Stable Electric Supply: BPE cuts power investors to 150

The number of investors that have indicated ‘expression of interest’ in the purchase of some companies under the Power Holding Company of Nigeria (PHCN) may have been pruned by half, by the Bureau of Public Enterprises (BPE) after a critical assessment of documents submitted by them.

About 300 companies had indicated interest in buying the power generation and distribution companies. But it was learnt that the number has been reduced to 150. Of these, about 80 companies are showing interest in the power distribution concerns, while 70 are interested in generation.

The source said ‘Requests for Purpose’ (RFP) have been sent to the 150 companies considered as successful applicants. The RFP is issued by the BPE to investors who show interest in buying any of the companies the agency wants to sell. It is in the RFP that the investors are expected to explain how they want to run the companies, if they eventually succeed in their bids.

None of the investors would be allowed to buy more than four companies, just as no one company would be allowed to buy the two power distribution companies in Lagos, investigations revealed.

According to a source close to both the Nigerian Electric Regulatory Commission (NERC) and BPE, all new power procurement would henceforth be competitive and superintended by NERC.

The BPE recently unveiled the shareholding structure for the 11 distribution companies created from the unbundling of the Power Holding Company of Nigeria (PHCN). By the structure, 70 per cent of each distribution company will be sold to core investors and the net proceeds, transferred to the Federation Account, for distribution to all tiers of government.

From the remaining 30 per cent, 10 per cent would be offered equally among all states within the jurisdiction of each distribution firm. Two per cent of the remaining 20 per cent, will be reserved for workers and the balance of 18 per cent will be sold to the general public, through Initial Public Offering (IPO) when the companies start performing well.

The divestiture strategy for the distribution companies will be primarily based on the use of quality of service/efficiency parameters, considered against investment proposals made by bidders, aimed at reducing Aggregate Technical, Commercial and Collection (ATC &C) losses over an agreed timeframe.

The strategy would be built around the Multi-Year Tariff Order (MYTO). While the merits of the strategy include emphasis on technical, financial and managerial competence of operators, a development which analysts say has the shortest curve for reducing subsidies, guarantees and section payment delinquency.

Meanwhile, Abdulkadir Shettima, deputy general manager, marketing and competition in the NERC, said the expected tariff which would come on stream in January 2012, would be a reflective tariff and based on 5,750 megawatts per day generation.

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