Nigerian President Hands Over Power Companies to Buyers

Nigerian President Goodluck Jonathan handed control 14 former state-owned power companies to new owners including Siemens AG, Korea Electric Power Corp. and Transnational Corp., marking the start of a market-driven electricity industry in the West African nation.

Share certificates and licenses were given to investors and companies that had completed payments for stakes in power utilities offered for sale. Investors paid more than $2.5 billion for 60 percent interest in the companies, the Abuja-based Bureau of Public Enterprises, the privatization agency, said today.

“Today’s ceremony is indeed a major step forward in our concerted efforts to ensure efficiency, competitiveness and best best practices in the country’s electricity sector,” Jonathan said at the transfer ceremony in Abuja, the capital. “We do not expect the sector to be revitalized overnight, but we can all look forward to a better time very soon.”

Blackouts are a daily occurrence in Nigeria, Africa’s most populous country with more than 160 million people. Electricity demand is almost double the supply of about 4,000 megawatts. The government sold majority stakes in the former state-owned monopoly, Power Holding Co. of Nigeria, to private investors that acquired as much as 60 percent holdings in the power-generation and distribution companies spun out of the former utility.

Tax Break

The government requires the new owners to add 5,000 megawatts to the national grid in five years. Incentives provided include a five-year tax break, a partial-risk guarantee backed by the World Bank, and a new electricity pricing system that allows for a progressive increase in tariffs. State-owned Nigeria Bulk Electricity Trading Co. was created and capitalized with more than $750 million to serve as a clearing house between power producers and distributors.

“The key thing is the exit of the government from the provision of electricity services; government’s monopoly is inefficient,” Ayo Teriba, chief executive officer of Economic Associates Ltd., a Lagos-based consultancy, said by phone today. “When you leave private investors to run the power sector without interference, demand will meet supply.”

Nigeria plans to boost electricity output to 20,000 megawatts by 2016, and with the impetus from private investors reach 40,000 megawatts by 2020. The country will spend about $5 billion in the next five years to improve its transmission grid, according to the Power Minister Chinedu Nebo.

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