• Govt plans staggered sale of 10 NIPP plants
Chineme Okafor and Omololu Ogunmade in Abuja
The Joint Senate Committee on Power, Employment, Labour and Productivity Tuesday lamented the deplorable state of power supply in the country and told the Minister of Power, Works and Housing, Mr. Babatunde Fashola, to live up to his responsibility.
The committee’s rebuke of Fashola coincided with THISDAY’s findings yesterday that the federal, state and local governments, owners of the 10 NIPP plants, have decided to stagger their sale to private entities.
Lamenting the state of power supply in the country, the Senate committee accused Fashola of defending what it perceived as an unjustifiable increase in electricity tariff, lashing him for unnecessarily defending, pampering and protecting the power firms.
The committee expressed its anger at a public hearing it organised on the hike in electricity tariff in the country. Fashola was accompanied to the hearing by the acting Chairman, Nigeria Electricity Regulatory Commission (NERC), Dr. Anthony Akah.
The minister, who had argued that adequate consultations were carried out among stakeholders in the power sector before the new tariff was fixed, asked those expecting the federal government to reverse the 45 per cent increase in electricity tariff to perish the thought.
According to him, doing so would be counter-productive.
He said it was too early to judge the effectiveness of the privatisation of the nation’s power sector, which was done only in 2013 by the administration of former President Goodluck Jonathan.
He asked the Senate to study the report of the House of Representatives, which he said had earlier carried out a similar public hearing, noting that the report would give the Senate a comprehensive knowledge of events, which led to the hike in electricity tariff.
He defended the 45 per cent tariff increase done by NERC, regretting, however, that the destruction of pipelines in Niger Delta region by some militants had continued to frustrate efforts to improve power supply.
He said: “Let me say again with all relevancies and for the purpose of those who will benefit from this public hearing that today there is no (Power Holding Company of Nigeria) PHCN anymore. And we must migrate because we have moved on from it. As a minister, I inherited a power sector where government interests had been illegally sold and therefore, I don’t control how power is distributed. I don’t control how power is generated as was possible to do in the past.
“They are now largely private businesses except those where government now has some minority shares and so, government is now a minority shareholder in businesses where there are majority shareholders and we can only exercise collaborative pressure to get things done, but things must be done now on a commercial basis.”
Fashola said in the past, it was easy for government managing the distribution access to say “give power to the people; don’t collect money”. But he said this was no longer possible because government had become a minority shareholder in the business.
“Government’s control is limited and it is largely exercising regulatory activities through the NERC, which sets the tariff. So, my interventions here would be largely to express why I support what NERC has done and to help amplify my understanding of it,” the minister said.
According to him, “The distribution companies (DISCOS) were making it very clear to us that if we did not give them the market reflective tariff, it meant that government would have to carry the continuing cost that accumulated in the region of about a trillion naira.
“We are not insensitive to Nigerians owing to their challenges. We are looking for the best way to solve what has become an over 60 year’s problem since 1950 when Electricity Company of Nigeria was first created.”
Fashola said one of the reasons why tariff had to go up was that a major component, a significant number of the nation’s power plant depended on gas, adding that there were only three hydro out of about 26 power plants.
“We were heavily dependent on gas, people were exporting gas because gas was selling outside the country at $4 and it was selling for domestic use at $1. Government reviewed that price to a total of $3,” he said.
In his submission, Akah said NERC painstakingly engaged power firms and as well as carried out wide and extensive consultations with relevant stakeholders before fixing the new tariff.
He listed those consulted to include the organised labour involving the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC), which has persistently called for the reversal of the tariff, disclosing that labour did not raise any formal objection in writing before or after the increase.
But the representatives of labour at the public hearing, Messrs Chris Okonkwo of TUC and Joe Ajaero of NLC, insisted that power supply was better off before the tariff hike than now as they viewed the increase as exploitative.
Meanwhile, THISDAY learnt that the 10 gas power stations built under the National Integrated Power Projects (NIPP) by the Niger Delta Power Holding Company (NDPHC) Plc might be sold in bits.
The paper yesterday exclusively gathered from top government sources who are aware of the new development that barring any last minute changes in advanced discussions on how to salvage the almost messy privatisation of the plants, a staggered sales strategy has been picked as the most viable option to conclude the process.
The sources explained in Abuja that by this, the owners — federal, state and local governments — had agreed to now sell the plants to the already preferred bidders one after the other.
They noted that any of the plants that is ready and its preferred bidders that are also ready to continue with the suspended negotiations would now be allowed to be sold independently instead of waiting for a collective conclusion of the transaction as it was the case before.
THISDAY was however told by the sources that the office of the Vice-President Yemi Osibanjo had been busy with key stakeholders to push forward the transactions and that the result of the engagement was the option of staggered privatisation.
It was also learnt that some of the preferred bidders are quite comfortable with the new strategy and had expressed their willingness to go on with it.
The new approach, they further explained, would now allow the transaction team comprising the Bureau of Public Enterprises (BPE), NDPHC and CPCS Transcom International Limited – the transaction advisors — to pick a plant and solely conclude its privatisation, thus sidestepping the former strategy of collective sale of the 10.
It was further learnt that in line with the discussions on this, the Calabar and Geregu stations have been pencilled down as the first two on which this strategy will be tried out.
The choice of the two plants, they said, was based on their level of operation, having reportedly been completed and in the case of Geregu, already generating power to the national grid.
According to them, the strategy will subsequently be used to privatise other plants that are ready or will be ready.
The government’s privatisation of the 10 power plants had been suspended for reasons relating to poor or lack of gas supply to some of them, amongst others, and for which their preferred bidders have held on to, thereby withholding the completion of their payments for the plants.
On November 8, 2013, the NDPHC and BPE received 66 proposals for the 10 generation plants which have over 5,000 megawatts (MW) installed production capacity.
The financial bids for the plants were then opened on March 7, 2014, and preferred and reserve bidders were determined afterwards.
However, the transaction had not gone beyond that stage when the preferred bidders alleged that the government raised some issues that were not part of what government promised them upon their entry into the transaction.
Some of the preferred bidders for the plant include AITEO Consortium, which bidded $902,000,000 for Alaoji; EMA Consortium, which put in $580,000,000 for Benin station and $625,000,000 for Calabar plant; Dozzy Integrated Power Limited with its $415,075,000 for Egbema; and KDI Energy Resources with $340,000,000 for Gbarain.
Others are Yellowstone Electric Power Limited with $613,111,113 for Geregu; Daniel Power Consortium has $531,777,777 for Ogorode; ENL Consortium Limited put in $751,240,000 for Olorunsogo; Shayobe International Limited Consortium has $318,710,840 for Omoku and Omotosho Electric Power, which tabled $659,999,000 for Omotosho power plant.
