THE recent shut-down of the Egbin Power Station has drawn attention to the stalled sale of the plant and the ambivalence of the government towards its own privatisation programme that dismays local and international investors. For several days, the darkness enveloping the country as a result of power shortages deepened when equipment failure shut down the 1,320-megawatt capacity plant.According to the Chief Executive Officer of Egbin Power Plc, Mike Uzoigwe, the malfunction caused the loss of the 1,080MW that the plant had been supplying to the national power grid. With national power supply averaging 3,400MW, far short of the 10,000MW demand and the 5,000MW target by December 2011, the impact of the loss, though lasting only a few days, was serious. Apart from the power shortages, the government bore the financial burden of restoring the damaged portion of Egbin. This need not have been so since the plant was to have been handed over to KERL as part of the privatisation plan under which the consortium would own 51 per cent of the plant and run it.The failure to consummate the arrangement arises from the governments notorious penchant for policy flip-flop, lack of commitment to divestment and corruption. Minister of Power, Prof. Barth Nnaji, announced in August that the Federal Government had suspended the proposed sale of Egbin power plant to KERL. According to him, There was an existing agreement to sell the Egbin plant under the Federal Governments equity. And since the agreement was done a long time ago, it behoves that before any investment is considered, there should be a renegotiation. The transfer of the plant cannot possibly happen this December again. The government claims it has committed additional resources to Egbin to increase output at the plant after the deal with KERL.A briefing by the Bureau of Public Enterprises in 2007 explained that after the Korea Electric Power Corporation successfully rehabilitated two boiler units at Egbin in 2006 at $24 million, much less than the rival bid of $47 million from Marubeni of Japan, the Federal Government opened negotiations with the South Korean firm through its local affiliateKERL, to take a 51 per cent stake in Egbin, which was then valued at $560 million. BPE demanded 10 per cent of the bid price of $280 million, and a further 50 per cent to be paid into an escrow account. KERL has since paid the $168 million and pledged to construct three additional plants supplying 450MW each.Though this deal, which would have been the first concrete demonstration of the governments execution of the Power Sector Reform Act 2005, was reached in 2006, it has yet to be ratified by the government. It suffered its first setback when, immediately on assuming office in May 2007, the late President Umaru Yar Adua suspended all action on the power sector reforms. Since then, the Federal Governments record on power has been dismal. A recent report by the World Bank notes that though over $8 billion had been spent on power in the last 12 years, output had moved only slightly, from 2,300MW to about 3,500MW. Many companies, according to the Manufacturers Association of Nigeria, have closed shop and moved to neighbouring countries, citing the excessive cost of generating their own power, which the organisation says adds a minimum 40 per cent to costs. The acute power shortages have held back development, killed industries, discouraged investment and contributed to the current 30 per cent unemployment rate.In furtherance of the PSRA, the inefficient, corruption-ridden power monopoly was broken into 18 unitsone transmission, six generation and 11 distribution firms. But five years after the unbundling, none of the 17 units slated for privatisation or concession has been privatised. In August last year, President Goodluck Jonathan launched the Power Sector Roadmap that envisaged the privatisation and concession of some unbundled Power Holding Company of Nigeria units within eight months, including the receipt of bids for the concession management of the sole transmission firm. What Nigerians have seen so far have been delays that translate to continued government control of the power sector when the clamour, and even governments own statute-backed plans, calls for private sector control while the government regulates.While the recent inauguration of the bulk trading firm, a key component of the reforms, is welcome, its handling of the Egbin plant sale is sending a wrong signal to investors. A major factor in attracting Foreign Direct Investment, according to Business Integrity Group, is confidence in the host governments track record in honouring agreements.The governments excuse that it wants an upward review of the bid price may be populist, but there is a greater national imperative to have adequate and uninterrupted power. Egbin power station lacks adequate maintenance, which constantly affects its output. The turbines are expected to be overhauled every five to six years, but some of the units have operated for 24 years without the statutory overhaul. It is estimated that N33.6 billion is required to overhaul the plants six turbines for optimal generation.Obviously, the present corrupt and inefficient PHCN is incapable of offering any lasting solution. The only realistic option is to round off the deal with KERL. KEPCO, with installed capacity of 65,383MW, supplying 93 per cent of South Koreas power needs and is active in 13 countries, is a departure from the dubious, hastily cobbled consortia that have emerged at some stages in Nigerias troubled privatisation programme. If there are issues that disqualify the company, they should be made public. The government should resolve the Egbin sale promptly and speed up all other aspects of the power road map. It should not deal with power sector players in a manner that could scare other reputable investors away.
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