The Omotosho Power Plant will now be owned by the China Corporation.
The Bureau of Public Enterprises, BPE, on Wednesday issued an offer letter to the consortium of China National Machinery and Equipment Import and Export Corporation, CMEC and Pacific Corporation, CMEC-Pacific, for a Power Purchase Agreement, PPA, for the sale of Omotosho power plant.
Presenting the offer letter to the Chairman of CMEC-Pacific, Adeleke Adedeji, the acting Director General of the BPE, Benjamin Dikki, said the sale, which is through a debt-equity swap process, was in pursuit of the approval by the National Council on Privatisation, NCP, during its February 28, 2013 meeting.
According to a statement by the BPE spokesperson Joes Anichebe, the NCP had approved that CMEC-Pacific pays $217,531,507.79 (N34.1 billion) for the power plant, though the net sum accruable to the Federal Government from the sale would be $ 82,336,179.42 (N12.93 billion), given that $30,325,386 (N4.76 billion) would be deducted from the capital cost for the construction of a switch yard for the Transmission Company of Nigeria, TCN. The BPE did not explain why the net sum accruable to the government ( even when added to the deduction for a switch yard) was over $100 million less than the selling price of the plant.
Phase 1 of the Omotosho power plant, with a capacity to generate about 335 megawatts, MW, of electricity was constructed in 2002 at the total cost of $166,724,578 (N26.176billion) under the turnkey contract arrangement.
The Federal Government provided 35 per cent funding for the total cost of the project, while the balance of 65 per cent was financed through vendor financing provided by China National Machinery and Equipment Import and Export Corporation, CMEC, at the interest rate of 6 per cent per annum.
It was initially conceived that the power project, after completion, would operate commercially and the proceeds from the sale of electricity used for the repayment of the vendor financing and the interest payment.
But, following the delay in the completion of the project, coupled with limitation in gas supply as well as paucity of funds at Power Holding Company of Nigeria, PHCN, the Federal Government defaulted in the payment of the debt leading to the accumulation of unpaid invoices to CMEC.
The Debt Management Office, DMO stepped in to take responsibility by paying approximately $104,267,966.22 (N16.370billion) to CMEC for the plant as at September 30, 2012.
Based on the recommendation of the Federal Ministry of Power, President Goodluck Jonathan on July 18, 2010 approved the proposal for the divestiture of the Federal Government’s investment in the plant, through a debt-equity swap deal approved by the NCP on May12, 2011.
The proposal would see a transfer of asset to the project company, Omotosho Power Plc, incorporated on November 10, 2006, as a vehicle to own the asset of the plant.