Nigeria lays out plans to privatise 10 power plants

from Reuters..

June 3, 2013, By Joe Brock

* Ten state power plants to be sold in 2014 – adviser

* Electricity shortages are huge brake on economy

ABUJA, June 3 (Reuters) – Nigeria will privatise 10 more state power plants by mid-2014, advisers to the government said on Monday, as part of plans to overhaul the country’s feeble electricity sector.

President Goodluck Jonathan pledged nearly three years ago to privatise the bulk of Nigeria’s electricity sector, in an effort to end chronic power shortages that are the biggest brake on growth in Africa’s second largesteconomy.

Although Jonathan’s roadmap is more than a year behind schedule, the government accepted deposits in April for 10 generation and five distribution companies that were created by unbundling the defunct state electricity firm.

Private firms will take control of these companies by the end of this year, the government says. The sell-off of the state power firm is expected to raise around $2.5 billion.

Nigeria now plans to sell 10 more power plants, all of them gas fired. Private investors must submit their interest in buying the plants on July 19 and preferred bidders will be announced in January next year, before handing over the power plants, advisers on the transaction CPCS told Reuters.

“We expect all the plants to be commissioned before June next year when private bidders should take over,” Arif Mohiuddin, a partner at CPCS said.

The 10 plants will have combined electricity generation output of 5,000 megawatts, Mohiuddin said, which would double Nigeria’s current capacity.

These power plants make up the National Integrated Power Project (NIPP), a plan set up in 2004 by then President Olusegun Obasanjo as a ‘fast-track’ solution to electricity shortages.

The fact that only six of these plants have been completed, nine years after the NIPP was formed, is a sign of how slowly electricity reforms are moving, industry experts say.

Nigeria has so far spent $15-$20 billion on the mismanaged NIPP, industry experts say. It is unlikely the sale of the plants will come close to recouping these funds, which could prompt wrangling between disgruntled politicians.

Mohiuddin declined to give valuations for NIPP plants.

A lack of investment in the transmission network, which remains in public hands, poor gas supply and labour disputes threaten to delay progress in boosting power output further.

Despite being the continent’s top oil producer and holding the world’s ninth largest gas reserves, Nigeria’s power output is a tenth of South Africa’s for a population three times the size. Sorting it out could seal Jonathan’s legacy.

It would also cut business costs by up to 40 percent, add 3 percent to GDP and ease mass unemployment that fuels unrest seen in rampant oil theft in the south and a bloody Islamist insurgency in the north, economists say.

Though government plans to boost power output tenfold by 2020 will not come close to being met, a significant improvement could be felt in 2-3 years, industry experts say.

($1 = 158.2000 Nigerian naira) (Editing by Tim Cocks and James Jukwey)

Link to the article: http://www.reuters.com/article/2013/06/03/nigeria-electricity-privatisation-idUSL5N0EF27H20130603

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