The primary investor in Eko Distribution firm, West electricity and Gas Ltd., is considering selling its stock in the electricity distribution firm.
The company is planning a capital raising, and in order to speed up the sale, consultants and fundraisers have been hired, according to information that THE MATRIX exclusively received.
According to sources, the corporation wants to sell its shares for $350 million.
According to reports, WPG spent $135 million to purchase 60% of the distribution company’s key assets from the government in 2013 when the power industry was privatized.
The government owns the balance of 40% of the equity in the distribution company.
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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.
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.
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“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.
THE MATRIX reached out to WPG for comments about the sale but the firm neither confirmed nor denied. However, in a note to THE MATRIX 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.”
Another source with knowledge of the deal disclosed to the MATRIX 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.
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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.
