Opportunities in the Nigerian Power Sector TONY O. ELUMELU (MFR) GMD/CEO UNITED BANK FOR AFRICA PLC

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

Overview NEPA established in 1972 as a state owned enterprise with absolute monopoly of the electricity market Installed capacity of circa 6,000MW; Hydro - 1,900MW; Thermal- 4,000MW However actual generation <3,100MW with resultant power outages costing the nation est.$1bn/p.a. losses Had limited Transmission & distribution capacity Current demand is estimated at 8,500MW against Generation < 3,100MW with possible suppressed demand of additional 5,000MW; Forecasts are that demand will reach 20,000MW by 2010

Overview..contd. Electric Power Sector Reform Act (“EPSR”) enacted in 2005 to reform /liberalize the electricity sector NEPA transformed into a public liability company ; Power Holding Company Company “PHCN” with 18 Business Units 6 - Gencos; 1 - Transco; 11 - Discos SPE to handle stranded assets/liabilities of defunct NEPA; Established a regulatory body - NERC; Rural Electrification plan amongst others Currently we have an Unprecedented level of investment in the sector to achieve 10,000MW Generation capacity by 2007

Overview….Contd. By Government New Power Plants (Omotoso, Papalanto, Alaoji, Geregu, Mambilla) with combined capacity of 3,500MW circa Launched National Integrated Power Plan “NIPP”; an integrated Generation (2,500MW); Transmission Distribution & Gas supply plan to fast track capacities State Government led projects (Ibom; TransAmadi etc) Converged Oil & Gas policy to drive Power Sector for e.g. development of IPPs tied to new oil blocs allocation; integrated gas pipeline network etc Proposed 2007 Budget allocates N105bn to Power & $8.7bn for Special Projects in Power All these Government intervention projects in Generation & Distribution will be privatized soon after completion

Forecasts are that sustained investments of between $5bn/$7bn p.a. is required in Power generation & associated infrastructure to meet increasing demand if the economy grows at an annualized rate of 7-10%! … By Private Sector Increasing Private sector led projects in Generation (AES, Geometric; Farm Electric; ENCON, Westcom etc) as well as Oil Majors (Shell, Agip et al) to add up to 4,000MW Generating Capacity Captive Power Solutions coming on stream; WAPCO/Ewekoro; Ajaokuta etc & alternative power generation sources are also being explored; Solar Reform in progress.. EOIs sought by BPE on 3 Gencos (Ijora, Calabar, Oji); Licensing of IPPs by NERC Prepaid metering scheme launched for DISCOs

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

value creation in the Power sector is based on the characteristics of each segment of the chain… Generation TransmissionDistributionTrading Physical infrastructure encompassing: power lines Sub stations Electrical systems Gas Coal Nuclear Hydro Solar Bulk Purchasers Captive Power Plants Last mile infrastructure Characteristics Business Activities Plant construction Input supplies Maintenance Load Management Line construction Systems Maintenance ArbitrageMetering, Billing & Collection Provision & Maintenance of Electrical Installations/stations House Hold Industrial Users

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

Phase …… in identifying the opportunities inherent in the sector it is Important to identify the life cycle of each segment which we believe are all at its infancy or expansionary phases.. Time Start up Expansion Mature/ Resuscitate Decline Generation Transmission Distribution Trading/Market Ops

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

Some of the topical Issues to be understood by FSIs or investors would include economic, business & industry risks such as… Regulatory Framework & Empowerment; NERC Privatization issues such as Timing; Strategy.. Concessioning or Sale PHCN -> Unbundled Biz Units & SPE Structure of Power sale/PPA; On Grid or Captive Tariff Structure; Cost recovery plus; MYTO (multi year tariff order) Investment Incentives (Duty; Tax Relief's/Holidays etc) Capital importation & Exchange Control issues; CBN

and.. Input/feedstock Arrangements; Gas, Fuel, Steam, Coal et al Supply; pass through or inclusive Quality Price; now & future Suitability of plant/systems being established; corrosion; climate; Infrastructural Support; delivery of inputs & evacuation of power -> delivery to customers Revenue Collection….RCM; Prepaid metering Vs MBM Power Transmission Evacuation arrangements – systems/load integrity; losses Other issues such as environmental; licensing; plant maintenance support services etc

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

The making of UBA DateEvent 1949French & British Bank Limited commences business in Nigeria 1961Incorporation of UBA to take over the banking business of the French & British Bank 1970IPO on NSE (1st such listing for a Nigerian bank) 1984Establishment of New York Branch (remains the only Nigerian or indeed SSA Bank with such a presence) 1998Establishment of GDR programme (1st for a Nigerian Bank as a means of facilitating international investor interest) Completion of merger with Standard Trust Bank PLC (1st such transaction, between the No. 3 and No. 5 industry players, of its nature to be completed in the history of the Nigerian Banking Industry) Emergence as the number 1 bank in Nigeria

Financial Highlights…. As at Sept. 30, 2006* PBT Over N15.0bn Deposit Base Over N757bn Total Footing Over N1 trillion Shareholders’ Funds Over N60bn *Audited & awaiting final regulatory approvals Over $2bn in Foreign Currency Liabilities with our UBA NY and Correspondents

Rating AgencyRatingRemark FITCH Jan, Long TermA+ Investment Grade - Short TermF1 GCR Feb, Long TermAA+ Highest Credit Quality. The risks factors are negligible slightly just above government bonds… -Short TermA1+ Highest certainty of timely payment AGUSTO & Co AA+ Dec 2005 A financial institution of very good financial condition and strong capacity to meet its obligations as & when due… Ratings… …..investment grade by local & international agencies.

Corporate & Investment Banking Directorate CIBD Energy Bank Corporate Bank Group Treasury Investment Bank Asset Management Origination We have a composite of related business areas in our Directorate streamlined to enhance our efficiencies….

our Energy Bank is positioned to take advantage of emerging business sectors such as Power ….. DownstreamPower Upstream UBA Energy Bank Oil TradingGasOil Services

…..in UBA we are best positioned to exploit Nigeria’s Power opportunities as a natural partner because we have…. Grown our Size to achieve an industry leading position with N1trn+ ($8bn) balance sheet footing and N757bn ($6bn+) in deposit liabilities (over $2bn in UBA, New York and correspondents) A group wide structure & business philosophy to optimise & leverage upon (Investment Banking; Business Banking; Retail, Asset Management; Trustees & Insurance) Developed skill & competencies in Nigeria’s Power Sector business aligned with the right corporate structure and a dedicated desk for Power UBA Global Markets

as well as the largest branch network 460+ & technology platform to facilitate cash management solutions Built strong alliances with FSIs/Multilateral/Developmental Institutions which we can leverage upon to undertake ticket transactions or projects Strong corporate leadership that is conscious of Power Sector Development business and track record in Power Sector Business in Nigeria (public … PHCN, DISCOs, or private IPPs - AES, Ibom Power etc

Outline Brief Overview of Nigeria’s Power Sector How Value is Created Opportunities Key Issues UBA Experience Our Expectations 

Our expectation …… is that current reform policies of the FGN will be sustained given the realisation of Power Sector development in Nigeria as THE platform of economic growth & sustainable development towards achieving the MDGs…. Nigeria is on the path to have a private sector led & vibrant Electricity Market with opportunities for all stakeholders; FSIs; Operators

Thank you the Financial Solutions Powerhouse…