200 investors show interest in 10 NIPPs
Nigeria’s power minister wooed prospective investors in 10 new power plants on Tuesday, promising them multi-billion dollar profits akin to those achieved by the telecoms sector since it was privatised in 1999.
The government opened a road show on Monday to try to attract investors to buy the majority stake in new gas-fired plants, which it said would have a combined capacity of 5,453 megawatts (MW), enough to almost double the power supply.
About 200 local and foreign investors have indicated interest to take part in the privatisation programme.
Speaking Tuesday in Lagos during the road show organised by the Niger Delta Power Holding Company (NDPHC), operators of the NIPP, and the Bureau of Public Enterprises (BPE) for the sale of power assets, Benue State Governor, Mr. Gabriel Suswam, stated that the road show was organised to further enhance the interest already generated in the investment opportunity in the sector.
Suswam, who was the chairman of the road show and a representative of the North-central geo-political zone on the NDPHC board , said a transparent process had been put in place to divest the interest of the government in the 10 power stations.
Also speaking, his Delta State counterpart, Dr. Emmanuel Uduaghan, who represents the South-south on the NDPHC board, urged successful bidders to first liaise with the host governors before going to take over the assets.
He assured investors that the governors would guarantee the security of the assets.
Minister of Power, Prof. Chinedu Nebo, said the federal government was doing all it could to provide a level playing ground for all the investors.
Nebo said the process had so far been transparent, adding that the government was aware that the world was watching.
He also said the federal government planned to commence the payment of the severance package of the PHCN workers on June 17.
Nebo, during a tour of the Egbin Power Station in Lagos, however added that June 17 was tentative and urged the workers to support the government to make the date a reality.
He said the technical and implementation committees that had been set up to look into the issues of workers' entitlements were working to ensure effective results and reminded the workers that they should provide adequate information on the forms issued to them
Nigeria’s government is offering to sell 80 percent of each plant, while keeping 20 percent under state ownership. It wants completed the deal on all 10 by mid-2014, but investors are wary of huge risks such as gas supply and transmission problems.
“We have a unique opportunity here … it is being given to investors on a platter of gold,” Power Minister Chinedu Nebo told the audience in a glitzy hotel in Lagos, the main commercial hub in Africa’s second biggest economy.
“What happened in the telecoms industry is about to repeat itself in the power sector, except we are expecting even greater results … it will dwarf what happened in telecoms,” he said.
The deregulation of telecoms paved the way for private mobile phone operators to set up shop and reap huge profits. Largest operator MTN makes around $2.5 billion annually in Nigeria, its biggest earner, and the owner of No. 2 operator Globacom, Mike Adenuga is Africa’s fifth richest man, with a $4.7 billion fortune, according to Forbes.
Yet unlike in telecoms, attracting investors worried about risks such as the reliability of gas, the distribution of what they produce and ensuring payment could still prove tough. The power sector has been a mess for decades and there remain huge hurdles such as disruptive unions and powerful interests like the generator and fuel importers who profit from the status quo.
The sale of the plants marks phase two of President Goodluck Jonathan’s plan to end the crippling power shortages that have hobbled industry and made daily life a misery for tens of millions of Nigerians. If he succeeds, it would seal his legacy.
Despite being the continent’s top oil producer and holding the world’s ninth largest gas reserves, power output is a tenth of South Africa’s for a population triple the size. Sorting it out would cut business costs by a third, economists say.
“It will revolutionise the economic situation in Nigeria, reduce poverty, create jobs,” Nebo said.
In the first phase, under way since last year, the state power firm is being broken up and sold for a total of around $2.5 billion. This next phase invites investors to buy new assets, instead of decrepit old state ones.
This in some ways is a bigger risk for investors because the initial capital investment could be up to $500 million, more than five times the going price of the state assets, said a government source close to the deals.
Nigeria has so far spent $15-$20 billion on the plants, so even at this price tag, it stands to lose a lot of money.
Arif Mohiuddin, a consultant working on the deals, said the government would compensate power plant owners for any income lost due to a lack of gas supply or problems transmitting electricity through the grid to end users.
“They (the investors) only take risks in terms of the operation they are running, not for instance the gas supply,” Mohiuddin said.