The power sector reform, which has entered the most critical stage, might run into a hitch as pending legal, labour and financial issues are yet to be sorted out.
THISDAY learnt that the preferred bidders of the 15 of 17 Power Holding Company of Nigeria (PHCN) successor companies are unhappy over the fact that the National Council on Privatisation (NCP), chaired by Vice-President Namadi Sambo, stampeded them into signing the Transaction and Industry Document (TDI), otherwise known as the Sale and Purchase Agreements (SPAs), when critical legal, financial, technical as well as labour issues had not been resolved.
Pending full and final payment for the successor companies, the signing of the SPAs with the Federal Government last Thursday, signalled the formal transfer of both the ownership and management of the distribution and generation assets to the private sector.
THISDAY gathered that some of the preferred buyers of the PHCN assets had prior to signing the SPAs, complained that the one week notice given them by NCP was not only sudden but grossly inadequate, given that the Bureau of Public Enterprises (BPE), the NCP implementation arm, had in January proposed that the handover ceremony be performed in the second quarter of 2013.
The investors, according to presidential sources, were said to have raised concerns that the invitation for the signing ceremony came only three days after the Presidential Task Force on Power (PTFP), headed by Reynold Dagogo-Jack, had proposed that the signing be held in the second quarter of 2013, to give the relevant parties in the transaction enough time to resolve all outstanding issues.
It was gathered that the vice-president's insistence on the signing, led to sharp disagreements between him and the preferred bidders, who accused him of attempting to railroad them into signing agreements when critical issues were yet to be sorted out.
By the signing last Thursday, preferred bidders were given 15 days to pay 25 per cent of the bid price for the companies and 90 days to pay the remainder, which sources said could jeopardise the power sector reforms.
"In spite of the backslapping and broad smiles before television cameras and government officials, it was evident all was not well at the ceremony," said a source.
According to the source, contrary to reports that all labour issues, preparatory to the privatisation of the PHCN assets, had been resolved, the various unions in the electricity industry said none of the several steps, which the three unions in the power sector had agreed on with the government had been taken.
In an unexpected move, Labour and Productivity Minister Emeka Wogu on February 20 announced that all labour issues relating to the privatisation of PHCN assets had been resolved because "payment of the PHCN employees' N384 billion severance package will start tomorrow (Thursday)."
But describing the statement as political, an official of Senior Staff Association of Electricity and Allied Companies (SSAEAC) said the union was "taken by surprise by the announcement."
Also, a member of the National Union of Electricity Employees (NUEE) said the union was not aware of any effort by the Federal Government to start payment, describing the announcement as "highly provocative".
He stated that none of the several agreements between the unions and the government had been fulfilled.
"Of course, no such payment began on Thursday, so you can see that it was just a political statement, which was meant to deceive the investors," he said.
Last December, the government had accepted to pay the N384 billion as the severance package for PHCN staff, but there is no indication that the Ministry of Finance has backed the payment with cash.
"The Labour Minister must have made the announcement on the eve of the date, which Vice-President Sambo wanted in order to goad investors into signing the agreements with the government on Thursday," noted the chief executive of a consortium, which won the bid for a power generation company (Genco).
"If there are no solid documents, covering to the minutest detail, funding, engineering, gas supply, human capital and the entire gamut of the electricity chain, which is a very complex business everywhere in the world, it means that there are no bankable projects in the privatised power sector in Nigeria.
"No serious investor or financier can part with so much money in a cavalier manner," the investor, who did not want to be named, said.
Aside from the labour and funding issues, THISDAY gathered that there are still some legal issues to be sorted out.
For instance, Geometric Power Ltd, founded by former Power Minister Bart Nnaji, which is nearing the completion of the $500 million Aba integrated power project designed to generate and supply power to the industrial city of Aba in Abia State, has yet to satisfactorily conclude its deal with the BPE.
