequently, Vice President Yemi Osibjanjo approved that phase one of the transaction should recommence for Calabar, Geregu and Omotosho. Egbema and Gbarain were later included as part of the immediate transactions.
BusinessDAY reported last November that the government hopes to end the financial close for Calabar, Geregu and Omotosho – the three of the ten electricity generation companies (Gencos) built by the Niger Delta Power Holding Company (NDPHC) under the National Integrated Power Projects (NIPPs) and which it has already pencilled down for sale between March and April 2018.
The capacity of the three plants include, 634 megawatts (MW) for Calabar, 1,076MW combined cycle Alaoji, and 506MW Geregu.
Director-General of the Bureau of Public Enterprises (BPE), Alex Okoh, confirmed then that the government has identified the core investors for the three NIPPs, and is in the process of signing the share sale agreement with the core investors after which they can then call for the payment for those assets that have been identified.
According to him, the share sale agreement was supposed to have been signed before the end of 2017, though BusinessDAY could not confirm whether that happened.
Okoh also said the government intends to finally sell all the ten National Integrated Power plants (NIPPs) but is beginning with these three to enable it fund the estimated over N2 trillion budget deficit in 2018.
He further hinted that the three Gencos would be sold between March and April 2018 while the remaining seven would be privatized at a later date.
“We are going to sell the 10 NIPPs but we are starting with three. It is the proceeds that the government intends to use to partly fund the 2018 budget and we have gone pretty far in terms of the transaction in concluding the financial sale, but we are not going to achieve financial close till about a March, April 2018,” Okoh had said.
The reliable source said the investors have agreed to pay, “but they are offering different payment arrangement which is being looked into and by the time we are satisfied, we will then present to the president, so we are on course and looking at the options, so it is just the payment terms that is holding us.”
He said before the offer was 15 percent initial payment, with the remaining 85 percent to be paid six months after the close of the transaction.
“But our concern is that if they pay the initial 15 percent now, they want to have an idea of when the transaction closing would be, and closing means we have to fix the market so that they can recover any amount they pay. The investors are still very much interested, and we hope to conclude very soon,” he added.
President Buhari last October sent in an N8.61 trillion 2018 proposed spending plan to the National Assembly for approval.
The budget estimated N2.005 trillion budget deficit, representing 1.77 percent of the nation’s GDP. Government intends to fund the deficit mainly by borrowing N1.699 trillion, and plans to source N850 billion domestically and N849 billion from international sources.
The Nigerian National Integrated Power Project (NIPP) was conceived in 2004 under President Olusegun Obasanjo’s regime to address the issues of insufficient electric power generation and excessive gas flaring from oil exploration in the Niger Delta region. But administration changes in 2007 interrupted funding for more than two years and the plants faced huge issues of gas supply to take off operations.
Onyinye Nwachukwu, Abuja
