There are indications that the Federal Government is set to begin fresh negotiations with preferred bidders for three power generation plants of the National Independent Power Projects, NIPPs, that have been slated for sale.
The affected power plants in the first phase are the 630.5 megawatt (MW)-capacity Calabar power station, 504MW-capacity plant in Geregu, Kogi State, and the 518MW-capacity plant in Omotosho, Ondo State.
The preferred bidders are EMA Consortium, which initially won the NIPP Calabar Genco at $625 million, Omotosho Electric Power, which won Omotosho Genco at $659.9 million, and Seoul Electric Power Ltd that won that of Geregu Genco at $690.2 million.
The three Gencos are currently under the management of the Niger Delta Power Holding Company Limited.
Sources quoted by THISDAY revealed that that in the resumed negotiations, factors such as sources of funds to finance the acquisition, operational statuses of the three plants and the financial liquidity challenge of Nigeria’s power market would be key priorities to both government and the investors.
Ten Gencos under the Niger Delta Power Holding Company were initially slated for sale in 2014 but government jettisoned the idea over liquidity among other concerns and settled for phased sale.
One of the sources revealed that government was worried about the sources of finance for the exercise considering that the transaction is structured to be funded by 30 per cent debt and 70 per cent equity.
The source also noted that government considered that Nigerian banks may have been over-exposed and may not be able to provide the debt portion of the financing, hence, its consideration of measures to allow for unhindered offshore financing.
Government is also said to have taken into consideration the operational statuses of the Gencos, and as such their initial prices would no longer be applied in the transaction.
According to the source, of all the challenges before the negotiating team which comprises of the Bureau of Public Enterprises (BPE); Nigerian Electricity Regulatory Commission (NERC); and Nigerian Bulk Electricity Trading (NBET) Plc, among others, the gas supply challenges was the least because the government has considered it could be resolved with less efforts.
“We have been in negotiation for quite some time now, and this has protracted due to the sector’s problems. When we are getting close to conclusion, some new issues will crop up and we will go back to the drawing table, but we are getting close to resolution of the problems.
“The negotiation is with preferred bidders that are in existence. The BPE, I am told will exhaust its processes, and if the preferred bidders walk away, we will revert to the reserve bidders, and if they also walk away, we will go back to the market.
“The price they initially bid may not be considered. The NIPPs acquisition are supposed to be financed through 30 per cent equity and 70 per cent debt, now the debt part is still being considered, in that how do they incur debt in a situation where there are illiquidity.
“And, you know the Nigerian banks are so to speak do not have funds for this, it is like they are exhausted or saturated and the chances are that the finance is likely to come from offshore and the requirement for such could be a little bit more stringent. So, we are looking at how to circumvent the problems.”
The source also explained that left for the team in the transaction exercise, they would have finished the process before the 2019 elections.
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