Govt agencies defend sale of PHCN firm
The Federal Government rose yesterday in defence of the power sector’s privatisation, after some governors said it was fraudulent.
The National Council on Privatisation (NCP) and the Bureau of Public Enterprises (BPE) are fighting off allegations of corruption, lack of transparency and opaque selection levelled by the governors, who promoted Southern Electric Distribution Company.
Chairman of NCP Technical Committee, Mr. Atedo Peterside, said the company failed from the beginning by submitting multiple commercial bids – primary and alternative commercial bids.
Besides, he said, the companies that make up the consortium are 90 per cent privately owned – not owned directly or indirectly by the governments of Delta, Edo, Ekiti and Ondo states.
“Is it fair that a private sector group, 90 per cent controlled, to submit two envelopes in violation of the rule and then drum up support of governors to cry foul over the process that was adjudged transparent by local and international observers? Did the consortium tell the governors that they submitted two bids? Is it right to call for a change of the rule after the game has been played? Perterside asked.
The NCP said it became imperative to respond to the allegations because of its potentially damaging fashion at a time when the nation is undertaking its largest and most complex privatisation transaction ever and which could raise divestment proceeds of close to N400 billion.
Governors Adams Oshiomhole (Edo), Emmanuel Uduaghan (Delta) and Kayode Fayemi (Ekiti), at a press conference in Abuja last week, said that the bidding for the distribution companies, which are part of the 18 successors of the unbundled Power Holding Company of Nigeria (PHCN), lacked transparency. Southern Electric Distribution Company, which the state governments promote.
The governors said: “The bidding process as organised by the BPE on behalf of the NCP, leading to the commercial bid opening on Tuesday 16th October was not transparent and was even – “fraught with corruption. That the use of the Aggregate Technical, Commercial and Collection (ATC&C) loss reduction strategy as a commercial bid evaluation tool/ranking is opaque, untested and not transparent.
“That Vigeo Power Consortium which submitted bid alongside Southern Electric Distribution Company for the Benin Electricity Distribution Company that emerged with the highest loss reduction target at the bid opening exercise lacked technical competence, experience and financial capability to manage such an extensive territory as covered by Benin Disco.
Their states, said the governors, have invested in power production and therefore, they wanted the bidder which they preferred – Southern Electric Distribution Company – to be declared as winner, failing which they would not allow Vigeo to operate in their territory.
Responding to the allegations, Mr. Peterside said: “The purpose of this is to present the full set of facts surrounding the ongoing power sector privatisation and to counter the very “weighty” allegations that the entire process was fraught with corruption. This allegation was widely publicised because it came out of a discussion/interview which the governors of Delta, Edo and Ekiti states had with the media on Thursday 18th October, 2012. The allegations of ‘corruption’ that I refer to were made with respect to the privatisation of Benin Disco in particular, and the privatisation process of the PHCN successor distribution companies (Discos) in general.
“It is pertinent to point out that Southern Consortium is the only one, of the 16 consortia that participated in the bid opening, to have submitted multiple commercial bids for the same Disco. Their envelope contained two different commercial bids, both of which were signed by a Mr. Matthew Edevbie. The first bid was dubbed the “primary” bid, while the other was dubbed an “alternate” bid. This was a clear contravention of the Request for Proposals (RFPs). We did not make a big issue of this on live TV because both the primary and the alternate bids fell below the bid submitted by Vigeo and so neither bid would alter Southern Consortium’s ranking on the large screen. Instead, this matter was brought to the attention of the Technical Committee of NCP, which considered the breach and made recommendations to the NCP.
“Therefore, on the allegation that the bid process was not transparent, I wholeheartedly affirm that the entire transaction followed due process and was governed by the provisions of the RFP.”
