2 September 2012

Nigeria: What Does Nnaji's Resignation Portend for Power Sector?


Prof. Barth Nnaji resigned as minister of power last Tuesday just two months to the expected conclusion of the planned privatization of the power sector. What does this sudden action hold for the much talked-about power sector privatisation?

His resignation shocked the small and mighty. It reverberated across the country as people expressed divergent opinions. Nigerians were surprised because number one, it is not a common occurrence to have public office holders voluntarily leave what is commonly called Juicy Positions.

Secondly, there had been considerable improvement in power generation and supply in recent times with generation hitting all time high of 4,237 megawatts and talks with electricity workers were slowly progressing.

Apart from having running battles with PHCN workers over severance package, he is said to have interests in two firms that submitted bids for the Afam Power Plc and the Enugu Electricity Distribution Company Plc.

It was gathered that it was when it was established that Nnaji had interest in two firms, Skipper Nigeria Limited and Eastern Electric Nigeria Limited, that the National Council on Privatisation (NCP) chaired by Vice President Namadi Sambo decided to cancel the technical bid evaluation process conducted for the two firms.

The NCP had on August 24 named seven firms as the successful bidders for five generation companies.

According to chairman of the NCP's technical committee, Mr Atedo Peterside, the successful bidders qualified to take part in the financial bidding slated for this month.

Like it started

Upon the nomination of Nnaji for Senate confirmation as minister 15 months ago, electricity workers had opposed with all the steam they could muster. They expressed fears that he would sell PHCN to his companies but that did not stop Jonathan from pushing him ahead as the minister of power. It was therefore surprising that the president would bow to pressure to make him (Nnaji) resign his portfolio abruptly.

A statement issued by his aide quoted him as saying he voluntarily resigned the office of minister "to retain his integrity which has in recent days come under scurrilous attacks by powerful vested interests hell bent on besmirching the integrity and reputation he painstakingly built over the years.

"This resignation is also to ensure that there is no spillover of these attacks to the president who is working very hard to transform the nation," he said. Nnaji said his resignation gives him the opportunity to go back to his integrated power project.

Reforms may suffer

Already, there are indications the reforms might suffer serious set-backs given that international development partners have expressed displeasure over Nnaji's exit.

Sunday Trust learnt that at a meeting held with the federal government on Friday, development partners including UNIDO, European Union, USAID etc expressed serious concern about the continuity of their commitment to the power sector. A source privy to the meeting said some of the partners were on the verge of shedding tears.

The source said, "Most of the development partners said they were committed to investing in the Nigeria power sector because of Nnaji. They had confidence in him in helping the system work. Now, they are saying they need serious assurances from the federal government that the next minister of power would be able to carry through the initiative."

Nnaji's international track record as a teacher in the United States of America made his job easier when he was in charge to attract the confidence of investors whom the sector so much needs. It is estimated that Nigeria needs $10 billion investment in the power sector annually in the next 10 years to hit the 40,000 Megawatts target.

It was said that the Managing Director of Daewoo Engineering and Construction Company Ltd, a South Korean Company w committed to investing in Nigeria power sector was a student of Nnaji during his teaching days at MIT in America.

During his 15 months in the saddle as minister, the Nigerian government signed a memorandum of understanding with the General Electric to partake as investors in the building of a 10,000 megawatt plant in Nigeria. The rest they said is now history as Nnaji is now addressed as former minister of power.

Nnaji's commitments

On May 15, 2012, Nnaji as a minister signed a power infrastructure upgrade memorandum of understanding (MOU) with two French companies backed by their government to undertake feasibility studies and thereafter select and construct a high voltage transmission line and substations whose maximum value was put at $200million.

The companies are the Electricite de France (EDF) and the Enterprise de Transporte et Distribution D'electricity (ETDE). Nnaji, along with the CEO of the Transmission Company of Nigeria (TCN), Mr O Akinniranye met and executed the MOU with executives of the French companies, Mr. Jean Paul Mairesse of the Electricite de France (EDF) and Mr. Jean Philippe Trin of the Enterprise de Transporte et Distribution D'electricity (ETDE).

Also, on the 4th of July 2012, Nnaji supervised the signing of an MoU with a South Korean Company, Daewoo Engineering and Construction Company Ltd, to facilitate the production of 10,000MW of electricity projects in the country. The company undertook to provide 20 percent equity in the various projects identified under the scheme, in addition to providing expert advice and guidance on electrical, production and construction of power projects to companies wishing to do business in Nigeria under the agreement.

In all, five MoUs were signed by the Nigerian government and various international investors since the launch of the Nigerian power reform road map on August 26, 2010 under the supervision of Nnaji as minister. Others are US Exim Bank to provide $5 billion credit to the Nigerian power sector and with Siemens of Germany to assist in the provision of 10, 000 megawatts of power generation infrastructure in the country and 10-15 percent equity in new power generation stations. Other MoUs were signed with General Electric of the United States and Electrobras of Brazil under identical terms with the one signed with Siemens.

The Nigeria Bulk Electricity Trading (NEBT) otherwise known as the Bulk Trader was established with Engr. Rumundaka Wonodi, as its pioneer Chief Executive Officer. It was created by the National Electricity Sector Reforms Act of 2005 to fight the single biggest risk in the growth of the power sector - the issue of distribution companies which buy power from independent power generating companies but are unable to collect enough revenue from consumers to pay for what they bought.

Privatisation timeline

According to a revised timetable by the Bureau of Public Enterprises (BPE), the transaction timeline for the privatization of the 17 successor companies of the PHCN is as follows: the evaluation of the technical bids would take place between August 14 and 28, 2012. NCP will approve the results of the technical evaluation by September 11, 2012.

It re reads: "The deadline for the short listed bidders for generation companies to submit their letters of credit is September 18, 2012 while October 2, 2012 is the deadline for short listed bidders for distribution companies.

"Consequently, NCP's approval will pave the way for the opening of financial bids of the short listed investors.

"The BPE will, on September 25, 2012, open the financial bids of prospective investors for the generating companies while October 10, 2012 is the date for the opening of the financial bids for the distribution companies.

"The announcement of the preferred bidders for the generating companies is October 9, 2012 while October 23, 2012 is the date for the announcement of the preferred bidders for the distribution companies."

Only time will tell if there was a deal between the presidency and Nnaji before he resigned. Last Friday, while top management of the ministry of power and journalists were waiting to witness the hand over ceremony from Nnaji slated for 3:00pm, word filtered in that President Goodluck Jonathan had invited him for an urgent meeting. The president reportedly sent a car to bring him with dispatch.

The hand over ceremony eventually held at 5:25pm after the meeting with the president. Nnaji may have quit as minister but he may still very much remain in the realm of power brokers in the power sector.

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