Vanguard (Lagos)

13 December 2012

Nigeria: PHCN - FG Shifts Ground, Agrees to Pay Off 54,000 Staff

ALL workers of the Power Holding Company of Nigeria, PHCN, totalling about 50,000 and 4000 unregularised staff will be paid off as part of the full privatisation of PHCN's assets, the Federal Government and organised labour have agreed.

The implication of this is that PHCN workers that will be absorbed by new owners will have a new condition of service in line with agreement with Labour.

Vanguard gathered that government needs over N400 billion as against less than N200 billion earlier earmarked by it to settle the workers severance pay which terminated on June 1, 2012.

Similarly, the government has agreed that the total accrued gratuity as at June 30, 2012 shall be paid to active PHCN workers in accordance with the defined benefit scheme stipulated in PHCN 2010 conditions of service. This is a major u-turn on the part of government which had agreed that the Pension Reform Act, PRA, 2004, had abolished gratuity.

These were parts of the agreement reached, Tuesday night, after over eight months of protracted negotiations.

Payment of gratuity had been the crux of the unresolved labour issues that had pitched organised labour against government, stalling the privatisation of PHCN assets and government reform agenda in the power sector.

Roll call at the meeting

The meeting held at the Secretary to the Government of the Federation, SGF, office was attended by the SGF, Senator Anyim Pius Anyim; Minister of Labour and Productivity, Chief Emeka Wogu; Minister of State for Power, Hajiya Zanab Ibrahim Kuchi;and Acting Director-General, Bureau of Public Enterprises, BPE, Mr. Benjamin Dikki (on the government side); President-General of the Trade Union Congress of Nigeria, TUC, Comrade Peter Esele; Deputy President of Nigeria Labour Congress, NLC, Comrade Joe Ajaero, representing Comrade Abdulwaheed Omar, President of NLC; President-General of Senior Staff Association of Electricity and Allied Companies, SSAEAC, Comrade Bede Opara and Deputy President of the National Union of Electricity Employees, NUEE, Comrade Isaac Abegye, representing Mansur Musa, President of NUEE (on Labour side).

The agreement

The agreement released at the end of the meeting read: "This agreement is made this 11th day of December 2012 between the Federal Government of Nigeria, FGN, represented by the Secretary to the Government of the Federation on the first part and the Nigeria Union of Electricity and Allied Companies SSAEAC both herein referred to as labour unions within the Power Holding Company of Nigeria, PHCN; the Nigeria Labour Congress, NLC, and the Trade Union Congress, TUC, all of the other part and represented here in by their responsible officers hereinafter indicated.

Whereas: The FGN is currently pursuing a policy of reforms in the power sector in Nigeria in line with the Power Sector Reform Act 2005 and other extant policies of the FGN. Pursuant to the said reforms and subsequent privatisation of the Power Holding Company ofNigeria, PHCH, by the FGN, it has become imperative to settle the labour liabilities of the current staff of PHCN. Since May 2011, the two parties have been involved in series of discussions and negotiations with a view to resolving the said labour liabilities. At the meeting of the parties held today, 11th December 2012, the parties agreed on the specific heads of claim to be deliberated upon in respect of the aforesaid liabilities, as set out in details below.

"The parties have agreed that the following items will constitute the heads of agreements which will be implemented by the FGN in final resolution of all claims by the labour unions in the PHCN in relation to the said labour liabilities. Total accrued pensions as at June 30, 2007 shall be paid in accordance with the defined benefits scheme stipulated in the PHCN 2010 conditions of service.Twenty five per cent is payable to exiting staff of PHCN while 75 per cent shall be paid into retirement savings accounts. Total accrued gratuity as at June 30, 2012 shall be paid in accordance with the defined benefit scheme stipulated in PHCN 2010 conditions of service. Fifteen per cent pension contributions shall be paid from July, 2007 through June 30, 2012 in accordance with the provisions of the pension reform act 2004.

"Severance shall be paid as 20 per cent of total accrued benefits (being the sum of accrued pensions as at June 30, 2007, accrued gratuity as at June 30, 2012 and 15 per cent pension contribution from July 1, 2007 through June 30, 2012. Repatriation allowance shall be paid as five per cent of annual pensionable emolument. Long service award shall be paid in accordance with the provisions of PHCN 2010 conditions of service. 13th month salary shall be paid in accordance with the provisions of PHCN 2010 conditions of service. Three months salary in lieu of notice shall be paid to all active employees of PHCN that have served for more than 10 years and one month salary in lieu of notice for employees that have a period of less than 10 years in service."

Chief negotiator's recommendations

It would be recalled that government appointed Chief Negotiator/Conciliator in its face-off with PHCN workers, Comrade Hassan Sumonu, in his recommendations to the government in October, advised that workers be paid their gratuity, but in line with PHCN's conditions of service.

The Chief Negotiator/Conciliator had dismissed argument by government that PRA 2004 abolished gratuity in PHCN or any other sector, saying there was no reference to gratuity in the act.

The disagreement on the modality for the payment of the workers' pensions and gratuity was the major problem between the Federal Government and workers of PHCN.

