Nigeria seeks bidders for power distribution firms

On August 31st, 2010, posted in: sep10news by

By Camillus Eboh

ABUJA (Reuters) – Nigeria is seeking bidders for 11 electricity distribution firms in deals that could unlock billions of dollars of foreign investment and help end chronic power shortages, the privatisation agency said on Monday.

The Bureau for Public Enterprise (BPE) said the country’s privatisation council recently approved the search for core investors for the firms, which currently operate under the umbrella of the Power Holding Company of Nigeria (PHCN).

Nigeria is Africa’s biggest crude oil and gas producer but is plagued by chronic power shortages, leaving its 140 million people without reliable mains electricity and its businesses reliant on expensive diesel generators.

“Under the proposed privatisation strategy for distribution companies, a private sector operator will acquire controlling equity interest in any of the distribution companies with a view to rapidly improving its operational efficiency,” the BPE said.

Bidders will have to submit estimates of how much they could improve efficiency over a five-year period, it said.

Successive governments including that of President Goodluck Jonathan have made resolution of the power crisis a priority, but progress has been painfully slow, hampered partly by vested interests including generator companies and diesel distributors.

The crisis has been a major brake on growth in sub-Saharan Africa’s second-biggest economy.

Solving the problems at PHCN are key to attracting independent power producers to Nigeria.

PHCN is not regarded as a creditworthy buyer of power partly because it fails to collect its own bills efficiently from consumers and partly because it sells power at government-subsidised rather than market rates.

That means private companies wanting to build power plants in Nigeria and sell electricity to PHCN for distribution struggle to find the funding to do so, because they cannot guarantee that PHCN will have the capacity to repay them.

Solving the power problem in such a large country could yield massive returns for utility companies. Infrastructure financiers say foreign investors are ready to pump billions of dollars into the power sector if the regulatory framework can be resolved.

It could also boost the popularity of President Jonathan, who has not yet said whether he will contest polls due in less than six months’ time.

Access to electricity is one of the main demands of many ordinary Nigerians, who dub PHCN “Please Have Candle Nearby”.

Source: Reuters   Image: Reuters

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