As successful bidders for the 10 power plants built on behalf of the three tiers of government by the Niger Delta Power Holding Company (NDPHC) prepare to pay about $5.8bn for the thermal stations, OSIGBESAN SULTAN LUQMAN writes that the focus has now shifted to the second phase of the Power Roadmap – construction of more hydro power plants in the country, especially in the North.
For most Nigerians, Friday, March 7, 2014 passed on like any other day they left home to hustle for their daily bread. But for the country’s power sector, it is now a day of significant history, as a consortium of investors – foreign and local – successfully put up their financial bids for the 80 per cent equity of the 10 thermal power plants built by the Niger Delta Power Holding Company (NDPHC) under the National Integrated Power Project (NIPP).
It was a realisation of a vision conceived way back in the year 2004 when the NIPP was initiated, albeit to much scepticism. With the infamous “Nigerian factor” weighing on the minds of many then, not a few citizens expressed misgivings that the NIPP was another white elephant project conceived to waste the nation’s resources or even siphon it.
The NIPP $8 billion investments include construction of 10 power stations with total capacity of 4,774MW; over 125 high voltage transmission network, gas pipelines and metering stations for the power stations; provision and integration of grid-wide telecommunication and tele-protection infrastructure; and over 290 electrical distribution and network projects at 11kv and 33kv voltage levels with injection substations and transformers.
However, a decade after and with about $8 billion spent by the three tiers of governments on the NIPP, the success Nigeria has made of it is obvious. This was clearly brought home with the successful financial bids for the 10 power plants, from which the three tiers of government stand to recoup $5.8 billion of their investments in the NIPP, by selling 80 per cent equity in just the generation arm of the tripod. In line with global best practices, the power plants were offered to the highest bidders. Sixty-six companies initially applied to bid for the 80 per cent equity in the 10 power plants. However, only 42 companies were approved to take part in the exercise. The 10 power plant have a combined capacity of 5,774MW.
The bid for Alaoji Generation Company was won by AITEO Consortium, which offered $902,000,000 for the 1,076 megawatt facility. Benin Generation Company was won by EMA Consortium with its $580 million offer. EMA Consortium also won the bid for the Calabar Generation Company with $625 million.
Dizzy Integrated Power Limited secured the Egbema power plant with the highest bid of $415,075,000 while KDI Energy Resources bought the Gbarain Generation Company with $340 million. The Geregu Generation Company bid was won by Seoul Electric Power Limited through the offer of $690,200,000 and Daniel Power Consortium bagged the Ogorode power plant after bidding the highest for it with $531,777,777.
ENL Consortium Limited were the preferred bidders for the Olorunsogo Generation Company with a bid of$751,240,000 while Omoku power plant bid was won by Shayobe International Limited Consortium with the highest offer of $318,710,840. Lastly, the Omotosho Generation Company went to Omotosho Electric Power, with a bid of $659,999,000. The new owners of these power plants are expected to take charge of them by June.
The financial bid process also produced 10 reserve bidders who are waiting in the wings to displace any of the preferred bidders that fail to meet up with extant transaction guidelines in the power plants’ privatisation process.
It is noteworthy that all the power plants were overpriced by the bidders, a development experts and stakeholders in the power sector say is a reflection of the facilities’ quality and their viability as business entities. And by constructing these power plants from the scratch and simultaneously, the NDPHC and Nigeria have pulled off a feat no other organisation or country has done till date. Appraised with the fact that the NDPHC built these 10 plants alongside its massive work in expanding the country’s power transmission capacity, Gas and distribution networks, it is no surprise that the power sector and indeed the NDPHC is the bride of the current federal administration, often cited by officials as one industry where the success of President Goodluck Jonathan’s Transformation Agenda is indisputable.
Chairman, Joint Technical Transaction Committee of the bid who is also the Benue State Governor, Rt. Hon. Gabriel Suswam, expressed delight at the successful conduct of the bid. He said: “All the plants are in good condition, the investors who bid for the plants have done their own due diligence and inspection of the plants before submitting their bids.’’
Managing Director, NDPHC, Mr James Olotu, said that with the privatisation of the GENCOS under the NIPP, the power situation in the country would improve significantly.
