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From ISAAC ANUMIHE, Abuja
As part of efforts to fast-track the unbundling process of Power Holding Company of Nigeria (PHCN), Bureau of Public Enterprises (BPE) transmitted an offer letter to CMEC-Pacific for Power Purchase Agreement (PPA) on Omotosho Power Plant. In a statement, BPE said that the sale transaction was through a debt-equity swap process.
Presenting the offer letter to Chairman of CMEC-Pacific, Adeleke Adedeji, the Acting Director General of the BPE, Mr. Benjamin Ezra Dikki, said that it was in fulfillment of the decision of the National Council on Privatisation (NCP) which approved the sale at its last meeting on February 28, 2013. NCP had earlier approved that CMEC-Pacific pays $217,531,507.79 for the power plant. However, the net total amount accruable to the Federal Government for the plant would be $82,336,179.42 given that $30,325,386 would be deducted from the capital cost for the construction of a switch yard for the Transmission Company of Nigeria (TCN).
It would be recalled that the Phase 1 of Omotosho Power Plant which has a capacity of 335MW was constructed in 2002. The total price under the turnkey contract was $166,724,578. The Federal Government funded 35 per cent of the cost 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 sales of electricity will be used for the repayment of the vendor financing and the interest payment. However, the delay in the completion period coupled with limitation in gas supply and paucity of funds at Power Holding Company of Nigeria (PHCN) resulted to default in the payment of the debt leading to the accumulation of unpaid invoices to CMEC. This responsibility was taken over by the Debt Management Office (DMO) which informed the Bureau of Public Enterprises, that it had paid approximately $104,267,966.22 to CMEC for the plant as at September 30, 2012.
“Based on the approval received by the Federal Ministry of Power from President Goodluck Jonathan on July 18, 2010 to proceed with the proposed divestiture of Federal Government’s investment in the plant, the Bureau sought and received NCP’s approval for the divestiture of Omotosho Power Plc through debt-equity swap during its first meeting of 12th May, 2011. NCP also approved the transfer of assets to the project company – Omotosho Power Plc. — which was incorporated on November 10, 2006.