Otedola: My Decision to Pull Out of Buying Ikeja DisCo Worried Jonathan
Femi Otedola, chairman of Geregu Power Plc, said his decision to pull out of buying Ikeja DisCo (now Ikeja Electric) during the privatisation of the power sector in 2013 left then-President Goodluck Jonathan worried.
The Nigerian tycoon says in his book ‘Making It Big’ that he knew nothing about the sector before 2013, when the government decided to embark on the privatisation.
“However, I was lucky to know Chris Adeyemi and Taj Giwa-Osagie, who heightened my interest in the power sector. What did I do to get off on the right foot? For the first time, I would engage consultants before starting a business,” he says.
He hired China’s SGCC/SMEPC, the largest utility company in the world with assets of over $585 billion, and spent $13 million in consulting fees.
Otedola says the consultancy contract was negotiated after several meetings in China and Nigeria.
He says: “We made a $4 million down payment, and work began. A team arrived in Nigeria and spent about six weeks visiting and studying the power generation and distributing companies that were up for sale.
“After extensive research, they recommended that I focus on acquiring Geregu Power Plc, because it was a new plant with easy access to gas. They advised that the other plants were old and would require considerable time and enormous resources to get them functioning properly.
“They dissuaded me from buying the power distribution company I’d initially had in mind, Ikeja DisCo, because I would have had to replace the transformers, put in an additional $400 million in capital investment and wait 13 years before breaking even. I set my sights on Geregu, and we notified the Bureau of Public Enterprises that we were withdrawing our bid for Ikeja DisCo.
“The country’s president, Goodluck Jonathan, was eager to get the power sector up and running, and was worried when we pulled out of the Ikeja DisCo deal at the last minute. He called me, sounding concerned, “Femi, my brother, why are you pulling out?”
”I went to see him, explained that I’d changed plans based on expert advice, and was buying into the sector with a different acquisition. That put his mind at ease, and I had no doubt that I was on the right path. It is important to state here that I do not consider Ikeja DisCo, which I’d opted out of buying, a bad company. It was just that we had to know what we were getting into, and concluded they were not for us.”
