Power Privatisation: Investors Give Stern Conditions To Balance Bid Payment

Preferred bidders for the 10 privatised distribution companies (Discos) yesterday gave the federal government tough conditions which must be met before they can pay the balance 75 per cent bid prices.

The investors had already made an initial 25 per cent part payment for the companies and are expected to make the final payment on August 21, 2013 before taking over the utilities in September, the Ministry of Power said.

This position however conflicts with the Bureau of Public Enterprises (BPE) timeline, which indicates that deadline for the payment of the 75 balance expires on September 21, 2013.

Recall that BPE Director General, Benjamin Dikki had recently said deadline for payment of the balance is September 21.

But in a meeting with the minister of power, Prof. Chinedu Nebo, in Abuja yesterday, the investors under the aegis of Disco Roundtable, told the minister that the deadline would not be met unless certain conditions are first met by the federal government.

Leader of the delegation and Chairman of the Disco Roundtable, Dr. Ransome Owan, listed the conditions to include conclusion of labour related issues, release of subsidy contained in Multi Year Tariff Order (MYTO) fund and adequate funding of the Transmission company of Nigeria (TCN).

Others are that government should grant them between five to 10 years tax holiday as was the case with the telecom industry start-up, and to consider the extension of payment deadline to allow for the full satisfaction of all conditions stipulated by the government.

He also listed metering of the grid interface points, testing of the market operators settlement and processes and the constitution of a dispute resolution panel as other conditions which government must meet.

According to Owan, “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 conditions drawn-down.

“Therefore, it is vital for full payment obligations to the current PHCN employees be finalised before the Long Stop Date of August 21, 2013. Lenders expect evidence of this payment before we can draw funds to complete our payments,” he said.

He further pointed out that a cost reflective tariff which guarantees a regulated return and covers all industry payments is not yet producing the desired results due to systematic and structural problems. “If the Discos are unable to cover the cost of the energy delivered then the Bulk trader, TRANSCO and GENCO’s will be adversely affected,” he said.

Responding Nebo noted that government is aware that the Discos are supposed to be handed over free of legacy liabilities and was working to ensure the payment of PHCN workers.

He said by the end of this week workers in the generation and PHCN headquarters would have fully been paid and workers in the distribution companies will begin to receive their payments, but admitted that the payments may not be concluded before August 21.

On transmission, he said about $1.6 billion of revenue realised from the sale of the 10 NIPP’s is being dedicated to funding the TCN to ensure a vibrant transmission network.

On the issue of the tax holiday, Nebo said only the National Council of privatisation can take a decision on that adding that only the Council too can take a decision about extending deadline beyond August 21.

Similarly, the minister told the delegation that until they fully take over the utilities, the MYTO subsidy fund cannot be released to them.

source: Leadership News

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