President Goodluck Jonathan on Monday September 30 handed over ownership certificates to 15 new investor companies to take over five generation companies (Gencos) and 10 distribution companies (Discos). The Bureau of Public Enterprises (BPE) put the total sale figures of both the gencos and discos at $2.525 billion (about N404 billion). The gencos went for $1.269 while the discos were sold for $1.256bn.
What happened on September 30 was largely ceremonial, though. Minister of Power, Prof. Chinedu Nebo disclosed at the take-over ceremony that practical take-over of the acquired power firms won’t be feasible until the end of October when government is expected to have completed the on-going payment of severance benefits to staff of the unbundled Power Holding Company of Nigeria (PHCN).
Final transition to the investors will, however, have to wait till January 1, 2014. Chairman, Presidential Task Force on Power, Engr. Beks Dagogo-Jack explained last Wednesday at a Lagos power investors summit that the decision was imperative to help the investors test-run the facilities between now and final take-over. “It will give them the opportunity to make adjustments so that when they get there they won’t go wrong. The investors will be doing the business as if they are in transition,” Dagogo-Jack stated.
Of the 18 privatised PHCN firms, 15 were confirmed with receipt of take-over documents while three are pending. Two of the three – the Afam Genco and the Kaduna Disco – will be collecting their documents at a later date. The third, CMEC/EURAFRIC, core investor in the Sapele Power plant, which earlier paid $120.034 million out of its outstanding balance of $150.75 million, has been directed to the Attorney General of the Federation (AGF) to conclude the legal issues. The total bid price for the plant was $201 million.
Who are they?
The take-over of the unbundled PHCN firms has generated issues as to the credibility of those behind the purchases and what they are expected to deliver in terms of capacity handling, stock of manpower and expertise, as well as quality service delivery across their areas of jurisdiction.
Local owners of the new power companies are mostly investors who had hitherto been fishing in unrelated business waters, with little or no technical knowledge of how these unbundled power firms operate. But checks showed that in all the cases, local investors have partnered with foreign partners with technical expertise in acquiring the plants and are relying on that expertise to turn the plants round.
Owners of the generation companies are: Amperion Limited for Geregu I Genco, Transcorp/Woodrock for Ughelli plant, Mainstream Energy for the Kainji and Jebba generation company (Genco), North South Power for Shiroro plant, and NEDC/KEPCO alongside its local partner, Sahara Energy Resource Nigeria for the Egbin Genco.
Chief Femi Otedola, Chairman of Amperion Ltd, owner of Geregu I Genco is also the Chairman of Forte Oil, a major player in the nation’s oil and gas sector. Otedola is financing 57% of Amperion’s total equity. Its technical partners are BSG Resources Ltd with 38% and Shanghai Municipal Electric Power Company, 5%. Amperion purchased the PHCN firm for $132 million. It plans to jack up power generation at the Geregu plant to 600mw, a 50% increase, in the short-to-medium term.
Mr Tony Elumelu is Chairman of Transcorp/Woodrock Consortium, which acquired the 972mw capacity Ughelli Power firm at $300million. The former Chief Executive Officer (CEO) of United Bank for Africa (UBA), through his Heirs Holdings Limited, committed a $225m fund through debt financing by African Finance Corporation (AFC), UBA and First City Monument Bank. The new owners plan a massive increase of generation capacity to over 1070mw within the next five years.
President/Chief Executive Officer of the Transcorp group, Obinna Ufudo, told Sunday Trust that management plans a three-phase operation of “quick wins, refurbishment and expansion.” He explained the quick wins as involving activities that will immediately address the shortage in available capacity. “Our technical experts have identified a number of small fixes which, when carried out in a relatively short time period of no longer than a year after we take over, will lead to an increase in available capacity,” Ufudo said.
Elumelu’s Heir Holdings has been promoting businesses, especially small and medium scale enterprises across Africa since its chairman retired as UBA’s group chief executive officer in July 2010. His Tony Elumelu Foundation, a pan-African “not-for-profit” institution dedicates itself to promoting and celebrating entrepreneurship by enhancing the capacity of African businesses and deploying financial capital through impact investments.
Elumelu’s philosophical objective is to, in his words, “prove that the African private sector can itself be the primary generator of economic development.” Transcorp, a publicly listed Nigerian company, is one of the firms Heir Holdings has investments in. With the partnership with Woodrock, an American multi-services firm, Elumelu hopes to add further practical vent to that objective, especially on the home front.
