The Bureau of Public Enterprises (BPE) has transmitted an offer letter to KEPCO Energy Resources for the supplemental share purchases agreement (SPA) of the 70 percent sale of Federal Government’s shares in Egbin Power Plc, the biggest power plant, at the cost of $407.3 million.
The National Council on Privatisation (NCP) had at its February meeting, the second in the year, approved the sale of 70 percent of Federal Government’s shares in Egbin Power Plant to KEPCO Energy Resources at that amount.
Council asked KEPCO to pay 51 percent of the plant’s shares at the 2007 valuation of $549.01 million and further pay for additional 19 percent of the shares at the current valuation of $670 million.
KEPCO has shown aggressiveness in the power reform with its joint acquisition of a power distribution company. The firm which is a member of the consortium, KEPCO/NEDC, last month paid $32.7 million being the 25 percent of $131 million for the 60 percent Federal Government’s equity in Ikeja Disco.
The KEPCO offer is barely a week after BPE sent a power purchase agreement (PPA) to CMEC-Pacific for Omotosho power plant. Omotosho sale transaction was through a debt-equity swap process, under which CMEC-Pacific was expected to pay $217,531,507.79 for the power plant.
However, the net total amount accruable to the Federal Government for the plant would be $ 82,336,179.42 given that $30,325,386 would be deducted from the cost of the construction of a switch yard for the Transmission Company of Nigeria (TCN).
The Phase 1 of Omotosho Power Plant which has a capacity of 335 megawatts was constructed in 2002. The total price under the turnkey contract was $166,724,578.
In the letter conveying the NCP’s approval to KEPCO, acting director-general of BPE, Benjamin Ezra Dikki, said KEPCO was expected to pay 25 percent of the money within 15 working days on receipt of the offer letter and the balance of 75 percent within 90 working days.
In the approval, council directed that the BPE reserves 10 percent of the reminder of 30 percent (which is 3 percent) for the workers and the remaining 90 percent of the 30 percent shares (which is 27 percent) be sold to the Nigerian people through initial public offer (IPO) at a later date.
It would be recalled that the privatisation of the power company was earlier concluded with KEPCO Energy Resources approved for the sale of 51 percent on May 17, 2007 at a price of $280 million.
An initial 10 percent of that bid price in the sum of $28 million was received at the time and an escrow agreement was entered into by committing the payment of a further 50 percent ($140 million) of the purchase price within 90 days after the conclusion of due diligence by the investor in accordance with the terms of the sale.
However, since the initial payment of the 10 percent, the transaction could not be concluded owing to the non-resolution of labour issues, which was a major obstacle towards the take-over of the plant.
Other challenges are non-delivery of a power purchase agreement and final off-take price and also the non execution of a gas supply agreement.