North-South Power, Axxela, and Stanbic Infrastructure Fund Consortium wins bid to acquire majority stake in Eko DisCo

West Power and Gas Ltd (WPG), the parent company of Eko DisCo, Nigeria’s second-largest distribution company (DisCo), is close to selling its entire stake in the electricity company.

Reliable sources with direct knowledge of the transaction informed Nairametrics that a consortium that won the bid has paid the minimum 10% commitment fee.

The consortium comprises North-South Power (NSP), owners of Shiroro Dam; Stanbic Infrastructure Fund (the largest infrastructure fund in the country); and Axxela (one of Nigeria’s largest gas producers).

Nairametrics previously reported that a winner of the bid was close to being chosen for one of the most anticipated deals of the year.

What they are saying

According to our sources, the consortium won the bid to acquire the stake in Eko Disco after a competitive process that began earlier in 2024.

Following the successful bid, all parties are now in the conditions precedent phase, where a set of conditions must be met before the deal can be finalized.

Once completed, Eko DisCo’s new ownership will include a combination of upstream and midstream players, making it one of the largest integrated electricity distribution companies in Nigeria.

A source with knowledge of the transaction explained that for NSP, the acquisition provides the power generation company with direct control and insight into the DisCo’s operations, enabling it to access the company’s cash flow distribution.

Eko DisCo is regarded as the most compliant of all distribution companies in meeting remittance obligations to the market.

However, because other DisCos often fail to meet their remittance obligations, major generating companies like NSP do not receive their full payments. This acquisition could help mitigate that challenge.

Another source suggested that the recent move towards bilateral contracts between distribution and generation companies also provides added incentives for power generation companies to acquire DisCos.

For example, Transcorp Power, the owners of Ughelli Power Plant, holds a significant stake in Abuja DisCo, while Sahara Power, the owners of Egbin Power Plant, owns a majority stake in Ikeja Electric, Nigeria’s largest power distribution company.

Meanwhile, for Axxela, the acquisition is seen as strategic, as it helps the gas company expand into the distribution end of the market, giving it direct access to cash flow sources.

Gas companies are at the end of the value chain and rely heavily on power-generating companies for payments.

Axxela says it has developed a natural gas distribution network infrastructure that stretches over 360 kilometers.

The company also has investments in power generation companies including the Akute and Alausa independent power plants respectively.

The company also has an existing relationship with Eko and Ikeja DisCo with embedded power projects with a capacity of 100 MW and 40 MW in both DisCos respectively.

For Stanbic Infrastructure Fund, the deal offers Nigeria’s largest dedicated private equity fund for infrastructure a unique opportunity to invest in the country’s power sector.

The fund, established in June 2021 as a ₦100 billion Shelf Programme, is registered under the Rules for Infrastructure Funds issued by the Securities and Exchange Commission.

Part of the fund’s objectives includes targeting strong cash flow prospects to meet periodic distribution requirements for investors.

The deal is expected to close early in 2025, with a transaction size that could exceed $200 million. Nairametrics also understands that the final purchase consideration will be determined upon completion of the conditions precedent.

(Nairametrics)