West Power and Gas Ltd (WPG), the core investor in Eko Distribution Company (Eko Disco), is exploring the sale of its stake in the power distribution company. Information obtained by Remotework.business indicates that WPG is seeking to raise $350 million through an equity sale and has engaged advisers to expedite the process.
Eko Disco, which serves Lagos South and a population of approximately 8 million, is recognized as a top performer in Nigeria’s power sector. In the fourth quarter of 2023, the company reported a loss rate of 10.22%, significantly below the industry average, and generated a revenue of N177.5 billion for the year, making it an attractive investment opportunity.
The potential sale is part of WPG’s strategy to recapitalize Eko Disco ahead of upcoming sector reforms. Experts believe these reforms could enhance the company’s financial and operational efficiency. Renewable energy players and power generation companies (GENCOs) have shown interest in the equity sale, viewing it as a synergistic opportunity.
WPG acquired a 60% stake in Eko Disco during the 2013 privatization of Nigeria’s electricity sector for $135 million, with the government retaining the remaining 40%. As one of the eleven distribution companies licensed by the federal government, Eko Disco has consistently led in market remittances and loss reduction.
The company’s performance metrics include a collection rate of 85% of billed revenue, according to data from the National Bureau of Statistics. In 2023, Eko Disco billed 3,448 GWh of energy, reflecting its efficiency and reliability in service delivery.
Sources within WPG suggest that the equity sale is aimed at expanding the company and improving its liquidity. While the company has not officially confirmed the sale, it has stated its commitment to exploring strategic investments to upgrade its network and ensure a reliable power supply for customers.
“There is strong interest from local renewable energy players and GENCOs, who see this as an opportunity to enter a vital value chain and increase their influence in the sector,” said a source familiar with the deal. Eko Disco’s franchise area, with its growing commercial and residential developments, is particularly attractive to these potential investors.
Energy experts believe that the anticipated sector reforms necessitate increased capital investment. Ayodele Oni, a legal expert and energy analyst, posits that the sale could lead to better corporate governance, operational efficiencies, and financial performance. Similarly, Ifeoma Malo, CEO of Clean Energy Technology, views the potential acquisition as a step towards improved efficiency in the management of DisCos.
Malo highlights the need for patient capital in the energy sector, noting that significant returns on investment might take ten to fifteen years. She emphasizes the critical role of power and electricity in Nigeria’s development, making it a compelling investment despite the long-term nature of the returns.
If successful, the equity sale would value Eko Disco at approximately $583 million (N875 billion). In comparison, Geregu Power and Transcorp Power, the only two listed power companies on the Nigerian Exchange, have market valuations of N1 trillion and N400 billion, respectively.