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Power privatisation threatened as bidders give FG conditions

By on August 15, 2013

The ongoing privatisation of power sector is facing a threat as winners of the 11 distribution companies of the Power Holding Company of Nigeria PHCN, yesterday issued the Federal Government fresh conditions before completing the balance of 75 percent for the bids value.

One of the conditions given by the investors is that the Federal Government must meet the established “condition precedent”.

They also requested for the extension of deadline by one month to September 21, for the payment with just about two weeks to the expiration of the deadline set by the National Council on Privatisation, NCP, for the payment of the outstanding 75 percent bid price.

Ten out of the 11 distribution companies with the exclusion of the Kaduna Distribution Company, who met with Minister of Power, Chinedu Nebo said the deadline of August 21 was not feasible.

Other demands by the bidders represented under the auspices of the Roundtable of Distribution Companies, the Disco Roundtable, are that the government must hand over the assets free of all legacy liabilities. They therefore, asked government to quicken the payment of severance benefits to employees of the defunct PHCN companies to allow them access funds to pay up the 75 percent balance.

The Chairman of the Disco Roundtable, Dr. Ransome Owan, who led the group, told the minister that government’s interactions with PHCN labour unions have remained a source of concern to financial institutions that are willing to lend money to the investors.

He explained that it was necessary for government to finalise the payment of the severance benefits before the stipulated August 21, adding that lenders expected the evidence of payments before funds are released for the completion of the payments.

Owan said: “By March 21, 2013, all the 10 bidders paid the 25 percent down payment and the balance is to be made by August 21, 2013. It is a condition precedent that the discos would be handed over free from all legacy liabilities.

“Our lenders are mindful of this and are reluctant to approve loans and condition draw-down. Therefore, it is vital for full payment obligations to the current PHCN employees be finalised before the long stop date of August 21. Lenders expect evidence of these payments before we can draw down on funds to complete our payments.

“As at now, the discos operate at a loss and buyers would quickly deploy their respective turnaround plans. Therefore, we pray the minister to convene a stakeholders meeting before August 21 to check the progress before the long stop date.

“In addition, the minister should kindly consider the following: conclude all labour issues and meet all conditions precedent before August 21, 2013, assistance in the release of the subsidy contained in the Multi Year Tariff Order (MYTO) model for each of the discos and adequate funding of the TCN”, he stated.

The group also requested for “extended five to 10 years special tax holidays for electricity distribution companies akin to the telecom start-up assistance to mitigate tariff increases and high cost and consider extending the long stop date to September 21, 2013 to allow for the full satisfaction of all condition precedent items of the government.”

Government needs 75% to offset liabilities

Responding, Nebo acknowledged that government was aware of the challenges facing the preferred bidders and had mulled over then before now, to allow for a smooth privatisation transition.

He said that government is banking on the 75 percent balance payment to offset most of its financial obligations in the process, adding that it was at the discretion of the NCP to grant an extension in the payment deadline.

The minister further explained that the ministry will begin the payment of the severance benefits to Distribution workers by next week, after concluding payment to f the Generation workers and PHCN corporate Headquarters this week.

“We are not unaware of the challenges that lie before, some of these issues raised, we have been mulling for the past weeks. We are working to ensure that the condition precedents are completely met before the declaration of the transmission electricity market.

“I do think that we need to realise that there will be some adjustments here and there but everything will still be consistent with the spirit of the reform, going by definite date and timelines as we can see now might not resolve all the problems, we are already experiencing slippages but we are going to address the issues as diligently as we can to ensure that the slippages are kept to a minimum,” he said.

On the 75 percent payment, he said: “you have given us some tasks; on one hand you are asking us to meet up with all the conditions precedent by the 21st of August, and on the other hand, you are telling us that while we meet up with our own, you are not going to be able to meet up with your own, we will do whatever we can but there is no way we can ensure full payment by the end of August.”

He assured that the challenges facing the Transmission Company of Nigeria (TCN), is being addressed, noting that “part of the proceeds from the sale of the NIPP projects, as much as $1.6 billion is being delegated to the improvement of TCN to give us a well deserved transmission network and that should not be your problem now.

He said, “We appreciate and share your concerns but I am sure you know that the process was supposed to have been completed by December, but it didn’t happen, I believe that we should be declaring the transition electricity market open by September, we need you to pay so that we can settle the workers.”

Power bidders Conditions, Vag 5, 14082013

 

 

 

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