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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
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
“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.