As the power sector privatisation draws to a close, the protests over the emergence of preferred bidders for the distribution assets may rubbish thes exercise adjudged to be one the most transparent by local and international observers, EMEKA UGWUANYI Assistant Editor (Energy) writes.
Nigerians are increasingly getting expectant of the day electricity would be stable as the privatisation process of the power sector gets completed by the end of this month.
The Federal Government as well as other stakeholders believes the takeover of operation and management of the electricity industry would remedy the age long problem of the sector.
Since the past four decades the power sector has been owned and controlled by the government through the Power Holding Company of Nigeria (PHCN), and despite enormous funds channelled toward improving supply and service delivery, no significant result has been achieved. This informed the government’s decision to privatise the industry.
The selection process
To ensure that utmost transparency was applied and due diligence process followed in the entire privatisation process, Chairman, Technical Committee of the National Council on Privatisation (NCP), Mr. Atedo Peterside, said in his opening remarks of commercial bids for the privatisation of the PHCN successor distribution companies in Abuja on October 16, 2012, that all the prequalified bidders were given access to the virtual data room from 1st September 2011 to the proposal submission date of July 31, 2012. Pre-qualified bidders were also allowed to visit the distribution companies and physical data rooms that were located within the franchise area of each distribution company, he added.
To further ensure transparency in the process, Peterside said that the NCP formed three committees to evaluate the bids that were received. Each of the committees had seven members drawn from the following agencies: BPE; Nigeria Electricity Regulatory Commission; 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.
Besides, he said the officials of the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices Commission (ICPC) and Directorate of State Security Services (DSSS) also observed the process from bid submission to the conclusion of evaluation. They were therefore witnesses to the fact that all late-comers were turned back.
Besides, the BPE said the reason the privatisation deadline was shifted from February to October was based on the demand of bidders who had claimed they were not carried along on some issues. The Bureau also said because the privatisation was intended to be market driven, it shifted the deadline to make room for any investor to clarify any issue of his interest.
Furthermore, state governments already have opportunity to own 30 per cent stake in assets within their areas and the Federal Government promised to release more stakes from its own to the states depending on the quantum of investment they made in the assets.
The protest
The consortium to which the governments of Edo, Delta, Ondo and Ekiti states have interests – Southern Electricity Distribution Company – was unable to score the highest mark in Aggregate Technical, Commercial and Collection (ATC&C) losses reduction, which was a major test for the bidders and consequently lost to another competitor, Vigeo Power Consortium. The governors of the four states had at a press conference dismissed the result of the privatisation exercise for distribution companies as fraudulent.
“The entire process was a racket that is inconsistent with running a transparent government. The BPE used a set of criteria that have never been used before,” the governors said.
Governors Adams Oshiomhole (Edo), Emmanuel Uduaghan (Delta) and Kayode Fayemi (Ekiti) in Abuja last week said that apart from the privatisation process lacking transparency, Vigeo Power Consortium lacks the necessary technical competence and financial capability to run the Benin Disco.
Oshiomhole said the process was rigged to favour Vigeo because during the technical evaluation of the bid process, Southern Electricity scored 898 points as against Vigeo’s 847 points. He questioned how Vigeo emerged the preferred bidder at last.
Fayemi said: “Our major complaint is competence. We are disappointed that the company that was awarded the preferred bid has no technical competence and the process by the BPE was not transparent. We are not going to sit idly and show lack of concern because the process was not transparent. We will take that up with those concerned. This is the handiwork of a racket.”
The three governors said they had made their complaints known to President Goodluck Jonathan.
BPE’s position
BPE, in a statement, faulted the governors’ position, stating that accusation of a flawed process and irregularities against the privatisation bureau was unfounded and reckless. “The bidding process was transparent and we followed the bible of our transaction in doing that. We did not deviate from the norm when dealing with the bidding. I think the governors are bad losers,” it added.
In a bid to give the press an opportunity to ask questions about the allegations levelled against the BPE, the Bureau has also slated a press conference that held yesterday.
Vigeo’s defence
Also reacting to the governors’ statement, the Chief Executive Officer of Global Utilities Management Company Limited (GUMCO), Mr. Abu Ejoor, said that his company, which is Vigeo’s local technical partner, has been involved in virtually all the public-private partnership initiatives in the distribution sub-sector starting from revenue cycle management (RCM). He said RCM is an outsourced management contract, which the company participated and ran in the Shomolu, Ikorodu and Ojodu districts of Ikeja Disco between 2002 and 2007.
“During this period, the company was involved in the entire revenue cycle management from metering to revenue collection, assisting the zone to boost its revenue collection and reducing commercial losses.
“In 2006, GUMCO, under the National Prepaid Metering Programme, introduced prepaid metering and billing to Benin Electricity Distribution Company. It started from Benin City and later extended its operations to Warri, Asaba, Ondo and Ekiti.
“Today GUMCO has presence in all the four states in Benin Disco, helping PHCN in the management of its commercial operations, including vending management. What the company does is to bring management and investment into improving the billing and collection of discos.
“Of all the companies that bided, only Vigeo Power has local experience in utility management through its local partner GUMCO,” he added.
On Vigeo’s foreign technical partner, he said the success of the Delhi model in the consortium is NDPL, a Tata Power Delhi distribution company providing efficiency.
