NIGERIA: BPE Gives KEPCO Payment Terms for Egbin’s Acquisition

BOLA ONAGURUWAThe Bureau of Public Enterprise (BPE) Tuesday said all obstacles standing in the way of the privatisation of Egbin Power Plant had now been resolved.

It said an offer letter had been transmitted to KEPCO Energy Resources in respect of the Supplemental Share Purchases Agreement (SPA) for the 70 per cent sale of the federal government’s shares worth $407.3 million in the plant.

Issues bothering on labour benefits, non-delivery of Power Purchase Agreement and take-off price as well as non-execution of a Gas Supply Agreement had hindered the smooth privatisation of the plant.
However, in a letter conveying the National Council on Privatisation (NCP)’s approval to KEPCO, the Acting Director-General of BPE, Mr. Benjamin Ezra Dikki, said KEPCO was expected to pay 25 per cent of the money within 15 working days on receipt of the offer letter and the balance of 75 per cent within 90 working days.

The NCP had asked KEPCO to pay 51 per cent of the plant’s shares at the 2007 valuation of $549.01 million and further pay for additional 19 per cent of the shares at the current valuation of $670 million.
The BPE, in a statement stated: “In the approval, council directed that the BPE reserves 10 per cent of the reminder of 30 per cent (which is three per cent) for the workers and the remaining 90 per cent of the 30 per cent shares (which is 27 per cent) to be sold to the Nigerian people through Initial Public Offer (IPO) at a later date.”

The privatisation of the power company was earlier concluded with KEPCO Energy Resources in May 2007 for the sale of 51 per cent stake in the plant at a price of $280 million.
An initial 10 per cent of the bid price in the sum of $28 million was received at the time and an escrow agreement was entered into by committing the payment of a further 50 per cent ($140 million), of the purchase price within 90 days after the conclusion of due diligence by the investor in accordance with the terms of the sale.

But, since the initial payment of the 10 per cent, the transaction could not be concluded due to energy, labour and power purchase and related issues.

However, with the establishment of clear institutional framework by the present administration for the power sector as witnessed by the operational take off of the Bulk Trader, Nigerian Electricity Liabilities Management Company (NELMCO), and the Gas Aggregator, a major progress is said to have been made towards addressing all the obstacles that had hindered the transaction.

Consequently, the NCP in March 2012 approved the engagement of CPCS Consortium to serve as the transaction advisers in order to revalue the plant and conclude the transaction with KEPCO Energy Resources.

The CPCS submitted a technical report which stated that the plant was inaugurated on May 11, 1985 with a total installed capacity of 1320 MW.
It was gathered that, given the need to generate sufficient revenues to enable government address the large labour liabilities due to PHCN worker, CPCS recommended that 70 per cent of the Company’s shares be sold to the core investor instead of the earlier 51 per cent.

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