NIGERIA Nigeria’s power sector reform enters next phase When the selected bidders made the August 2013 final 75% payment for the privatisation of Power Holding Company of Nigeria successor firms, it marked an important milestone in Nigeria’s power sector reform initiative. T he successful consortia included West Power and Gas, the preferred bidder for the Eko distribution company; NEDC/Kepco, the preferred bidder for Ikeja distribution company; 4Power consortium, the preferred bidder for the Port Harcourt distribution company; Vigeo consortium, for Benin distribution company; Aura Energy, for Jos distribution company; Kann consortium, for Abuja distribution company; and Interstate Electrics for Enugu distribution company. All the following were also successful: Integrated Energy Distribution and Marketing Company was the successful preferred bidder for both the Ibadan and Yola distribution companies; Sahelian Power was the successful preferred bidder for the Kano distribution company; Transcorp/Woodrock consortium was successful for Ughelli Power; Amperion for Geregu Power; North-South for the Shiroro plant; Mainstream Energy for Kainji Power; and CMEC Euafric for the Sapele power station. In 2005, the Electric Power Sector Reform (EPSR) Act led to the unbundling of the Power Holding Company of Nigeria (PHCN) into successor companies, consisting of six generation companies, 10 distribution companies and one transmission company. The plan was to have these successor companies privatised to ensure enhanced capacities, and improved efficiency. With Nigeria’s privatisation of the PHCN successor firms reaching the full payment closure, the focus turns to the second round of privatisation in the country’s electricity sector. The government of Nigeria plans to privatise ten gas fired power plants under development by the Niger Delta Power Holding Company (NDPHC). These power plants have been developed using government funds in line with the National Integrated Power Project (NIPP) program launched in 2004 to deal with serious shortfalls in Nigeria’s electricity generation capacity and to leverage the country’s large natural gas reserves. After receiving over 100 expressions of interest for the NIPP power plants in July 2013, the NDPHC and the Bureau of Public Enterprises (BPE) published the list of prequalified bidders on 19 August 2013. There were between 28 and 45 prequalified bidders for each power plant, comprising a mix of Nigerian and international investors and consortia. The privatisation of the NIPP power plants has been structured as the sale of an 80% ownership interest in each of ten generating companies, each of which is a special purpose Nigerian company formed to own and operate one of the ten NIPP power plants. The NDPHC will hold the remaining 20% interest in each of the generation companies after privatisation. All of the power plants, most of which are open-cycle plants but ESI AFRICA ISSUE 3 2013 capable of conversion to combined-cycle, will be completed prior to closing of the acquisition. Once completed, the NIPP power plants will collectively add over 5,000 MW of gas-fired generating capacity to the Nigerian grid, nearly doubling the existing installed capacity. According to the NDPHC, bidders will receive a new, commissioned power plant along with all necessary contractual structures. Each of the plants has been or is being constructed by international engineering, procurement, construction (EPC) contractors using proven technology and established original equipment manufacturers. “There is also a sustained effort to diversify Nigeria’s energy mix” Each of these generation companies will, in terms of a 20 year power purchase agreement (PPA), sell the electric power generated at its power plant to the Nigerian Bulk Electricity Trading (NBET) company, a special purpose entity formed by the government in 2010 to act as an intermediary between generation companies and the recently privatised distribution companies. All of the NIPP power plants will be connected to the national grid. Each generation company will procure its gas supply by means of a long-term gas supply agreement with the Gas Aggregation Company of Nigeria (GACN). GACN was formed on 5 January, 2010 and is owned by the upstream joint ventures formed between NNPC and one or more of the international oil companies operating in Nigeria. However, the generation companies will be permitted to enter into separate gas supply agreements with other gas suppliers for any additional gas needs to cover future expansion as well as to back-stop the supply obligations of the GACN. Gas transportation services will be provided by the state-owned Nigerian Gas Company. In addition to this second round of privatisation, there is also a sustained effort to diversify Nigeria’s energy mix. As an example, Nigeria’s federal government recently signed a memorandum of understanding with Chinese company HTG/ Pacific Energy for a US$3.7 billion coal to power project. Chairman of Pacific Energy, Adedeji Adeleke, says the MoU represents the first step towards building plant that will generate an additional 1,200 MW for Nigeria’s national grid. 19