“We believe in the transparency of the process of BPE, the integrity of the members of the bid process, and the trust the president has in them to have given them this herculean task. So it is wrong for anybody to allege that we don’t have experience to run distribution companies,” he said.
Besides, he said: “With the TATA partnership, a private interest operator in India, stakes for excelling are high. They operate a reform that the Nigerian power sector is modeled around. They have the objective to perform and are not saddled with the bureaucracy of government, the same reason the federal government is running from with the privatization.
“The foreign technical partner, TPDDL is the success story of the Delhi Reform reducing ATC&C Losses from 50 percent to 11 percent within 10years. The only Industry leader in India and Asia that is known to the world and major international institutions is TPDDL, having won consistently in the last six years the Asian Power Award.”
The company emerged the preferred bidder for the Benin Disco, for scoring an average technical, commercial and collection (ATC&C) loss reduction projection or efficiency ratio of 21.78 per cent, as against Southern Electricity’s 17.72 per cent.
The Vigeo Power Consortium is made up companies with track records of successful performance, including Vigeo Holdings, GUMCO, Africa Finance Corporation (AFC) and Tata Power Delhi Distribution Limited (TPDDL).
Stakeholders’ perspective
The Nigerian Economic Summit Group (NESG) has urged governors of the states that lost out in the bid for the discos not to play politics with the privatisation exercise.
The Chairman, NESG, Mr. Foluso Phillips, who spoke on behalf of the Group, questioned why the governors are trying to stall the privatisation exercise despite the fact that all the bidders were given equal opportunities.
He said: “We had a bidding process in which everybody participated. If they (the governors) have a problem with the process, the issues should have been raised at the beginning of the process. Why is it that they are now complaining after the process had been concluded?
“We are not in a military era. I don’t really know what they are complaining about because they already have 30 per cent stake in the project. Nothing should stop the privatisation exercise because the Summit believes in the deregulation of the Nigerian economy. The whole economy should be deregulated because government in all aspect has shown that it is not capable of running a commercial entity.
“See what happened in the telecoms sector. We need deregulation so that the private sector can create good jobs and provide better services.”
Besides, he said States and the Federal Government should not be allowed to be much involved in the power sector because they will not be able to add value.
“If the states and Federal Government participate, it will be more complicated because they will start fighting themselves over who sits on the board instead of looking at the commercial entity,” he said.
Frontline financial expert, Mr. Bismarck Rewane also commended the Federal Government for opening up the power sector to private firms. Rewane, who is the Managing Director of Financial Derivatives Company Limited, stated that private owned firms were far better than public owned. “State monopoly is the worst structure in any country. As long as people are paying for what they using, Nigeria will be better off,” he said.
Chairman, Technical Committee, NCP, Atedo Peterside has also challenged those that lost out to state the specific rules that were breached in the privatisation exercise.
Peterside, who is also the Chairman of Stanbic/IBTC Bank, said if the losers read and understood the rules of privatization process, they would realize that rules were followed to the latter. He said: “It is sad that in year 2012 some Nigerians will not go and read the rules before they (losers) rush to make comments. The rules (Request for Proposal) are in 72 pages. They should sight which rules were breached. If they read and understood the rules, they will comprehend that the rules were followed to the latter from the very first day of the transactions. They all took part in a race and the final results have not been announced. So, if they are now faulting the entire process, it shows that something is wrong.”
An engineer and former Executive Director (ED) of the PHCN, Mr. Bisi Oyinloye also said the process for the selection of the Discos was very transparent and urged the BPE to muster enough courage to follow through the entire process.”From what I saw on the television, the process could not have been more transparent than that. Guidelines were given to everybody and they also took a risk. Some quoted low loss rates while others quoted high loss rates. So, I don’t know why the losers are kicking against the process. Nigerians will always be critical but the truth is that everyone was given the guidelines and they all had equal opportunities. The issue thereafter is if the selected distribution companies will be able to meet their loss rates,” he said.
Conclusion
Given the transparent way the privatisation of the power sector is being handled, President Goodluck Jonathan should be commended for giving the BPE and the National Council on Privatisation (NCP), the political will to privatise the power sector. Mr. President however, should not allow the process to be truncated by political pressure.
The NCP under the chairmanship of Vice President Namadi Sambo, should also be commended for mustering enough courage to follow through the entire process diligently.
Some stakeholders are of the view that the 30 per cent allocated to states may be a cog in the wheel of Nigerians’expectations to see quick achievement of stable power supply. They noted that the 30 per cent given to the states can be detrimental to the privatisation process. The governors faulting and questioning the criteria for the selection process will draw the privatisation programme backward because the companies they promoted also had equal opportunities.
The protest by the governors may also drive away both local and foreign investors needed for the power sector that needs an annual investment of $10billion for the next 10 years.
The aggrieved governors should demonstrate good sportsmanship and work together with the preferred bidders to fix the power sector problems and provide reliable power supply to Nigerians or in alternative they (governors) should go to court of law to challenge the result instead of threatening to truncate the privatisation programme by making operation difficult for the preferred bidders.
Also, given the fact the Vigeo Consortium is very familiar with the terrain, having been in operation for over 11 years, it makes logical and economic sense to allow the company to continue in a seamless manner that would further add value to the consumers.
