INVESTORS TAKE OVER PHCN ASSETS

With the physical handover of the 14 PHCN companies to their new owners, the power sector reforms have reached a tipping point as the sector effectively crosses the threshold of government monopoly to one dominated by the private sector.

On September 30, 2013, government did a shadow handover of the assets to the core investors as it presented certificates of ownership to buyers of the PHCN generating companies (Gencos) and distribution companies (Discos).

The acquisition of the companies, which was recently concluded with the payment of the 75 percent balance of the bid prices on August 21, had gulped over $2.5 billion from the investors.

“It is a historic day for Nigeria as the private investors takes over the assets. It is probably the most important step in the privatisation process,” said Solomon Adegbie-Quaynor, country manager, International Finance Corporation (IFC).

He added that the next thing for the investors would be to take stock of the assets and prepare a good business plan, and then financiers will be willing to provide further financing. He however added that Nigerians should exercise some patience with the investors.

“We at IFC are committed to supporting the power privatisation and we will engage with the private and public sector stakeholders to make sure that the environment can support further investment.”

Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo, said with the taking over by the private sector of the formerly government owned electric power generation and distribution companies, efficiency should greatly increase as the tariff structure is such that it promotes efficiency. He added that the more efficiently a company along the electricity value chain runs, the more profitable it is likely to be.

“It is great to be a part of the new vista that is opening in the electric power sector. I had always firmly believed that the current administration would achieve this feat provided the political will was in place. My belief was premised on the fact that the structure adopted for the privatisation of the PHCN successor companies and the reforms in the electric power sector have been successfully adopted in several other countries of the world prior to this time.”

According to him, no private sector generation or distribution company would accept the old order where equipment such as transformers would be in disuse for several months without repair because that would affect profitability as meters won’t run where there is no electricity and then distribution companies may not receive payments for electricity which did not flow (save for the fixed monthly fee).

“This has the potential of being the beginning of a new era of regular power supply for Nigeria, but we still have to wait,” said Oladiran Ajayi, energy expert and a senior associate with Templars law firm.

He stated that as the investors meet the obligations imposed on them by NERC in terms of generation and distribution, it would open up a new vista of electricity supply in Nigeria. “As the investors begin to make profits to meet their financial obligations, they will have strong incentives to provide better services.”