Tuesday 1 October 2013

FG to earn N1.33trn from power assets – NCP

The National Council on Privatisation, NCP,
has disclosed that the Federal
Government will earn about $8.3 billion
(N1.328 trillion) from the sale of the
unbundled power generation and
distribution companies of the Power Holding Company of Nigeria, PHCN. Part of the money will also be derived
from the sale of the 10 new power plants
being built by the Niger Delta Power
Holding Company Limited, NDPHC. The Chairman, Technical Committee of
the NCP, Mr. Atedo Peterside, disclosed
this at a special forum on, “Financing the
Power Sector Reforms for Economic
Development,” organised by the Bankers’
Committee in Abuja. He also disclosed that the new owners of
the PHCN assets are expected to invest
about N300 billion in Nigeria for the
provision of 6.52 million electricity meters
and other capital expenditures. He said, “For the Discos, some very
significant investments will also be
required to improve efficiencies and
reduce Aggregate, Technical Commercial
and Collection Losses. Based on the
proposals submitted by the core investors, new meters will be installed
over the course of the next five years as
follows:- “At an estimated weighted average cost
(purchase and installation) of N25, 000 per
meter, this amounts to over N150bn. “The
bulk of this should be recoverable from
the consumer, but then the distribution
infrastructure also needs to be modernised and expanded to achieve
greater coverage. The 11 Discos are
projecting annual capital expenditures in
the region of N60 billion per annum for
each of the next five years.” According to Peterside, a grand total of
approximately $3.3bn (N528 billion) should
accrue to the Federal Government’s
coffers from the PHCN Genco and Disco
transactions. He further stated that at a crude estimate
of $1.2 million per mega watt, the sale of
the Federal Government’s 80 per cent
equity stake to core investors will raise
close to $5 billion (N800 billion),
expressing optimism that about 70 per cent of the amount will be financed in
2014 largely through debt/loan
instruments provided by Nigerian banks. Peterside disclosed that the new owners
of the power generating and distribution
companies will need to make investments
of about $4.28 billion (N684.8 billion) to
boost the country’s power supply by an
additional 4,284.4 mega watts. “The nine PHCN Gencos, including
Omotosho and Olorunsogo, only had
available capacity of 2,692 MW as at 10th
Sept. 2013, as against a total installed
capacity of 6,976.40 MW. “Financing the necessary capital
expenditure (capex) to fund this
incremental 4,284.4 MW that is required
to achieve full capacity, crudely estimated
at $1m per MW approximately, will cost an
additional $4.28bn.” he said. He conceded that there are still some
unfinished businesses in the privatisation
of the assets of the PHCN, calling for
concerted efforts to ensure the success
of the exercise. He said, “I must emphasis that there is still
some “unfinished business” with the
privatisation of the Power Holding
Company of Nigeria (PHCN) Successor
Companies and so, like accomplished
sportsmen, I believe we must stay focused and not take our eyes off the ball
until the game is truly over. “However, it is pertinent to remember
that this is really the beginning of a
journey and not the end of a journey as
some have mistaken it to be. As we all
know, the purpose of privatising the
Discos and Gencos was not just to transfer ownership of the assets. The primary purpose was to bring into play new owners with deep pockets who could
finance and/or access financing for the rapid restoration of lost capacity and/or add significant new capacity to make up for decades of Government neglect and mismanagement.” Continuing, Peterside said, “In my opinion,
FGN should also continue to offer a safety net by subsidising the tariffs for the poorest consumers, that is, the R1 and R2
customers.

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