BPE, NDPHC move to conclude sale of Geregu, Omotosho, Calabar NIPPs

The Bureau of Public Enterprises (BPE) and the Niger Delta Power Holding Company (NDPHC) has begun moves to conclude the sale of three out of 10 power plants under the National Integrated Power Projects (NIPP), in the first phase of its power privatisation programme.
According to documents seen by BusinessDay, the two agencies propose a revised transaction structure for the three power plants namely Geregu, Omotosho and Calabar, which would involve engaging with the preferred bidders and a revision of the Share Sale Agreement (SSA).
This is to ensure that the transaction structure proposed in the memo addressed to Vice President, Yemi Osinbajo who is the chairman of the National Council on Privatisation and commercialisation (NCPC) in respect of the plants is addressed adequately.
Following the revision and requisite approval of the council, the SSA will be executed between relevant parties.  While the SAA remains the key document guiding the sales of the assets, 30 per cent of the sale value representing “initial payment” will be triggered after:
“Execution of Gas Supply Agreement (GSA) and confirmation of adequate supply of gas within a specific period of time, execution of functional Power Purchase Agreement (PPA) tied to the PPA currently in place with NDPHC that would be acceptable to the parties and any other agreement required by Nigerian law to operate the plants.”
Also considered as part of the things that would trigger the initial payment of 30 per cent are the execution of a put and call option Agreement (PCOA) containing provisions of reimbursement in case of undue termination, execution of an Escrow Agreement (EA), agreement on the outline of methodology for the valuation of the power plants and execution of Shareholders Agreement (SA) in case less than 100 percent (i.e. 80%) of shares are sold.”
The agencies said once the GSA, PPA, PCOA, EA and SA, (if required) are executed, the preferred bidders will be required to make the initial payment to an escrow account. The Initial payment will be 30 per cent of the bid price or the prorated increased amount in case of 100 per cent share purchase.
The total price tag placed on the three plants is about $2.715 billion. A further breakdown of the price indicates that Omotosho 2, 450megawatts is to be sold for $939.4 million, Geregu Power plant 2 with an installed capacity of 434 megawatts, $572.7 million and Calabar Power Plant, 561megawatts for $889.9 million.
The BPE and the NDPHC had written the 6 page document with reference number BPE/ED/VPO/260 and dated July 2, 2018 addressed to the vice president, Prof Yemi Osinbajo to apprise him of various efforts that they have made so far towards privatising the three power plants.

The revised transaction structure proposes that within a month of the initial 30 percent payment by preferred bidders, a valuation will be carried out by the joint team of the Seller and the Buyer and an independent engineer, following which the amount held under the escrow account will be released to the Seller and the Buyer will receive the share allocation.
“The initial share allocation to the Buyer will be based on the adjusted value of the generation company vis-à-vis the initial payment made by the Buyer. The Seller will also ensure that the Buyer has control to be able to run the company effectively following handover, with NDPHC having representatives in the management until full completion is achieved,” the document said.
The revised structure anticipates that within a week of the release of the amount from the escrow account to the Seller, the seller will hand over the power plants to the Buyer to ensure avoidance of further depreciation of the plants prior to completion of the sale.
“It is anticipated that by the handover date, adequate gas will be made for the operation of the plant.”
The preferred bidders are however expected to pay the balance of the agreed amount within 12 months.
The memo was jointly signed by Chiedu Ugbo Managing Director of the NDPHC and Alex Okoh, Director General of the BPE.
Reacting to enquiries from BusinessDay on the current situation of things with the transaction, Ugbo, MD of the NDPHC said: “The privatisation negotiation is still ongoing due to the current liquidity challenges in the electricity market in Nigeria.”
He said BusinessDay should be rest assured that neither BPE nor NDPHC is helping any preferred bidder.
“We are working according to the terms of the transaction as originally conceived. The bidders are the same bidders who emerged through the competitive process which culminated in the financial bid opening in 2013. No preferred bidder has been changed or substituted,” he said.
The NDPHC boss said the gas supply agreement GSA challenges are being resolved, adding that it is the power plants with less challenges in terms of GSA and completion that are being discussed with the preferred bidders.”
“The remaining 7 will follow as soon as we are able to achieve closing of the 3,” he said.
BusinessDay efforts to get the reaction of the BPE was not successful as telephone calls, texts and email sent were not responded to by the officials.

OLUSOLA BELLO