Col. Sani Bello (rtd) is the arrowhead of Mainstream Energy Solutions, which got Kainji and Jebba Generation Company (Genco) for N27.2bn ($170m). The deal was financed by Guaranty Trust Bank and the AFC. Bello is a former military administrator of Kano state. He has also been chairman of MTN in the telecoms sector and Amni Oil and Gas. Mainstream partnered with a Russian company, RusHydro to acquire the plant thereby venturing into a third sector of the Nigerian economy.
Niger State Government is one of the owners of the North South Power which acquired the Shiroro generation plant at $111.7 million. Other partners are XS Energy Ltd, BP Investment Ltd, Urban Shelter Ltd, Road Nigeria Plc, China International Water Electric and China Three Gorgers Corporation, the corporation handling the Zungeru 700mw hydroelectricity project in the same Niger state.
Tope Sonubi and Tonye Cole’s Sahara Energy Resource Nigeria is the local partner to the NEDC/Korea Electric Power Company (KEPCO), an international investor that acquired the Egbin Power Station located in Ijede, Lagos state for $407 million. Sonubi and Cole are known players in the oil and gas downstream sector company.
For the distribution companies, KANN Consortium acquired the Abuja Distribution Company (Disco), Vigeo got the Benin Disco, West Power and Gas acquired Eko Disco, NEDC/KEPCO bought Ikeja, while Sahelian Power SPV got the Kano disco. Also, Integrated Energy Distribution and Marketing Company acquired both Ibadan and Yola discos, Interstate Electrics got Enugu, Aura Energy got the Jos disco while the 4Power Consortium comprising Bayelsa, Rivers, Cross River and Akwa Ibom state governments acquired the Port Harcourt disco.
Neil Croucher is Managing Director of KANN Utility Consortium Ltd. The company, a joint venture of Copperbelt Energy Corporation (CEC) Plc and Xerxes Global Investments, acquired 60% of the Abuja Electricity Distribution Company (AEDC) at $164 million. Its technical partner, CEC Zambia has a standing history of providing power solutions to mining companies in Zambia, Congo Democratic Republic and South Africa. As an international firm with the required expertise, it is expected to ensure a complete turnaround of the Abuja Disco within a short term. The disco has a franchise for providing electricity services for the Federal Capital Territory, Kogi, Nasarawa and (parts of) Niger states.
Victor Gbolade Osibodu is the owner of Vigeo Power Ltd which acquired the Benin Disco after paying its 75% balance of $96.75. He is the husband of former Managing Director of Union Bank, Mrs Funke Osibodu. Vigeo, established in 1999, is a multi-business group that includes Global Utilities Management Company (GUMC). GUMC has since been providing services in metering system to the Benin Disco. Vigeo plans an additional N40 billion investment in the next five years to turn around its acquired disco.
Mr Charles Momoh, Chairman of West Power and Gas; Dr Tunji Olowolafe and Mr Ernest Orji lead the ownership of Eko Disco. They are partnering with Siemens Ltd of Germany, the executor of the recently commissioned 434mw Geregu II National Integrated Power Projects (NIPP) under the Niger Delta Power Holding Company (NDPHC); Alpha Consortium Ltd, Atlantic Meridian and Africa Infrastructure Investment Fund 2, Mauritius to form the West Power and Gas Consortium. West Power acquired the Eko Disco after full payment of $135 million. Its management disclosed the expansion and rehabilitation of the plant will take another $257 million.
KEPCO/NEDC Consortium also acquired the Ikeja Distribution Company at $134.75 million, making it the only investor to have a stake in both the generation and distribution sections of the nation’s power sector. Experts said the development raises a major concern as to its efficiency and that monitoring efforts by stakeholders and consumer societies must be doubled to sustain performance.
Former Head of State, Gen. Abdulsalam Abubakar is chairman of Integrated Energy Distribution and Marketing Company (IEDMC), which acquired both the Ibadan and Yola discos for $160 million. The oil and gas company is now venturing into power sector operations with technical partnership with the Manila Electric Company (Meralco), the Philippines largest distributor of electric power. IEDMC was among the earliest firms to complete payment for their respective bids.
Alhaji Yusuf Hamisu Abubakar is the Managing Director of the Sahelian Power SPV that acquired the Kano Disco for $102 million. Abubakar is a Commissioner at the Nigerian Communications Commission (NCC), a one-time Executive Secretary of the Petroleum Development Trust Fund (PTDF) and former lecturer at the University of Nigeria, Nsukka and the Ahmadu Bello University, Zaria. He is also board member at Niger Insurance Company and was said to have once been nominated for a ministerial post by Vice President Namadi Sambo.