On his part, Director General, Bureau of Public Enterprise (BPE), Mr Benjamin Dikki, said: “This NIPP privatisation process will usher in the last step of the session. At the conclusion of this, all the generation companies (Gencos) will now be in private hands and it is a historical landmark.”
NIPP Phase 2: A Turn To Northern Nigeria
The sale of the 10 thermal stations brings to culmination the first phase of the NIPP and opens up for implementation the second phase of the initiative, which encompasses a transformation of the country’s power infrastructure in the northern region. This will involve the construction of at least 16 large, medium and small hydro power plants on dams in northern states and the country as a whole, including a 3,050MW Mambilla Dam hydro power plant (HPP) in Taraba State and the 360MW Gurara II Dam HPP in Niger State. Others are Itisi Dam HPP, Kaduna, 40MW; Bakolori Dam HPP, Zamfara State, 3.0MW; Challawa Dam HP, Kano, 7.5MW; Tiga Dam HPP, Kano, 10MW; Kampe Dam HPP, Kogi State, 0.5MW; Zobe Dam HPP, Katsina, 0.30MW; Jibia Dam HPP, Katsina, 4.0MW.
The rest are Doma Dam HPP, Nasarawa State, 1.0MW; Katsina Ala Dam HPP, Benue State, 40MW; Oyan Dam HPP, Ogun State, 10MW; Ikere Gorge HPP, Oyo State, 6.0MW; and Owena Dam HPP, Ondo State, 0.45MW. The NDPHC would also a small dam-based HPPs at the Ahmadu Bello University (ABU), Zaria, Kaduna State and a Jado Dam HPP in Adamawa state. In total, these HPPs would increase the country’s power generation capacity by about 4,000MW.
In addition to these power generation projects under the second phase of the NIPP, the NDPHC is also expanding transmission infrastructure in the area, leveraging on invaluable experience garnered in the course of executing the first phase of the NIPP.
The challenges to be met under NIPP Phase 2 are many in the North where, for instance, Transmission Transfer Capability is constrained to less than 4,000MW or about 40% of the line capacity. The long radial lines that characterise the three northern planning regions results in a cascading voltage instability that degenerates further north.
In the North East, high and low voltages are the usual experience of residents. The region is also suffers from high voltage during light load condition and low voltage at times of heavy load condition. Some of the weakest system nodes are located in this region due to long electrical distances from generating station. Power transfer capacity to the region is reduced to less than 30% of the line capacity because of voltage regulation problem. The entire North Eastern region transmission capacity is limited to less than 150MW because of voltage regulation problem.
Also, due to voltage regulation problem in the North West, transmission power transfer capability is constrained to less than 30% of the 330kV line capacity of 660MW, which translates to less than 200MW.
A significant percentage of the $5.8 billion proceeds of the partial sale of the 10 thermal plants would be spent on the second phase of the NIPP even as government has said that it would seek a $10 billion worth of investments in collaboration with power sector private investors to build the new hydro power stations across the North.
While the first phase of the NIPP has, in no small measure, increased the country’s capacity in power generation, transmission and distribution, experts are of the view that the nation would need to explore the combination of various energy sources to achieve optimal capacity and energy security. Thus, a diligent approach to executing the second phase of the NIPP, which is largely hydro, is imperative if the country is to meet its energy needs.
Meanwhile, following spates of acts of vandalism against gas supply infrastructure, gas supply remains a challenge in the optimisation of the 10 thermal plants. However, the federal government and the Nigerian National Petroleum Corporation (NNPC) are working assiduously to meet this challenge.
A growing debt challenge among the players in the power sector is also of concern here. For instance, the NDPHC, which runs its operations on internally generated revenue (IGR), is being owed a whooping N36 billion for electricity supplied to the Transmission Company of Nigeria (TCN) as at the end of December 2013. Industry stakeholders say this is an issue government needs to address in order not to send the wrong signals to investors in the sector. The government, through its regulatory agencies, must ensure that a culture of debt does not gain ground in the power sector as privatisation takes root in the industry to the benefit of all Nigerians.
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