Nigerian government approves sale of 11 power distribution firms

• 14 years ago (2010-08-24)
• David Flin

Africa 320

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The Nigerian government has announced the approval of steps for the sale of 11 power firms, in a bid to solve the power supply situation. The firms will emerge from the Power Holding Company of Nigeria (PHCN). This comes as the government expressed concern over the high aggregate technical, commercial and collection losses suffered.

At present, the distribution companies are hampered by very high technical losses from transmission and distribution systems in need of upgrading, and difficulty in collecting revenue from debtor consumers, including government institutions. As a result, the National Council on Privatisation (NCP) emphasised that prospective bidders will need to demonstrate the capability of curbing these losses.

NCP said that the selection of bidders would be on the basis of efficiency improvement – the reduction of Aggregate Technical, Commercial and Collection (ATCC) losses that would be achieved over a five-year period – and yielding the highest net present value in terms of consequential benefits.

Mohammed Sambo, Vice President of the NCP, said that the current ATCC losses of 40-50 per cent was not sustainable. Under the proposed strategy, private sector operators will be free to acquire controlling equity interest in any of the distribution companies with a view to rapidly improving its operational efficiency, and bidders will be allowed to bid on the basis of a trajectory of technical, commercial and collection loss improvements, unlike the traditional transaction approach where bidders bid only on price for the equity shares.

The proposed method would be built around the Multi Year Tariff Order (MYTO) issued by the Nigerian Electricity Regulatory Commission (NERC), which establishes the commercial and economic indices and the financial model for the entire electricity industry.

In addition to approving a minority equity interest for state governments interested in participating in the privatisation of the distribution companies, NCP also approved the privatisation strategy for some of the generation companies and their assets. They include the sale of PHCN non-operational assets located at Ijora, Calabar, and Oji River plants, along with the sale of Sapele Power, Afam Power, Ughelli Power, Kainji Hydro Power and Shiroro Hydro Power.