FG offers Omotosho power plant to Chinese company, CMEC-Pacific

A subsidiary of the China Machinery Engineering Corporation, CMEC-Pacific, has been offered the Omotosho Power Plant at a price of $217.53m.

A statement issued by Head of Public Communication, Bureau of Public Enterprises, Mr. Chigbo Anichebe, in Abuja on Wednesday, however, said the company would pay a net value of $82.34m.

Anichebe said BPE had transmitted an offer letter to CMEC-Pacific in respect of a Power Purchase Agreement for the sale of Omotosho power plant, adding that the transaction was through a debt-equity swap process.

He said, 'Presenting the offer letter to the Chairman of CMEC-Pacific, Adeleke Adedeji, the acting Director-General of BPE, Mr. Benjamin Dikki, said it was in fulfilment of the decision of the National Council on Privatisation, which approved the sale at its last meeting, which held on February 28, 2013.

'NCP had approved that CMEC-Pacific pays $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 capital cost for the construction of a switch yard for the Transmission Company of Nigeria.'

The phase one of the Omotosho Power Plant, which has a capacity to generate 335 Megawatts of electricity, was completed in 2002. The total cost of the turnkey contract was $166,724,578.

The Federal Government funded 35 per cent of the cost, while the balance was funded through vendor financing provided by the China National Machinery and Equipment Import and Export Corporation at an interest rate of six per cent per annum.

It was initially conceived that the plant would, after completion, operate commercially and the proceeds from the sale of the electricity it would generate would be used for the repayment of the vendor financing and the interest.

However, the delay in the completion period coupled with limitation in gas supply and paucity of funds at the Power Holding Company of Nigeria resulted in a default in the repayment of the debt, leading to the accumulation of unpaid invoices to CMEC.

The responsibility for repayment was taken over by the Debt Management Office, which informed the BPE that it had paid approximately $104.3m to CMEC for the plant as of September 30, 2012, Anichebe said.

He added that based on the approval received by the Ministry of Power from President Goodluck Jonathan on July 18, 2010 to proceed with the proposed divestiture of Federal Government's investment in the plant, BPE sought and received NCP's approval for the divestiture of Omotosho Power Plc through debt-equity swap during its meeting of May 12, 2011.

According to him, NCP also approved the transfer of assets to the project company - Omotosho Power Plc - which was incorporated on November 10, 2006 as a vehicle to own the assets of the plant.