The company, in an advertorial last week, notified the Federal Government, relevant agencies and other stakeholders of a subsisting lease agreement between it, the Enugu Distribution Company (Enugu Disco) and the Federal Government, which ring-fenced Aba and Ariaria business units within the Enugu Disco and leased to Aba Power Ltd and warned against the purchase, lease or transfer of rights whatsoever in Enugu Disco that include the areas covered in the agreement.
Aba and Ariaria business units of the PHCN were carved out of the Enugu Electricity Distribution Company, long before the enactment of the Electric Power Sector Reform Act of 2005, and handed over to Geometric Power in a landmark decision by the Federal Government to bring the private sector into electricity business in Nigeria, which hitherto had been the exclusive preserve of the Federal Government.
Fearing that the signing of the SPA could jeopardise the operations of the Aba Power Project, managers of the project last week published a caveat emptor in national dailies to remind the Federal Government, its relevant agencies and other stakeholders that both Aba and Ariaria business units were not part of the areas bid by Interstate Consortium when it sought to purchase majority stake in the Enugu Disco.
THISDAY gathered that counsel to Aba Power, Chief Wole Olanipekun, has even approached the court to obtain an injunction to restrain the government from implementing the SPA with Interstate Consortium until all issues arising from the Aba Power Project are straightened out.
Though Geometric Power did not respond to THISDAY enquires about the caveat emptor, a source conversant with the deal simply said: "Geometric Power may not count on the vice-president's impartiality."
The Aba project is scheduled to start commercial operations next month (March), but Sambo had in a memo written in November to the then BPE Director General, Bolanle Onagoruwa, directed the agency to disregard the 2004 MoU and the 2005/2006 lease agreement, ring fencing power supply to the city most famous for indigenous manufacturing.
Onagoruwa's spirited argument that the sanctity of the contract must be respected was said to have led to her removal last November.
The vice-president's memo was said to have elicited reactions from South-east political leaders who quickly mobilised a select group of business leaders from the zone who met with President Goodluck Jonathan on the need to maintain the sanctity of contracts.
The group was led by the Chairman of MTN and founder of Diamond Bank, Pascal Dozie; Professor Anya O. Anya and Chief Christopher Ezeh, Chairman of John Holt Plc in Africa.
Following the January 10 meeting at the State House, in which Sambo was in attendance, Jonathan was said to have directed that the terms of the agreement be respected by all parties.
"The directive came two months after the presidency had on November 12 shocked the business community by announcing that it had unilaterally cancelled the $23.7 million Manitoba Hydro International contract to manage the Transmission Company of Nigeria for three years in the first instance.
"The local and international outcry forced the authorities to reverse themselves within days.
"Nigeria needs investments of $10 billion annually in the power sector for the next 10 years so as to generate 40,000MW by 2020 when its leaders say it should become one of the world's 20 largest economies. Much of the money is expected from offshore sources.
"A nation of 167 million people, Nigeria currently produces some 4,300MW, in sharp contrast to South Africa, a country of some 62 million, which generates 47,000MW that has since 2007 proved inadequate, leading to load shedding or scheduled power outages" the source stated.
"President Jonathan has made the power sector reform the cornerstone of his administration. He has shown personal commitment to its success, but poor policy coordination and the pursuit of personal interests have always remained serious threats to the reform.
"Consequently, there is little confidence among stakeholders. Trust is not just a social virtue, but also the basis of business everywhere and the chief driver of the economic prosperity of nations. When will Nigeria get its acts together?" he asked rhetorically.
However, a source at Interstate Consortium, the Enugu Disco bid winner, said the lease agreement would not affect the business of the company.
He stated that the company would send a formal response to THISDAY enquiries as soon as possible. The firm had after the signing of its SPA said that it would operate with its unique private sector model, which comes with high efficiency and corporate governance standards and set the pace for electricity distribution in Nigeria.
Two members of Interstate consortium - Chrome Group and Powerhouse International Limited - are promoted by billionaire businessman, Chief Emeka Offor, and Mr. Kester Enwereonu respectively.