28 January 2013

Nigeria: Power Reform - FG Delays U.S.$23 Million Manitoba Contract

The management contract for the Transmission Company of Nigeria (TCN) which was awarded to Canadian firm, Manitoba Hydro International, is yet to be activated following government's reluctance to hand a schedule of delegated authority to Manitoba to enable it take over full control of TCN.

The management of the TCN was contracted to Manitoba Hydro at the sum of $23 million for a period of three years, and was supposed to have commenced on September 1, 2012.

But LEADERSHIP gathered at the weekend that high level interest politics over the control of the market operator and power shift was hindering the contract from being followed through by the federal government.

It was gathered from a presidential source that although a board had been announced for TCN, it is not yet constituted.

According to the source, "the contract has been approved but the people (Manitoba) have not fully taken off. There is no issue with the contract other than reluctance to get them to work. If government appoints a contractor, it means government in its wisdom thinks that a management contractor is the right thing to do for TCN."

While advising government to allow the Manitoba team do a full takeover of TCN, he noted that there were people who did not want the firm's team take over for many reasons.

"There are issues over market operator and, as far as I am concerned, the market operator should be in their (Manitoba) hands. Market operator carries the money and invoicing of transaction. So the key thing is not even the board; government has done well to get the board announced, but the management has to be in place," he said.

The source, who did not want to be named because of the nature of the matter, noted that having a Nigerian TCN chief executive officer (CEO) and a Manitoba TCN CEO created an unhealthy uncertainty and lack of clarity of who to deal with in the market.

According to him, "if the Nigerian team were good enough, they should have been left to stay. It was because of capacity deficit that we are bringing in Manitoba. They are coming only for the fact that they have the capacity to turn things around; so if they are not being allowed to take over, if they must still work under the shadow of the Nigerian people, then it's a waste of time. The reason why you have a management contract is because you believe you have a management problem," he said.

He stated that the main issue was about power shift and control of the market operator, noting that Manitoba would always insist that the market operator pay money according to market rules, because it was coming from a disciplined background, a fact that might not go down well with some people.

When contacted, the CEO of Manitoba/TCN, Mr. Don Priestman, confirmed that his team was yet to be given a delegated authority to take over full control of TCN.

Asked reasons for the delay, he said, "I don't know; I have not been told anything officially or unofficially about it. We were supposed to take over in September 2012, but that hasn't happened. We have been ready for the past five months but we don't know why government is not giving us authority; they have not told us why we can't start or the cause of the delay."

He, however, stated that two licences were given to Manitoba for the management of TCN and market operator respectively, adding that TCN had been neglected financially for too long and was in dire need of infrastructural and staff training intervention among others. He also disclosed that Manitoba had only been gathering data since September, the report of which would be necessary in running TCN when they eventually take over.

Although Priestman declined to comment on whether Manitoba would still go ahead with the contract if market operatorship was taken out of its hands, an expert told LEADERSHIP that once that component was removed from Manitoba's contract "then the contract would have been fractured, and it is no longer a contract."

He explained that if that component was pulled out, Manitoba would see it as frustrating the contract, adding that it was better for government to leave it as it was because it showed transparency - that they would not interfere with the money.

The expert, who pleaded anonymity, said government should be reminded that the international community was watching, "so tampering with the contract now will send a virus to the whole reform and create fear in the minds of the investors."

Warning that Manitoba might pull out and ask for a huge sum as damages, he advised the president not allow invisible hands to tinker with the contract because doing so could jeopardise the entire ongoing privatisation, with investors likely to develop cold feet about committing their money in this all-important sect.

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