While agents of the government had contended that the workers were entitled to pension and gratuity up to June 30, 2004, and thereafter the provisions of PRA 2004 should apply, the unions on the other hand argued that gratuity should be paid in accordance with the extant PHCN Conditions of Service.

They argued that contrary to the views of government, the Act was not against the payment of gratuity.

Supporting the unions' position, Sumonu in a report submitted to government urged the authorities to consider the unions' demands because the Pension Reform Act 2004 did not abolish the payment of gratuity as a separate component of retirement benefit.

The chief negotiator noted that the Act never abrogated the conditions of service of PHCN which was signed in March, 2010, and asked government to pay gratuity to workers in the sector in accordance with the staff conditions of service.

According to the report, on the computation of severance package and benefits accruable to workers, the report recommended "five weeks salary for every completed year of service on basic salary, subject to a maximum of 18 months."

This is against the unions' demand of "five weeks salary for every completed year of service, computed on total emolument and not subject to any ceiling."

Govt shifts ground

Before the agreement, government had insisted that the new Contributory Pension Scheme, CPS, which took effect on July 1, 2004, must be applied to PHCN workers and that gratuity ended with the take off of CPS. But the workers insisted that PHCN in-house pension scheme should be applied and the PRA did not abolish gratuity.

In this agreement, government agreed to extend the payment of workers' gratuity to July 1, 2007. Government will calculate 15 per cent contribution from government and workers from July 1, 2007 up to June 30, 2012, and paid in accordance to the CPS.

While 25 per cent will be paid to the workers, the remaining 75 per cent will be paid into the workers' Retirement Saving Accounts, RSAs.

On the issue of severance benefit, before the SGF took over the negotiation, government was saying it would pay 20 per cent of basic salary, while the unions disagreed.

However, it now agreed that the 20 per cent should now be calculated based on the total value of gratuity and pension.

Contrary to earlier government position, three months' salary in lieu of notice will now be paid.

Pending issue

However, Vanguard gathered that on the issue of 10 percent equity share that should be reserved for workers, government had argued that it should be 10 percent of its equity holding it. But the unions have insisted that it should pay 10 per cent of the total equity share.

It was consequently agreed that the matter should be resolved in accordance with the National Council of Privatisation, NCP Act.

Unbundling of PHCN

After the enactment of the Electricity Power Sector Reform Act, 2005, PHCN was subsequently unbundled into 18 successor companies.

PHCN now comprises: 1)Three hydro and seven thermal generating stations with a total installed capacity of about 6,852MW, with available capacity of 3,542MW (as of 31st July 2010). Each entity has been incorporated as a single-asset generating company;

2) A radial transmission grid (330kV and 132kV), owned and managed by the Transmission Company of Nigeria, with the responsibility of undertaking the system operation and market settlement functions, respectively; and

3) Eleven distribution companies (33kV and below) that undertake the wires, sales, billing, collection and customer care functions within their area of geographical monopoly.

According to the reform/privatisation agenda, competitive tender would be carried out to receive bids from core investor groups (inclusive of competent generation asset owner/operators) for a minimum of 51 per cent of equity in the following successor thermal generating companies:

a) Afam Power Plc; b) Sapele Power Plc; c) Ughelli Power Plc; d) Geregu Power Plc; and a separate concessioning process for the following successor hydro generating companies; e) Shiroro Hydro Power Plc;f)Kainji Hydro Power, Jebba power station is part of Kainji Hydro Power Plc.

Competitive tender will be carried out to receive bids from core investor groups (inclusive of competent distribution asset owner/operators).

The bids will be considered against certain specific criteria that seek to address the strategic policy objectives summarised above.

These criteria, first, are the payment of 51 per cent of the value of the company as determined and incorporated in the Multi Year Tariff Order (MYTO); second, given the levels of investment contained in MYTO proposals on the reduction of Aggregate Technical, Commercial and Collection (ATC&C) losses over a five-year period (note that a bidder who passes the technical evaluation and offers the highest ATC&C reduction proposal shall be designated the preferred bidder); and, third, proposals for investing in expanding the customer base and customer access/coverage area of the various successor distribution companies.

Before the agreement

Meantime, before this agreement, organised labour in the sector had picked holes in the recent bidding of PHCN assets handled by the Bureau of Public Enterprises (BPE) and its supervisory agency, the National Council on Privatisation, describing it as not only flawed, but highly compromised.

Under the Senior Staff Association of Electricity and Allied Companies, SSAEAC, labour contended that the bidding results announced by the BPE was a confirmation of what the unions had largely predicted that the whole essence of the privatisation exercise was to transfer PHCN assets to some few rich Nigerians, mostly fronts of government officials.

Successor distribution coys at a Glance

Abuja Electricity Distribution Plc;

Benin Electricity Distribution Plc;

Eko Electricity Distribution Plc;

Enugu Electricity Distribution Plc;

Ibadan Electricity Distribution Plc ;

Ikeja Electricity Distribution Plc;

Jos Electricity Distribution Plc;

Kaduna Electricity Distribution Plc;

Kano Electricity Distribution Plc;

Port Harcourt Electricity Distribution Plc;

Yola Electricity Distribution Plc

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