Asian stocks to lead the way to year's end, Fed seen pulling back - Reuters Poll. Full Article
Confused while buying stocks? Get buy, sell or hold recommendations from VantageTrade. Full Coverage
Power Grid in fray for running Nigeria grid
LAGOS (Reuters) - Nigeria will hand over management of its electricity grid to a Canadian, Indian or Irish firm by year-end as it embarks on the multi-billion dollar privatisation of its dilapidated power sector, a top official said on Friday.
Bart Nnaji, head of a presidential taskforce charged with reforming Nigeria's power sector, said Manitoba Hydro, owned by the Canadian province of Manitoba, India's Power Grid Corp(PGRD.BO) and Ireland's Electricity Supply Board (ESB) were the three final bidders to manage the transmission network.
"I can tell you that we expect to finalise everything and hand over by the end of the year," Nnaji told Reuters on the sidelines of a conference in the commercial hub of Lagos.
President Goodluck Jonathan on Thursday unveiled a blueprint for ending chronic power shortages in Africa's most populous nation, which estimates its electricity sector needs $10 billion of annual investment over the next decade.
Under the strategy, Nigeria will privatise power generation and distribution. Government will continue to own the national grid but its management will be privatised.
Nnaji said Nigeria would hold a "retreat" for investors from around the world in mid-October to further explain its plans.
Despite being Africa's biggest oil and gas producer, Nigeria relies on diesel generators to power everything from phone chargers to luxury hotels because of constant power outages.
Jonathan's plan, unveiled less than five months before elections are due to be held, is the most comprehensive yet designed to solve the nation's power problems.
But previous privatisation efforts, most recently of former state telecoms monopoly NITEL, have been a failure and investors say the roadmap for reform will need to be backed up by cast-iron guarantees on the regulatory framework.
Jonathan said he would send a list of members for a new regulatory committee to the House of Representatives on Monday and pledged its chairman would be highly credible.
"The whole sector is going to be dependent largely on the strength of the regulator and the ability of the regulator to enforce the rules of the game," Solomon Asamoah, deputy head of the African Finance Corporation (AFC) which funds infrastructure projects around the continent, told the conference.
Nigeria's generation has at times plunged below 1,000 megawatts (MW), around a tenth of its basic needs, largely due to a lack of maintenance at power stations. South Africa, with a third of Nigeria's population, has ten times the capacity.
The power problem is a major brake on development in sub-Saharan Africa's biggest economy. The cost of power is estimated to be nine times higher than in China and four times higher than in Europe, leaving its industry unable to compete.
A big stumbling block in privatising the power sector in a country most of whose 140 million people survive on less than $2 a day is setting a pricing regime which keeps power affordable for the poor while allowing private firms to recoup investment.
Jonathan's blueprint foresees a "lifeline tariff" for the poorest and a rate which varies with consumption and can be pre-paid, making it more affordable for the lowest-volume users.
But financiers point out the amount of money Nigerians spend each year on private generators means a sizeable portion of the population would be ready to pay for reliable power.
The central bank says 60 million people rely on generators and spend $13 billion a year fuelling them. Nigeria accounts for 40 percent of the small generator sets imported into Africa.
"The market is so enticing ... The base is low, which means the growth potential is so high," AFC's Asamoah said.
"There is bountiful supply of fuel, of gas, and there is a population that is able and willing to pay -- the proof is that we pay so much more for self-generation. These are the ingredients that private sector investors die for."
Osaze Osifo, head of investment banking and asset management at Nigeria's First Bank, said the power blueprint opened up project finance opportunities as well as the prospect of equity and debt financing for the acquisition and refurbishment of existing generation and distribution assets.
Long-term projects have often run into trouble in Nigeria because they are financed with short-term debt. A 300 billion naira ($2.3 bln) central bank fund and pledges of long-term financing support from development agencies including the World Bank and AFC aim to prevent such problems in the power sector.
(Editing by Sue Thomas)
- Tweet this
- Share this
- Digg this