The private owners of Nigeria’s electricity companies would not inherit unwanted liabilities, Beks Dagogo-Jacks, the Chairman of the Presidential Task Force on Power, said, at the inaugural Nigeria Power Investors Summit which began in Lagos on Monday.
Mr. Dagogo-Jacks said for power projects already in the pipeline, the new investors would perform due diligence and make decisions on the best options for them. According to him, the elements and factors that would be considered on such projects would be strictly business driven.
“All projects which do not meet up with the decisions based on the due diligence would be transferred to the liability management company. Invoices not paid and projects not of value to the new owners of the companies would also be migrated to the liability management company,” he said.
Mr. Dagogo-Jacks said the privatisation process is still at the pre-transitional market stage, and has two stages to go. According to him, among the milestones expected are the commercialisation and privatisation of the successor companies, as well as the creation of a holding company, among others.
He said the nation’s Transitional Electricity Market when announced, would further set the stage for progress in the process. “By that time, most of the issues would have been addressed” he said.
A myriad of enquiries by local and foreign investors gave rise to the need for a power sector summit, Chinedu Nebo, Minister of Power, Federal Republic of Nigeria, said.
“The current exercise of privatisation has attracted investors from all over the world.
“Privatisation has brought Nigeria to a different level,” Mr. Nebo added via a recorded video played for the participants, as he was reported to be unavoidably absent. According to him, the government realised that it cannot single-handedly fund the sector, hence the need for privatisation.
“In 1999, when the telecoms sector was being privatised, some people were being skeptical” he said. However, those that could see beyond the then challenges decided to invest in the sector and today, they are reaping the reward of such investments. According to him, the telecoms privatisation will be dwarfed by the on-going power privatisation, when completed.
“The power sector is very key. Without the power sector, all the talks about vision 2020will never be realised,” he said, highlighting that there is a huge subdued demand for power which needs to be attended to.
Nigeria’s power sector reform witnessed setbacks from inception due to a lack of political will, the uprising of labour against the unbundling of the state owned PHCN, and the resignation of the former Minister of Power. These created uncertainty and shattered the confidence of interested investors in Nigeria’s hugely attractive power privatisation process.
However, 2012 marked a major turning point in the history of Nigeria’s power sector. After the restructuring of the Ministry of Power and a transparent and rigorous transaction process, Manitoba hydro was first awarded the management contract for the Transmission Company of Nigeria (TCN), five core investors were awarded licenses for the generation companies (GENCOs); and ten investors were awarded license for the distribution companies (DISCOs).
The 15 preferred investors have now paid their 25 per cent installment for the purchase price for the PHCN successor companies with a remaining 75 per cent to conclude the negotiations.
On Monday, companies recently privatised were handed to their new owners. The government presented certificates of ownership to new core investors of PHCN’s generation and distribution companies. The corporal handover is, however, scheduled for October 30.
However, participants say the reform is by no means complete and though the reform train has left the station, it is not an end to itself, and just a part of the journey as power generated is still grossly inadequate.
Bernie Sheahan, Global Industry Director, International Finance Corporation, in a ‘speaker interview’ with Energy Net, one of the organisers of the event, on the role played by the World Bank/ IFC on this process, said the progress that has been made to date is significant and would be difficult to reverse.
“We have seen substantial political will to put the Nigerian power sector on a sustainable path. As long as that will remains in place, we anticipate good progress for power sector reforms. Areas where concerns remain are being addressed. For instance, concerns about gas supply are addressed in the Gas Master Plan and solutions to transmission constraints are well articulated. The primary requirement for continued progress is sustained political will to bring all these initiatives to fruition,” he said.
“Our immediate goal is to deliver on the World Bank Group Energy Business Plan for Nigeria over the next 18 months. That would see us supporting the addition of 1,500mw to the national grid through investment in about 3 to 4 IPPs and investments to support 2 to 3 distribution companies (Discos). Overall, these interventions should help improve electricity supply to 8 million households,” he said.
Mr. Sheahan said the company’s aim is to help develop demonstration projects that can be replicated by other private sector players across the energy value chain. In this regard, the organisation said, it plans to have targeted interventions in generation, distribution, and gas supply.
“Nigeria requires an effective and transparent regulatory regime to provide stability and maintain competition in Nigeria’s electricity sector with private operators involved,” he said.