Govs demand refund from $10bn NIPP investments
CHIGOZIE AMADI
State governors have called for the refund of state governments’ full equity investments in the $10bn National Integrated Power Projects that are under the management of the Niger Delta Power Holding Company.
In addition to this, the governors under their umbrella body-Nigeria Governors’ Forum-said the Federal Government should refund an equitable rate of return on their investments in the power plants.
They made the demands in the document titled, ‘Development of the National Integrated Electricity Policy and Strategic Implementation Plan Policy Recommendations by State Governments,’ which was submitted to the Federal Ministry of Power.
The Federal Ministry of Power confirmed receipt of the document when contacted by our correspondent on Wednesday, but was silent on the demands made by the NGF.“The investments by states in the NDPHC need to be clearly defined. States advocate for a refund by the Federal Government of the states’ full equity investments in the NIPPs plus an equitable rate of return on their investment.
“The refund of states’ investments in the NIPPs is without prejudice to the ability of the Federal Government to privatise or sell the NIPPs,” the governors stated.
State governments have now been empowered under the Electricity Act 2023 to operate and regulate their own electricity markets outside the control of the Nigerian Electricity Regulatory Commission, an agency of the Federal Government.
NIPPs refer to a government-led initiative launched in 2004 to improve Nigeria’s electricity generation capacity. The NIPPs involved the construction of several gas-powered plants across the country. The goal was to address the nation’s long-standing power shortages.
NIPPs are owned by the federal, state, and Local Governments through the Niger Delta Power Holding Company. The NDPHC is a limited liability company specifically created to manage NIPP assets.
There are currently 10 operational NIPP plants across Nigeria. However, there are plans to build more. There have been discussions and plans for the privatisation of some NIPP plants. In December 2022, the Federal Government and states agreed to sell five NIPP plants to raise funds.
$10bn spent on NIPPs
The exact final amount invested in the National Integrated Power Projects may be difficult to pinpoint. However, sources point to an initial commitment of around $2.5bn as a seed fund, and the project involved further investments throughout its development.
The project was initially envisioned with a total outlay of $9bn, but the Socio – Economic Rights And Accountability Project, a non-governmental organisation, said about $10bn was spent on the projects.
“The Obasanjo’s administration spent $10bn on NIPP with no results in terms of increase in power generation. $13.278,937,409.94 was expended on the power sector in eight years while unfunded commitments amounted to $12bn,” the NGO had stated in a statement in August.
Awaiting FMoP’s reaction
When told what the states were demanding, the media aide to the Minister of Power, Bolaji Tunji, said the Federal Ministry of Power received the document from the NGF.
He promised to revert with respect to the demand by the governors.
However, he had yet to revert till when this report was filed.
Ex-NERC chair reacts
Commenting on the development when contacted, the former Chairman, Nigerian Electricity Regulatory Commission, Dr Sam Amadi, said since the assets are still owned by the three tiers of government, the states can continue to have their equities in the plants.
He, however, noted that the state governments might call for a refund had it been the assets had been fully taken over by the Federal Government.
He said, “I’ll respond to this in two ways. First, the investments in NIPPs are supposed to be for the three tiers of government, federal, states and Local Governments, although, of course, the states control the Local Governments. So is it that they want a refund of their equity investments because the Federal Government has taken over everything to itself?
“If the Federal Government is treating it as a federal concern, now because of the fact that the states are now developing their own electricity markets, it does not mean that there is business failure with the NIPPs. The states can still be equity owners in the plant, receiving returns and getting people to be on the board.”
He added, “And even though we have sub-national power markets, the NIPPs can sell power to all the markets. So from a contractual perspective, there is no failure of contract, because it is still owned by the three tiers of government.
“Therefore, the fact that states now have the right to have their own power generation, transmission, and distribution companies do not mean that the NIPs can’t be owned by the three tiers of government. Ownership can be managed beyond jurisdictions, which means that Imo State, for instance, can create power plants and still be an owner of the NIPPs.”
The former NERC boss, however, said if the Federal Government had completely taken over the NIPPs, then the states might have reasons to call for a refund of their investments in the assets.
“But if it is that the Federal Government is running the NIPPs without recourse to the states, and nationalising a federal entity, then they (states) have a right to say we are all owners, so take us out, pay us and take over the place,” Amadi explained.
He added, “So the two key points are: 1. The expected change in the electricity sector should not affect the management and ownership of the NIPPs, because these are plants that provide services. States can use the services, make resources from these services and share the resources.
“But they can also liquidate it by saying we want to pull out. A shareholder has the right to pull out of the market but this has legal implications that must be met too, and remember my earlier explanation as to if the Federal Government is taking full ownership of the plants.”
Governors’ demand
Meanwhile, the governors pointed out that it must be noted that there was no determination of the value of states’ assets in successor power distribution companies prior to privatisation.
“In addition, existing edicts establishing state Rural Electrification Boards did not cede or transfer the assets created by a state REB to either NEPA (National Electric Power Authority) or the Federal Government. The EPSRA (Electric Power Sector Reform Act) 2005 did not repeal or invalidate the REB edicts, thus REBs still legally own the Disco assets built by REBs.
“Consequently, there is a need to do a comprehensive pre- and post-privatisation assessment of states’ investments in the assets of successor Discos,” the stated.
