Nigeria’s Power Firms Sold To Cabal for N404bn after Gulping N3.2tr

Oct. 1, 2013

Bello, Otedola, Elumelu take over PHCN assets

The Federal Government yesterday handed over its spun off power companies to private buyers who paid a total of N404 billion to acquire assets into which investment of over N3.2 trillion was made in the past 14 years.

President Goodluck Jonathan, at a ceremony in Abuja, presented the share certificates and licences to the new owners of six power generation companies and nine distribution firms that have completed payment of their bid amounts.

The public companies now gone private are among the 18 successors of the now defunct Power Holding Company of Nigeria (PHCN).

Mainstream Energy, headed by Col. Sani Bello, took over Kainji Hydro and Jebba Hydro, Geregu was handed over to oil magnate Femi Otedola’s Amperion Power, while Ughelli was handed over to Tony Elumelu, the owner of Transcorp/Woodrock Consortium.
The other generating companies sold are Shiroro Hydro, Olorunsogo and Egbin.

New owners of distribution companies are West Power and Gas (now owns Eko Disco), NEDC/KEPCO (Ikeja), 4Power Consortium (Port Harcourt), Vigeo Consortium (Benin), Aura Energy (Jos), Kann Consortium (Abuja), Integrated Energy (Ibadan and Yola) and Sahelian Power (Kano).

PHCN was broken up in a privatisation process that is aimed at ending debilitating power shortage in the country.

At least N3.2 trillion (about $20 billion) has gone into several power reform programmes in the past 14 years of civilian rule, much of it wasted.
The PHCN was split into six generation, 11 distribution and one transmission companies.

osigwe jonathanAll the generating and distributing firms were sold separately for $2.5 billion (about N404 billion) in total.

A House of Representatives inquiry in 2008-2009 found that at least $15 billion dollars had been spent in the power sector, most of it stolen, with no commensurate result.

Around the same period, the Federal Government announced that additional $5 billion would be invested to ensure stable power supply by the end of 2010.

More money had been spent by President Jonathan’s administration in the sector since then, aside the regular budgetary provisions, but power supply remains epileptic around the country.

Despite holding the world’s ninth largest gas reserves, Nigeria only produces a tenth of the amount of electricity as South Africa for a population three times the size, according to Reuters news agency.
Yesterday’s handing over of power companies to private buyers came eight years after the Power Reform Act was enacted to enable the process.

President Jonathan commended Nigerians for their patience and confidence, assuring them of an improved power sector.
“To the Nigerian people who have demonstrated such great patience and confidence, putting up often with darkness, noisy power generating sets, the related pollution and the daily disruption in their lives, I say better days are coming,” he said.

“We cannot expect the sector to be revitalised overnight, but we can all look forward to a better time very soon as we have seen in the telecommunication and banking sectors.”

The president also said the privatisation process was transparent, well-organised and fair.

He added that the process has begun of privatising the gas-fired plants of the National Integrated Power Projects (NIPP) of the Niger Delta Power Holding Company of Nigeria (NDPHC).

Jonathan said arrangements were also ongoing to adequately fund the Nigerian Electricity Liability Company to assume all liabilities of the PHCN successor companies.

He said the new generation company owners are inheriting signed gas supply and transportation agreements. “We will maintain the agreed gas pricing policy in order to encourage new investments in gas supply and infrastructure development,” he added.

Earlier, Vice President Mohammed Namadi Sambo, who is the chairman of the National Council on Privatisation, said the handover of the power companies represented the government’s conclusion that only private sector investment could satisfy Nigeria’s yearning for stable electricity supply.

“We anticipate that in the next two years, Nigerians will be reaping the benefits of this privatisation programme by the virtue of the improvement of service delivery across the power value chain,” he said.

Responding on behalf of the companies, retired Col. Sani Bello said the privatisation exercise had shown the administration’s commitment to improving the power sector. He pledged that the new owners would not fail the nation.

The buyers of power companies will take physical ownership of the assets next month, while two of the remaining three PHCN successor companies are expected to be sold within six months.

The Transmission Company of Nigeria (TCN) remains in government ownership, at present being managed by Canadian firm Manitoba Hydro under a contract.

Fixing electricity could reduce business costs by up to 40 percent, add 3 percent to GDP and cut the mass unemployment, economists say, according to Reuters news agency.

Protest greets handover

Meanwhile, electricity workers’ union yesterday staged protests in Abuja, Lagos and Kaduna against the handover of the power companies.

Members of the National Union of Electricity Employees (NUEE), who besieged the entrance to the PHCN headquarters in Abuja, warned the new owners to stay away from the facilities untill their demands on full payment of their severance package and pensions were met.

In his reaction, civil rights activist Shehu Sani said the sale of power plants amounted to “an economic heist and a moral disaster.”
In a statement, Sani, who is the president of Civil Rights Congress of Nigeria, said the exercise was “a criminal robbery of the people’s collective assets by a few bourgeoisie elites.”

He said PHCN privatisation brought nothing but untold hardship and misery to the thousands of sacked employees and their families.
“Our crave for light must not be upon the casting of darkness on the lives of other helpless Nigerians. It’s unfortunate that in most industrialised and developing nations the power sector performs efficiently and it’s public owned but in Nigeria it has to be auctioned to so called investors,” he said.

Sani added that Jonathan’s government “will go down in history as the government that approved, executed and presided over the dispossession of our collective assets and its criminal handover to a predatory and parasitic class of Nigerians.”

But Managing Director of PowerCap Limited, Mr.Abiodun Ogunleye, told Daily Trust the transfer of the assets to new owners is a watershed in the history of power privatisation in Nigeria.

He said the exercise would enable the new owners to commence turning around the power sector.
Ogunleye said the new investors would not have a smooth ride as they would need a lot of resources to be able to meet the high expectations of Nigerians for improved supply.

Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yussuf, advised Nigerians to moderate their expectations of the new investors.

Yussuf said there was no likelihood of tariff reduction as investors would want to recoup their investments. But he said there will be improved power supply.

Also, chief executive officer of Energy International Services, Dr Diran Fawibe, said electricity consumers should not expect immediate changes in the supply as there are still lots of investment to be made.

“The focus and priority of the Federal Government is not about tariff reduction but availability of electricity in the country. To do this the new companies will have to invest a lot of money and resources to be able to achieve that,” he said.
“After doing that the next thing is how they will recover their cost and return profit to their shareholders.”
Fawibe said though there will be efficiency in the electricity generation and distribution, consumers should be ready to pay at a cost reasonable to the suppliers

“I don’t forsee any reduction in the tariff now either in the medium and long term because what is important now is constant power and Nigerians are even willing to pay above the current level if there is improvement in supply,” he said.

by Isiaka Wakili, Simon Sunday (Abuja), Kayode Ekundayo, Mohammed Shosanya (Lagos) & Christiana Alabi (Kaduna) of DailyTrust