“Incidentally, the submissions made by the Southern Consortium to the BPE show that the ownership of the Consortium is comprised of seven members as follows:- Uttar Gujarat Vij Company Limited (of India) (25% equity of consortium); Income Electrix Limited (of Nigeria) (25 %); Smartworks Global Resources Ltd (of Nigeria)(8.3%); Pinnacle Power Projects & Services Limited (of Nigeria) (31.7%); Fountain Holdings Limited (of Nigeria)[3.33%]; Citadel Nominees (of Nigeria)[3.33%]; and NJ Services (of Nigeria) (3.33%),” he said.
On the allegation of Vigeo having little knowledge about the environment in which it wishes to operate, Peterside puntured the governors’ argument, saying there has never been a distribution licensee in Nigeria, apart from the Federal Government-owned distribution companies. He also noted that the information at NCP’s disposal indicates that GUMCO, a member of the Vigeo Consortium has participated in both the Revenue Cycle Management and National Prepaid Metering programmes since 2006. “It also introduced prepaid metering and billing to the Benin Disco. It started from Benin City and later extended its operations to Warri, Asaba, Ondo and Ekiti. It is worth noting that none of the members of the Southern Consortium has such a record.
On the criticism of ATC&C loss reduction strategy, Peterside said the current ATC&C losses sustained by the various distribution companies in Nigeria are estimated at between 35 and 40 percent of the power wheeled to them. These levels of losses are very high. He noted that the privatisation strategy that the NCP chose for the Discos was aimed at addressing the identified problems within the distribution segment of the sector.
“Accordingly, bidders were told from the onset that they would compete on the basis of a trajectory of technical, commercial and collection loss improvements for the first five years of operation. Furthermore, this method is built around the Multi Year Tariff Order (MYTO) 2 issued by the Nigerian Electricity Regulatory Commission (NERC) – the industry regulator.
“It is important to emphasise that all the bidders who participated in the Commercial Bid Opening had obtained scores in excess of 75% when technical evaluations were being scored some weeks ago. It is also imperative to point out that the NCP approved the privatisation strategy for the Discos, based on the use of ATC&C loss reduction proposal as a basis for core investor selection, as far back as 11th June, 2010. The advertisements that ran in December 2010 soliciting for Expressions of Interest (EOIs) from prospective core investors emphasised that the BPE would use this strategy. So, Southern Consortium knew the rules of the race before it joined the contest.
“It is also apt to point out that even when the BPE solicited feedback from prospective investors about the bid process and the industry and transaction documents last year, Southern Consortium did not raise any concerns about the use of this strategy,” he added.
Besides, in respect of the 20 Disco bidders, which NCP approved that they fully met the RFP requirement which specified that in order to have its commercial proposals opened each bidder must have a tangible net worth of a minimum of $100 million and competent technical partners, both Southern Consortium and Vigeo had competent technical partners from India.
On the allegation of Vigeo having little knowledge about the environment in which it wishes to operate, Peterside said there has never been a distribution licensee in Nigeria, apart from the Federal Government-owned distribution companies.
He also noted that the information at NCP’s disposal indicates that GUMCO, a member of the Vigeo Consortium, has participated in both the Revenue Cycle Management and National Prepaid Metering programmes since 2006. It also introduced prepaid metering and billing to the Benin Disco, starting from Benin City and later extending its operations to Warri, Asaba, Ondo and Ekiti. It is worth noting that none of the members of the Southern Consortium has such a record, Peterside said.
He said that Vigeo Power Consortium has technical and financial capability, noting that Section 93 of the RFP states that: “Those bidders with proposals that have successfully achieved the benchmark technical score 75% will be considered eligible contenders, and the ranking of the bidders for each distribution company will be determined solely based on the technically qualified bidders’ Commercial Proposals.”
Peterside insisted that the process was transparent as it was evaluated by a team whose members were drawn from the BPE, the Nigeria Electricity Regulatory Commission; the Federal Ministry of Power; CPCS Transcom – advisers on the transaction; NEXANT—USAID-funded power sector consultants providing support to the BPE; and NIAF—DFID-funded infrastructure support programme to the Nigerian government. It was observed by officials of the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices Commission (ICPC) and the Directorate of State Security Services (DSSS).
