The introduction of competition into electricity systems, variously referred to as ‘liberalization’ or deregulation’, (although, these terms are sometimes misused) became the predominant trend in the developed world and progressively more in the developing markets in the period commencing from about the year 1990. In fact, several international organizations, including the International Energy Agency, have encouraged countries to increase the extent to which both electricity generation and supply are open to market forces.
The Federal Republic of Nigeria was one of the countries that took heed and began a reform program, beginning from the late 1990s. To show serious intent, the Federal Government of Nigeria (the “FGN”) hired a South African consulting firm, NERA together with Anil Kapoor and Trevor Byer of the World Bank, (See Mallam El Rufai’s book, The Accidental Public Servant (2013) at page 98) to work with the Bureau of Public Enterprises (BPE).
The journey which had commenced in the late 1990s, led to the approval of the National Electric Power Policy by the Federal Executive Council of Nigeria (in 2000/2001). The said journey then climaxed, on Thursday 21 February 2013, with the execution of the transaction documentation for private sector investments in the power generation and distribution companies spun-off of the (now de-established) Power Holding Company of Nigeria (PHCN). The PHCN was the initial holding company established pursuant to the Electric Power Sector Reform Act No. 6 of 2005 (“Power Reform Act”), to assume the assets and liabilities of the defunct National Electric Power Authority (NEPA).
These private sector investors, however, were those approved by the National Council on Privatization (NCP), as the preferred bidders (now prospective core investors or concessionaires) for the above mentioned power generation and distribution companies. This week we begin a series on what roles the government, preferred bidders (now, prospective core investors and or concessionaires), members of organized labour and other Nigerians generally need to play for the privatization along value chain of the electric power sector to yield the expected results.
A Summary of the Journey So Far
Between December 2010 and March 2011, the Bureau of Public Enterprise (BPE) made requests for expressions of interests and organized a number of road shows. The BPE received a number of expressions of interests (EOIs) and shortlisted a number of firms that had met the minimum qualification standards that were set. Amongst those shortlisted as meeting the minimum qualification standards, a number of those companies and alliances (incorporated and unincorporated companies) purchased bid documents and also signed confidentiality agreements in order to forge ahead with the process.
Many of those companies conducted technical, legal and commercial due diligence exercises on the generation and distribution companies, visited the virtual data room, conducted physical data room visits and also conducted site visits. There was a 2-day Transaction and Industry conference in the Federal Capital Territory in November 2011 where papers were presented on various issues related to the electric power industry in Nigeria.
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