West Power and Gas, looking to sell stake in Eko DisCo for $350 million 


West Power and Gas Ltd (WPG), the core investor in Eko Distribution Company, is considering selling its stake to raise $350 million and has engaged advisers to expedite the process.

Eko Disco, serving Lagos South and 8 million people, is a top performer in the power sector with a 10.22% loss rate in Q4 2023 and $177.5 billion revenue in 2023, making it an attractive investment opportunity.

The potential equity sale aims to recapitalize Eko Disco ahead of sector reforms, drawing interest from renewable energy players and GENCOs seeking synergies, which experts believe could enhance the company’s financial and operational efficiency.

West Power and Gas Ltd, the core investor in Eko Distribution Company, is exploring a potential equity sale of its stake in the power distribution company.


Nairametrics exclusively obtained information confirming that the company is considering a capital raise and has engaged advisers and fundraisers to expedite the sale.


Sources suggest the company is looking to raise $350 million through an equity sale.


WPG reportedly paid $135 million to acquire 60% of the core assets of the distribution company from the government during the privatization of the electricity sector in 2013.


The government owns the balance of 40% of the equity in the distribution company.


Eko Disco, one of the eleven distribution companies licensed by the federal government, operates in the Lagos South franchise area, serving up to 8 million people.


The power distribution company has been one of the better performers in the sector, leading in terms of remittances to the market and loss reduction.


The company recently recorded an all-time low aggregate technical commercial and collection loss of about 10.22% in the fourth quarter of 2023, one of the lowest in the industry.


According to data from the National Bureau of Statistics, the company reported a revenue collected of N177.5 billion in 2023 and billed 3,448GWh of energy. Eko Disco collects about 85% of its billed revenue per regulatory data.


What they are saying

According to our sources, the planned equity sale is part of the company’s strategy to recapitalize ahead of a slew of ongoing reforms in the sector that many believe could shape the industry in years to come.


“They are planning to sell about 60% of the company to investors for about $350 million as part of the strategy to expand the firm and improve its liquidity,” one source said.


Nairametrics reached out to WPG for comments about the sale but the firm neither confirmed nor denied. However, in a note to Nairametrics, the company stated that it is consistently exploring strategic investments in upgrading its network to ensure a reliable power supply for customers.


“The Board and Management of WPG are continually evaluating potential investors and strategic partnerships that align with our vision for EKEDC’s long-term growth and sustainability. We are committed to pursuing initiatives that generate positive returns for our investors, EKEDC employees, and the communities it serves,” the statement read in part.


However, another senior source in the company who chose to speak on the condition of anonymity as they were not authorized to speak directly to the media confirmed that the company is actively seeking investors interested in actualizing their vision for Eko Disco.


“Yes, we are looking for investors in our stake in Eko DisCo and we are currently speaking to several interested parties. Despite the challenges in the distribution end of the sector, Eko DisCo is one of the leading performers in the sector and has always met its remittance obligations.”


Possible Buyers and Investors

Another source with knowledge of the deal disclosed to Nairametrics that there is strong interest from local players, particularly in the renewable energy space, who might see this as an opportunity to gain entry into a vital value chain and increase their reach and influence in the sector.


Eko DisCo’s distribution franchise area is considered prime for renewable energy stakeholders due to a spate of commercial and residential property developments that have sprung up in recent years.


There is also potential interest from power generation companies (GENCOs) who view this as an opportunity for synergy in a value chain that is closer to customers, providing them with a clear line of sight into cash collection. GENCOs are generally in a stronger financial position than DisCos.


“The likely investors are the players in GENCOs, given their substantial financial resources and profound understanding of the market,” said the source, highlighting the strategic fit between the potential acquirers and the target company’s industry focus.


Transcorp Power executed a similar transaction with the Abuja Electricity Distribution Company (AEDC), acquiring a 60% equity interest in one of Nigeria’s 11 electricity distribution companies.


There are also other owners of cheaper hydropower-generating companies that have made inroads into the power distribution space, leveraging the eligibility provisions that allow generating companies to sell directly to large manufacturing maximum-demand customers. Sources suggest they are also actively looking for potential acquisitions in the sector.


New reforms driving the need for capital raise

In the eyes of stakeholders and energy experts, the anticipated shakeup in the energy sector highlights the pressing need for increased capital investment to drive growth.


Ayodele Oni, a legal expert and energy analyst, shares this sentiment. He suggests that should the acquisition speculation materialize; it could yield positive results for the sector.


Oni specifically foresees an enhancement in the financial performance of the company as a potential outcome.


“It is important to have good corporate governance structures, more operational efficiencies and financing to function properly as a DisCo. Hence, where the sale of the interest would improve the performance and financial capacity of the DisCo, it can yield positive results for the sector,” Oni said.


On her part, the CEO of Clean Energy Technology, Ifeoma Malo, sees the potential acquisition as a signal for improved efficiency in DisCos.


She notes that historically, these companies have not been efficiently managed, whether under government or private ownership.


Malo suggests that recapitalization to enhance financial capacity for the DisCo could lead to extended lifespan and operational efficiency, which she welcomes.


“At every point in time, energy companies are looking for more and more investment. Most of them are recapitalized to attract more financial flows to extend their operations and lifespan. Almost every DisCo I know is looking for new investors.


“Power and electricity are the most fundamental things holding back Nigeria’s development, and I think it’s an attractive point of investment for anybody who is looking to invest in a country like Nigeria. The potential for return eventually is great.


“The only thing is that we need patient capital. It’s not an investment that you will get a yield in five or seven years. We are looking at people who can do at least ten to fifteen years. That is the kind of investment we are talking about,” Malo added.


At $350 million, Eko Disco will be valued at around $583 million or N875 billion. The only two listed companies on the Nigerian Exchange, Geregu Power and Transcorp Power have market valuations of N1 trillion and N400 billion respectively.



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