This Day (Lagos)

23 October 2012

Nigeria: FG to Earn N400 Billion From Sale of PHCN Companies

Photo: Chris Kirchhoff
Electricity pylons.

The Federal Government is expected to realise close to N400 billion from the divestment of 60 per cent equity in the 18 successor companies created from the unbundling of the Power Holding Company of Nigeria (PHCN), Chairman, Technical Committee of the National Council on Privatisation (NCP), Mr. Atedo Peterside, has said.

It also emerged Monday that Southern Electricity Distribution Company Ltd, one of the contenders for the Benin Distribution Company (Disco), submitted multiple commercial bids for the same disco, in clear violation of the Request for Proposals (RFPs) provided by the Bureau of Public Enterprises (BPE) to all bidders.

Making the disclosure at a press conference in Lagos Monday to refute allegations of corruption in the bid process made by Edo, Ekiti, Delta and Ondo State governors, Peterside said it was regrettable that such a damaging allegation was being made at a time when the nation was undertaking its largest and most complex privatisation transaction ever.

He said the divestment from the discos could raise proceeds close to N400 billion, which could come from senior citizens who most Nigerians have phenomenal respect for.

He added that he had the mandate of Vice-President Namadi Sambo, who is the NCP chairman, to speak on the issue alongside the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, and the BPE Director-General, Ms. Bola Onagoruwa, revealing that of all the consortiums that participated in the bid opening, Southern Electricity was the only one that submitted multiple commercial bids for the same disco.

The governors of Delta, Edo and Ekiti States had at a joint news conference in Abuja last week, vehemently rejected the choice of Vigeo Power Consortium as the preferred bidder for the Benin Disco and described the bid processes organised by the BPE as "highly fraudulent, not transparent and representing some racketeering interests".

Part of their contention was that Vigeo lacked the necessary technical competence and capacity to run the Benin Disco.

Specifically, the Governor of Edo State, Adams Oshiomhole, had claimed that the process was rigged to favour Vigeo as Southern Electricity scored 898 points to Vigeo's 847 points during the technical evaluation of the bids and ought to have emerged the preferred bidder.

However, Peterside disclosed that Southern Electricity's envelope was discovered to have contained two different commercial bids, both of which were signed by one Mr. Matthew Edevbie.

He said: "The first bid was dubbed the 'primary bid', while the other was dubbed an 'alternate bid'. This was a clear contravention of the RFP.

"But 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.

"Instead, this matter was brought to the attention of the Technical Committee of NCP, which considered the breach and has made recommendations to the NCP."

While reaffirming that the entire transaction followed due process and was governed by the provisions of the RFP, Peterside noted that close to 90 per cent of the seven members that make up Southern Electricity comprises private sector companies that are not owned directly or indirectly by the governments of Delta, Edo, Ekiti and Ondo States.

Responding to the allegation of lack of transparency, Peterside noted that Southern Electricity had been in the race for Benin Disco alongside other bidders since September 2011, when they received the RFPs for the privatisation process.

He explained that the consortium had ample opportunity to participate in the various investors' forums that BPE held to communicate with potential bidders and obtain feedback, pointing out that the consortium never made any allegations of lack of transparency until after the race had been run via the commercial bid opening ceremony, which was televised live on both NTA and AIT.

Giving a detailed rundown of the process, Peterside explained that during the commercial bid opening, the representative of Southern Electricity was asked to examine and confirm that the envelope that contained its commercial proposal was intact, and he did so on live TV before the envelope was opened.

The same process, he said, was observed for every other bidder at the event and that as the loss reduction targets for each bidder were read out, they were captured on the multimedia screen, and immediately ranked in descending order for everyone to see.

"Before the bids were opened, the ground rules of the bid opening were read out and circulated and it was made clear to all that the ground rules were in accordance with the RFP, which all the bidders were given the opportunity to comment upon and accept before they submitted their technical and commercial proposals," he said.

On the Aggregate Technical, Commercial and Collection (ATC&C) loss reduction targets, Peterside stated 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, he said bidders were told from the outset that they would compete on the basis of a trajectory of technical, commercial and collection loss improvements for the first five years of operations.

The method, he added, was built around the Multi Year Tariff Order (MYTO) 2 issued by the NERC.

"It is important to emphasise that all the bidders who participated in the commercial bid opening had obtained scores in excess of 75 per cent when the 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 proposals as a basis for core investor selection, as far back as June 11, 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 Electricity knew the rules of the race before it joined the contest," he said.

He revealed that Southern Electricity did not raise any concerns about the use of this strategy even when the BPE solicited feedback from prospective investors about the bid process and the industry and transaction documents last year.

Responding to allegations that Vigeo Power lacked the technical competence and financial capacity to manage the power asset, Peterside explained that three evaluating teams were formed to evaluate the technical bids and that the bids were assigned to the teams by balloting to ensure that no evaluator had prior knowledge of which bid he/she would evaluate.

He said some of the criteria evaluated were: Experience in operation and maintenance of distribution companies; Experience in developing countries; Technical and investment plan; Management and staffing-human resources; and Financing plan and ability to raise finance.

He said both Southern Electricity and Vigeo had competent technical partners from India, had met the RFP requirements, 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.

Besides, he said officials of the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices Commission (ICPC) and Directorate of State Security Services (DSSS) observed the entire process from bid submission to the conclusion of evaluation.

"On the allegation of Vigeo having little knowledge about the environment in which it wishes to operate, this is not and could not logically be a requirement of the RFP since there has never been a distribution licensee in Nigeria apart from the Federal Government-owned distribution companies.

"In any event, the information at our 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 Electricity has such a record," he said.

On the Benin Disco comprising states that had invested in the power sector, Peterside explained that in recognition of efforts of states and local governments' contribution in the power sector, the balance of 40 per cent stake will be owned by the federal and state governments within that disco territories, through a special purpose vehicle (SPV) to be created by the states, as well as the staff of PHCN.

According to him, the exact percentage that the states will get will vary depending on the valuation of their previous investments, adding that the valuation will be determined by the industry regulator, NERC, working in collaboration with the state governments.

"In a nutshell, the state governments will be equity partners with any preferred bidder for a disco which operates in their territory," he added.

Ads by Google

Copyright © 2012 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.

InFocus

Nigeria Approves Energy Privatization Bids

Electricity pylons.

The National Council on Privatisation has approved 14 preferred bidders for the Power Holding Company of Nigeria in its ongoing privatisation programme. Read more »