Sir Emeka Offor, is the Chairman of Interstate Electrics which got the Enugu Disco. He is also chairman of Chrome Energy Ltd majoring in oil and gas services, telecommunications and logistics. Interstate made an entry into the power sector with the acquisition of the Enugu Disco for $106.4m. It could not meet up earlier with the 75% payment deadline and had earlier been recommended by the BPE for disqualification in the bidding process as it could not meet up with its technical requirements. It mentioned its partners as the Power House International and Metropolitan Electricity Authority of Thailand.
Alhaji Mohammed Noma, Chairman of the Aura Energy got the Jos Disco. Noma, a politician, is former speaker, House of Assembly in Bauchi State in the second republic. Aura acquired the disco after paying $82 million.
Governments of Bayelsa, Rivers, Cross River and Akwa Ibom state formed the 4Power Consortium which acquired the Port Harcourt Disco. 4Power, which also has some governors and politicians as investors, is also partnering with other private investors to manage the power assets.
Chairman, Disco Roundtable and pioneering Chairman/CEO, Nigerian Electricity Regulatory Commission (NERC), Dr Ransom Owan lamented in an interview failure of an earlier proposed shadow management period which would have given the investors time for better understanding of the facilities. Owan, however, welcomed the test-running period, saying it would help the firms to cope with familiarisation challenges. He assuaged fears of power outages during the testing period.
Owan, who assured consumers of consistency in power supply from the new investors further said, “Consumers should realise we bought PHCN problems. The business has not been making money and performing well. So the new investors’ number one goal is to turn the businesses around, but they will have to carry the consumers along because they (consumers) are the ones to pay.”
In a phone chat, Croucher expressed KANN Utilities’ eagerness to see government fulfil the pending Conditions Precedents (CPs) leading to the physical hand-over. He said, “We are legally awaiting the completion of the CPs leading to the physical handover. We are waiting for the CPs to be concluded before we enter.” Croucher assured Abuja electricity consumers that with the vast experience at the investor’s disposal, it will deliver optimum services to them.
Although the investors keep reassuring consumers of delivering the desired heartwarming performance during the testing period and thereafter, experts warned consumers should not be unaware of the many challenges that have been bedevelling power generation and distribution, and should, therefore, not be too expectant.
For instance, the north eastern axis which harbours the Yola disco has been experiencing challenges of insurgence and wanton destruction of lives and properties in recent times. Such crises have at one point or the other spread to Kano, Jos, Kaduna and even Niger state, which called for heightening of security apparatus and taking proactive measures by the federal government to forestall further reoccurrences.
The western, southern and eastern axes where other generation and distribution companies are located are also not without their pockets of crises. Concentration of power assets in the hands of private investors comes with security challenges, as private investors in the telecommunication sector are experiencing.
Another contending issue is that of adequate gas infrastructure and gas supply to power the generators. Vandalism in recent times has accounted for shutdown of power plants like Afam IV, Okpai, thereby reducing the already fluctuation 4000mw total grid to less than 2000mw. The Federal government, which has been showing commitment to tackling the problem, will need to do more, especially on enhancing the operations of the Gas Aggregation Company of Nigeria (GACN) and adhering to the already available gas supply and infrastructure development policies.
Government will also need to ensure hitch-free transmission, as there can be no distribution without a mediating transmission from the generating companies. Government recently recruited 522 engineers for the Transmission Company of Nigeria (TCN), reconstituted the boards and empowered the consultant, Manitoba Hydro International for a turnaround in transmission. Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr Sam Amadi urged government to complement its efforts with requisite corporate governance to achieve optimal result in the transmission company.
While responding to the challenges in the metering and tariff system, Amadi stated that the current tariff system, the Multi Year Tariff Order (MYTO) 2 which the new investors are to comply with, is consumer-friendly. He had earlier disclosed plans by government to assist in an effective metering system for the new investors to ensure that power consumed is fully paid for, adding that a new electricity code will be unveiled soon to tackle problems recorded in the defunct PHCN.
With these regulations on ground, the new investors are expected to start test-running immediately, while awaiting the declaration of the Transition Electricity Market (TEM) within the shortest time. The public expect regulators to adequately assess operations of the new investors during the test-run period with a view to ensuring prompt intervention towards achieving uninterrupted power supply.