They further argued that based on NERC valuation carried out in 2018, states and the Federal Capital Territory have greater equity than the Federal Government in the 40 per cent government shareholding in successor DisCos.
“Despite having greater equity holding in successor Discos, states have no representations on the boards of Discos. States recommend that they should have at least one representative on successor Discos’ boards, while the Federal
Government also maintains its single board membership.
“This collaborative approach ensures that states have a vested interest in the efficient functioning and success of Discos, fostering a more inclusive and participatory decision-making process within the state electricity market,” they stated.
They also noted that direct representation of states on the boards of Discos would enable states optimise their equity investments in Discos and foster greater collaboration between the states and DisCos.
“The Federal Government should take steps to formally recognise the shareholding of states in Discos by way of federal gazette and formal notification to states by the National Council on Privatisation,” the governors stated.
They went ahead to declare that “states are equally concerned with the takeover and subsequent management of the entire 40 per cent government shares in successor Discos by the MOFI Ltd (Ministry of Finance Incorporated), under the directive of the Minister of Finance, without due consultations with states.”
The state governors recommended that the Federal Government should handover its residual equity interest in Discos to any entity it so wishes to, while allowing states to have full equity rights in Discos without attempting to manage a state equity either directly or through any of entities.
Five NIPPs sale
In January this year, The PUNCH exclusively reported that the Federal Government through the Bureau of Public Enterprises was carrying out transactions for the sale of five power plants under the National Integrated Power Projects at a cost of about $1.15bn.
Although sources familiar with the development explained that the cost of the plants should exceed $5bn based on international benchmark, they revealed that the BPE was planning to sell the facilities at a price that is a little above $1.1bn, according to the report.
The acting Director-General, BPE, Ignatius Ayewoh, had confirmed to our correspondent in a brief telephone conversation that “the transaction is ongoing,” adding that “it is not concluded.”
The BPE boss did not disclose the cost for the five plants, as he quickly stated that he was in a meeting and would not be able to give additional details as at the time the report was filed in January.
However, impeccable sources at the bureau named the five power plants to include the 434 megawatts gas-fired Geregu II power plant, located in Kogi; 451MW Omotosho II plant in Ondo; and 750MW Olorunshogo II plant in Ogun State.
Others include the 563MW Odukpami power plant in Calabar, Cross River State; and the 451MW Benin-Ihovbor plant in Edo State.
It was gathered at the time that the Omotosho plant, which has four power generating turbines, would be sold at about $85m; while the Olorunsogo NIPP with also four turbines would cost $170m.
he Benin-Ihovbor plant with five power generating turbines would go for $420m; Calabar Odukpami plant with five turbines would be sold at about $260m; while the Geregu plant with four turbines would go $215m.
“These are Siemens turbines and each of the turbine can generate about 115MW of electricity,” one of the sources, who pleaded not to be named due to lack of authorisation, stated at the time.
The official went ahead to explain that it would cost about $1m to construct a plant that could generate 1MW of electricity, stressing that if the five NIPP plants were valued on this basis, they would cost more than $5bn.
It was, however, gathered that the cost of constructing 1MW power plant vary depending on several factors, including type of power plant, location, technological advancements, etc.
“But a general range for the cost of constructing a 1MW power plant based on different technologies is that for a solar power plant, it is between $1m and $2m per MW.
“For wind power plant, it is between $1.5m to $2.5m per MW. For natural gas-fired power plant, such as the NIPPs, it is between $1m to $2m per MW, while for coal power plants, it is between $2m and $3m per MW,” another source in the sector explained at the time.
In December 2022, The PUNCH reported that the Federal Government and the 36 state governors finally agreed to sell five power plants under the National Integrated Power Projects and use the proceeds to fund the 2023 budget.
Parties in the deal reached the agreement in December after over two years of disputes and legal tussle as regards the sale of the NIPP plants being managed by the Niger Delta Power Holding Company.
The NDPHC, owned by the federal, state, and local government councils, is a power generation and distribution company that oversees the implementation of the NIPPs.
The former Director-General, Bureau of Public Enterprises, Alex Okoh, had disclosed the agreement between the Federal Government and the states as regards the NIPP plants to journalists in Abuja during an interview. The disclosure was, however, opposed by various groups.
There have been discussions and plans for the sale of the NIPPs by the Bureau of Public Enterprises for several years, with the specific details and target sale amount evolving over time.
In April 2021, the National Council on Privatisation approved the sale of five NIPPs through a fast-track strategy. The estimated value of these five plants was not publicly disclosed at the time.
In March 2022, the Nigerian National Petroleum Corporation expressed interest in acquiring some NIPPs, indicating continued progress with the sale.
In December 2022, the former BPE boss, Okoh, confirmed an agreement between the Federal Government and states for the sale of five NIPPs.
He projected the sale to generate over N260bn (around $600m). However, some many sources and CSOs expressed concerns that this amount wouldn’t significantly impact the rising budget deficits at the time.
As January, and going by what the acting DG of the BPE stated at the time, the sale of the NIPPs had not been finalised. The Niger Delta Power Holding Company, which manages the NIPPs, has also not confirmed its sale.
Meanwhile, it should be stated that while there is no official confirmation on the cost of the NIPPs, some sources speculate that the initial estimates for individual NIPPs could have ranged from $300m to $500m.
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