13 September 2013 – With Nigeria’s privatisation of the majority of Power Holding Company of Nigeria successor firms reaching the full payment closure, the focus turns to the second series of privatisation initiatives in the country’s electricity sector. The government of Nigeria recently announced it will privatise ten gas-fired power plants under development by the Niger Delta Power Holding Company (NDPHC).
These power plants have been developed using government funds in line with the National Integrated Power Project (NIPP) program launched in 2004 to deal with serious shortfalls in Nigeria’s electric generating capacity and leverage the country’s large natural gas reserves. After receiving over 100 expressions of interest for the NIPP power plants in July 2013, the NDPHC and the Bureau of Public Enterprises (BPE) published the list of prequalified bidders on August 19th 2013. There are between 28 and 45 prequalified bidders for each power plant, comprising a mix of Nigerian and international investors and consortia.
The privatisation of the NIPP power plants has been structured as the sale of an 80% ownership interest in each of ten generating companies, each of which is a special purpose Nigerian company formed to own and operate one of the ten NIPP power plants. The NDPHC will hold the remaining 20% interest in each of the generation companies after privatisation. All of the power plants, most of which are open-cycle but capable of conversion to combined-cycle, will be completed prior to closing of the acquisition. Once completed, the NIPP power plants will collectively add over 5,000 MW of gas-fired generating capacity to the Nigerian grid, nearly doubling the existing installed capacity.
According to the NDPHC, bidders will receive a new, commissioned power plant along with all necessary contractual structures. This will avoid the need to wait to have all contractual structures in place and avoid the risks of construction and commissioning. Each of the plants has been or is being constructed by international EPC contractors using proven technology and established OEMs.
Each of these generation companies will, in terms of a 20 year power purchase agreement, sell the electric power generated at its power plant to Nigerian Bulk Electricity Trading (NBET) company, a special purpose company formed by the government in 2010 to act as an intermediary between generation companies and the recently privatised distribution companies. The power tariff will reflect the rates set forth in the most recent multi-year tariff order (effective from June 1, 2012 until May 31, 2017). All of the NIPP power plants will be connected to the national grid.
Each generation company will procure its gas supply by means of a long-term gas supply agreement with the Gas Aggregation Company of Nigeria (GACN). GACN was formed on January 5th, 2010 and is owned by the upstream joint ventures formed between NNPC and one or more of the international oil companies operating in Nigeria. However, the generation companies will be permitted to enter into separate gas supply agreements with other gas suppliers for any additional gas needs to cover future expansion as well as to back-stop the supply obligations of the GACN. Gas transportation services will be provided by the state-owned Nigerian Gas Company.