NIPPS: DASHED HOPES AND UNFULFILLED PROMISES
Unveiling the privatisation plan, the Chief Executive Officer of the Niger Delta Power Holding Company (NDPHC), operators of the NIPP, Mr. James Olotu, said the privatisation of the 10 plants had already attracted over 40 local and foreign investors.
Olotu said the board of directors of NDPHC, headed by Vice-President Sambo, had recommended the sale of the plants to President Jonathan, who had also approved their sale.
Olotu, who confirmed that the privatisation would be concluded by the middle of 2014, further stated that four of the plants had been technically completed, while six others, which were at various stages of completion, would be completed in 2014.
He said the federal government would sell 80 per cent of its shares in the power plants, adding that the Ministry of Power and Bureau of Public Enterprises (BPE) would partner in the sale of the power plants.
“With the planned privatisation, there would be efficiency and effectiveness in the management of the power plants.
“Government can play its role where it has relative advantage. Government will invest a little but more in the transmission sector so as to build the country’s power infrastructure,” he said.
Olotu assured prospective investors that the auction of the plants would be transparent and follow due process, in view of the caibre of investors that had expressed interest and the federal government’s desire to make the power sector work.
He, however, declined to disclose the value of the assets slated for sale, but added that the proceeds from the exercise would be used to build more power plants.
Also speaking on the time-table for the exercise, the CPCS Global Transaction Adviser to NDPHC, Mr. Arif Mohiuddin, said submission of bids for the plants would take place on July 19, 2013, while August 8 had been fixed for the shortlisting of bidders.
According to him, there would be a bidders’ conference on September 18 and 19, 2013.
He also stated that the bidders would submit their proposals on November 8, while the evaluation of technical proposals would be done one month later.
He said the names of successful bidders for the plants would be announced, while the handover of the assets to the investors would come up before June 2014.
Mohiuddin, however said the uncompleted plants would not be handed over to the would-be owners until they are fully completed.
Justifying the privatisation of the plant, Olotu said the sale became imperative because NDPHC had achieved the mandate given to it from inception in 2005, which was to build 10 independent power plants to generate 5,000 megawatts (MW) of electricity.
“The mandate was to build 10 power plants across the country with capacity to generate 5,000MW by end of 2013 and divest from them. We are confident to tell you that this year will be a good year in the power sector. All the power generating plants will be completed this year.
“In fact, six plants are ready for commissioning while four others are about to be completed within the next few months.
“The process that we went through to ensure that we are where we are today is intrinsic. President Goodluck Jonathan has approved the divestment plan and it would be concluded mid-next year. We are divesting 80 per cent in each power plant as valued by our financial advisers and valuers.
We will retain 20 per cent in order to assure potential investors of our confidence in the plants we are selling,” Olotu explainedThough the assets were supposed to be handed over to the new buyers in June 2014, successful bidders emerged only in March 2014, following a successful financial bids opening exercise conducted on March 7.
Exactly one year after inviting the preferred bidders to pay 15 per cent deposit for these assets, the National Council on Privatisation (NCP), through the BPE may have opted to extend the time-frame.
There are strong indications that the BPE may have written the preferred bidders for a renewal of their bid bonds for another six months, raising concern over the credibility and integrity of the privatisation process.
The continued extension of the time-frame will no doubt expose the bidders to huge interest on bank loans borrowed to pay for the assets, thus weakening their financial capacity to run the assets when handed over.
But a BPE source told THISDAY at the weekend that in line with the privatisation agreement, the investors should demonstrate their financial capacity by using their money to pay for the 15 per cent deposit and a substantial part of the remaining 75 per cent, while bank loan should be used to complete the payment. Gas shortage However, apart from the seven uncompleted plants, the privatisation of the three completed plants has also been stalled by inadequate gas to fire the turbines to generate electricity.
The Director General of BPE, Dikki, recently confirmed that gas shortage, rather than politics was responsible for the delay in the conclusion of the privatisation of the 10 NIPP plants.
Dikk said the on-going privatisation of NIPP power plants was being delayed by the problem of gas supply that had stalled the signing of the gas agreements which would make the transaction bankable.
He stated that concerted efforts were being made to secure reliable gas supply that would enable the signing of the gas agreements necessary to proceed with the process of privatisation of the NIPP plants.
According to him, the privatisation programme is anchored on the attainment of clearly defined goals and parameters.
In the case of the generation companies, Dikki said, capacity was expected to be ramped up from the current low levels to those that meet the minimum target capacities specified under the respective business plans submitted by the core investors.
For the distribution companies, Dikki said the performance of the business operations of the new owners would be measured on the basis of their abilities to reduce the Aggregate Technical, Commercial and Collection loss targets specified in their business plans. Court action Before the winners emerged, a Federal High Court in Abuja had stopped the Bureau of Public Enterprises (BPE) from going ahead with the bid process for three power plants.
The order was granted at the instance of one of the companies bidding for the power plants, Ethiope Energy Limited.
After listening to Dr. Alex Izinyon (SAN), counsel to Ethiope Energy, Justice Abdul Kafarati, in a short ruling for an order of injunction granted an order of interim injunction against BPE from further going on with the bid process for the power stations.
The BPE had commenced the bid process for Alaoji, Omoku and Gbarain power stations on March 7, 2014.
However, Ethiope Energy, which claimed it also submitted bids for the power stations, said it was excluded from the process.
Not satisfied with its exclusion, Ethiope approached the court for an order to stop the BPE from going ahead with the bid process.
In the statement of claim filed through Izinyon, Ethiope accused the Chairman of Due Diligence Committee, Mr. Atedo Peterside, of having an enormous influence on the BPE.
The company said Peterside had been having a running battle with its Chairman, Mr. Johnson Arumemi, was hostile and had animosity for him.
Ethiope accused the BPE of bias, prejudice, conflict of interest, manipulation of the technical bid evaluation, due diligence exercise and that Peterside should have excused himself completely in the whole evaluation as it related to the plaintiff owing to the animosity and litigation he had instituted against its chairman.
Other defendants in the suit are the NDPHC and the Attorney-General of the Federation.
With the sale of the three power plants halted by the court, the government confirmed the preferred bidders for the remaining seven plants, where it targets to realise $4.3 billion.
EMA Consortium was confirmed as the preferred bidder for Benin Generation Company with a bid of $580 million, while the reserve bidder was Index Consortium, which bided $575 million. EMA Consortium was also the preferred bidder for Calabar Generation Company with a bid price of $625million, as against Nebula Power Generation Consortium, which emerged the reserve bidder with an offer of $623.75 million.
Dozzy Integrated Power Limited emerged the preferred bidder for Egbema Generation Company with a bid of $415.7 million dollars, while AITEO Consortium was named the reserve bidder with an offer of $392 million.
Seoul Electric Power Limited, was the preferred bidder for Geregu Generation Company with a bid of $690.2 million, with YellowStone Electric Limited as emerged as the reserve bidder with $613.1 million.
Ogorode Generation Company had Daniel Poer Consortium as the preferred bidder with a bid of $532.78 million, followed by ESOP Power Limited as reserve bidder with an offer of $510 million.The preferred bidder for Olorunsogo Generation Company was ENL Consortium Limited, which bidded $751.24 million dollars, with the reserved bidder as Index Consortium, which offered $730 million.
Omotosho Electric Power emerged as the preferred bidder for Omotosho Generation Company with a bid of $659.9 million, while the reserve bidder was ENL Consortium Limited, which offered $645.15 million.
The bid winners were required to provide an Unconditional Bank Guarantee of 15 per cent of the offers within 15 business days of official notification to them.