1. CPCS Transcom Limited Solutions for growing economies The Privatization Transaction Process and the Opportunities for Investments in the Nigerian Power Sector May 25, 2011

2. Solutions for growing economies 2 Nigeria Country Profile Power Industry in Nigeria Power Privatisation Transaction Investment Opportunities Outline

3. Solutions for growing economies 3 Nigeria is the largest country in Africa with a population of over 150 million Between 2005 and 2010 GDP per capita has doubled Nigeria has one of the fastest growth rates of the world with growth of 6-8% per annum expected over the medium term It is expected Nigeria will be one of the future leading economies in Africa Nigeria Country Profile

4. Solutions for growing economies 4 With the rapid expansion in GDP expected, there will be an increasing demand for electricity: Nigeria Country Profile

5. Solutions for growing economies 5 Nigeria Country Profile Power Industry in Nigeria Power Privatisation Transaction Investment Opportunities Outline

6. Solutions for growing economies 6 Demand in Nigeria currently far outstrips supply Estimations have indicated that expensive private generators currently produce more electricity than that of on-grid sources Estimates for projected demand by 2020 have ranged from 12,000- 40,000 MW Available generation capacity is currently below 4000 MW compared to Algeria’s 11,000 MW and Egypt’s 24,000 MW Power Industry in Nigeria

7. Solutions for growing economies 7 Taking national comparisons, there is not only strong excess demand for electricity today, but this demand will continue to grow with the population and economy Power Industry in Nigeria

8. Solutions for growing economies 8 Nigeria Country Profile Power Industry in Nigeria Power Privatisation Transaction Investment Opportunities Outline

9. Solutions for growing economies 9 Power Privatisation Transaction 2011+ Takeover of regulated private sector of 17 Successor Companies 5 Year transition period under bulk trader, then move to competitive market 2005-2011 Deepening of reforms through passing of EPSRA: break up of NEPA, unbundling into separate Successor Companies Preparations for transfer of companies to the private sector 1998-2004 Break up of Monopoly of NEPA First entrance of private industry in power generation market

10. Solutions for growing economies 10 Demand Large suppressed demand High growth rates for GDP and population expected will lead to high future growth Commercial Viability Strong incentives in place to promote investment Regulatory framework and tariffs to promote commercial success of private companies High Value Investment High value industry Strong interest from reputable national and international firms looking to make significant investments in the industry Power Privatisation Transaction

11. Solutions for growing economies 11 Generation Companies Power Privatisation Transaction

12. Solutions for growing economies 12 Power Privatisation Transaction Installed Capacity (MW) Available Capacity (MW) Private Participation Afam776 MW45 MW100% Equity Geregu414361[51]% Equity Sapele1020135100% Equity Ughelli900228100% Equity Kainji: Kainji Plant760359 Long Term Concession Jebba Plant578410 Shiroro600393Long Term Concession

13. Solutions for growing economies 13 Distribution Companies Power Privatisation Transaction

14. Solutions for growing economies 14 Power Privatisation Transaction Area (Km 2 )PopulationParticipation Abuja104,2798,675,000[51-70]% Equity Benin57,55013,206,000[51-70]% Equity Eko1,800*4,556,000*[51-70]% Equity Enugu28,98716,396,000[51-70]% Equity Ibadan87,63115,114,000[51-70]% Equity Ikeja1,800*4,556,000*[51-70]% Equity Jos152,90116,348,000[51-70]% Equity Kaduna145,22216,352,000[51-70]% Equity Kano67,12819,564,000[51-70]% Equity Port Harcourt48,32113,698,000[51-70]% Equity Yola214,20011,966,000[51-70]% Equity *Eko and Ikeja both serve Lagos state, this figure represents 50% of the total

15. Solutions for growing economies 15 BPE received 331 EOI’s earlier this year and is finalizing the list of preferred bidders Once the final steps for the preparations of the sale are complete, RFP’s and bid documents will be issued to preferred bidders Bids for generation companies will be based upon a standard highest bid value format Bids for distribution companies will be based upon highest reduction in aggregate technical, commercial and collections loss Power Privatisation Transaction

16. Solutions for growing economies 16 ATC&C is a concept in the power sector used as a measure of the efficiency and effectiveness of a distribution company Bidders will not bid on price, but will bid based on reductions in losses (or increase in efficiency), which will effectively increase energy supply This method of evaluation was chosen to maximize the benefit to Nigerian consumers and the efficiency of the energy sector Power Privatisation Transaction

17. Solutions for growing economies 17 Power Privatisation Transaction Task Timeline (in weeks) Issue Bid Documents to Prequalified Bidders0 * Establish data room0 Pre-Bid Conference4 Bidders’ Site Visits 4-10 MYTO Review Conference5 Sale/Concession Agreement Review Conferences8 Bids to be Submitted12 Complete Bid Evaluation Process16 Commence Negotiation with Bidders17 Sign Agreements19 Handover of Facilities20 ** *Expected at the end of June ** Targeted for November-December

18. Solutions for growing economies 18 Incentives For Investors Pioneer Status A tax holiday on investors for 3 years, extendable by 2 more years R&D Allowance Companies can deduct between 10-100% Capital Allowance Deductions, up to approved limits, for expenditures on capital equipment Training Allowance Training expenses can be deducted before arriving at profit Rural Investment Allowance Deductions of up to 100% for 5 years based on distance from infrastructure facilities Replacement Allowance Companies in manufacturing can obtain 15% tax credit on replacement of obsolete plant and machineries Double Taxation Agreements The Government of Nigeria currently has double taxation agreements with several countries with respect to taxes paid in Nigeria when remitting funds into a counterpart country Guarantee Against Expropriation The Nigerian Investment Promotion Commission Act guarantees against the nationalization or expropriation of any foreign or domestic enterprise Power Sector Intervention Fund The Central Bank of Nigeria has established a N300 billion fund for the aviation and power sectors to provide funds to fast track development Power Privatisation Transaction

19. Solutions for growing economies 19 While as part of the process valuations of the companies are still ongoing, it is expected that this will be a multi- billion dollar transaction Suppressed demand and opportunities for further efficiencies already identified mean that there is potential for a high return to equity Power Privatisation Transaction

20. Solutions for growing economies 20 Nigeria Country Profile Power Industry in Nigeria Power Privatisation Transaction Investment Opportunities Outline

21. Solutions for growing economies 21 The privatization transaction has received much attention from highly reputed national and international firms It is expected that given the size of the power privatization transaction considerable funding will be required to finance the refurbishment of the power sector. Investment Opportunities

22. Solutions for growing economies 22 While the RfP documents are still being finalized, it is expected that during this process, bidders may be required to have Bid Bonds and/or Letters of Credit Based on precedents of international transactions we expect that the rehabilitation/expansion of existing SC infrastructure will require total investments of: For Generation Companies, approx. $1 Billion and For Distribution Companies, approx. $2-3 Billion Investment Opportunities

23. Solutions for growing economies 23 International/Local Banks Infrastructure Funds Corporate Loans Bid Bonds and LC’s Debt for Refurbishment Equity Investment Opportunities

24. CPCS Transcom Limited Solutions for growing economies Thank You For further information please contact: Arif Mohiuddin PHCNprivatisation@cpcstrans.com