Privatisation of GENCOs, DISCOs marks new beginning

The Federal Government has handed over the GENCOs and DISCOs to preferred bidders. UDEME AKPAN who traces the evolution of the sector from the beginning to the present, reports that the advent of the new investors promises to create many multiplier effects in the nation’s economy.

Mr. Femi Salami who lives in Ikosi area of Ketu, Lagos has not witnessed consistent supply of electricity in the past six months. Despite the situation which has compelled him to depend more on private generator at higher cost, his monthly estimated bill from the Power Holding Company of Nigeria, PHCN has increased from N6, 000 to N10, 000.

Salami is not alone. Other consumers also have similar experiences. Take the case of Godwin Ode who occupies a three bedroom flat in Durumi 11, Gariki, Abuja as an example. His monthly bill has increased from N5, 000 to N9, 000 with or without electricity. Efforts aimed at getting the new metres in order to ensure they pay for what they consume have not yet been successful. As Ode pointed out over the weekend in Abuja: “I have paid for the new metre, but it has not yet been installed t me.”

The case of Salami and Ode are not peculiar. They represent the sad experiences of consumers in different parts of the nation. But the situation may likely move from bad to good as the Federal Government seems ready to hand over 15 Electricity Generation Companies, GENCOs and Electricity Distribution Companies, DISCOs to preferred bidders. The development which appears to be President Goodluck Jonathan’s birthday gift to Nigerians as the nation marks its 63th anniversary portends a good omen for consumers.

The Chairman of the National Council on Privatisation, Technical Committee, Mr. Atedo Peterside made it emphatic that: “Nigeria’s power sector will benefit from a major paradigm shift from October 2013 when the effective handover of the bulk of the PHCN Discos and Gencos takes place. In the execution of the privatisation programme, I always favoured strict adherence to rules and argued against the granting of needless waivers and exemptions for minor and sloppy violations even where the rules gave the authorities such latitude to “forgive” minor unprofessional conduct. He remarked that: “Additionally, I believe that an industry that is undergoing major transformation, after decades of incompetence and graft, must be made to rapidly adopt high standards in order to signify to all the participants that it is no longer “business as usual”. In any case, the “win-win” aspect of the reforms arises from the better alignment of goals between the industry players and the consumer, as the disciplined pursuit of revenue and growth by the Discos and Gencos should translate into many more hours of continuous electricity for the consumer who only pays for electricity supplied and consumed.

Peterside optimism seems to be based on the progress so far made on the privatisation process. He maintains that: “Virtually all the preferred bidders have paid for the firms, thus raising hope for the handing over privatized firms. Peterside pointed out that by the payment deadline of 21 August, 2013; private sector core investors had paid a total of $1.130 bn for 60per cent equity controlling stakes in nine Discos (namely Abuja, Benin, Eko, Ibadan, Ikeja, Jos, Kano, Port Harcourt and Yola).

Peterside stated that: “The core investors for the 10th Disco (Enugu) paid their $126m late and so the National Council on Privatisation, NCP directed that they must pay a late penalty fee equal to Libor + 5 per cent for the number of days for which they were in default and the preferred bidder for the 11th Disco (Kaduna), which has a separate timetable, is expected to pay a total of $163m within 6 months, thereby completing the $1.419bn that was originally targeted from the sale of all 11 Discos. He also remarked that: “For the Gencos, a total of $1.077bn was received from the core investors by the same 21st August, 2013 payment deadline date for equity stakes ranging between 51per cent and 100per cent in 4 Gencos (namely Egbin, Geregu, Kainji and Ughelli), while the core investor for the 5th Genco (Shiroro) completed its $111.6m payment a few days late and will also pay a late penalty fee equal to Libor + 5per cent for the number of days for which they were in default.

However, many stakeholders look forward to the eventual placement of the GENCOs and DISCOs in private hands at least a reason. It would mark the effective involvement of players other than the Federal Government in the important sector as it was at the end of the 19th century when the first generating power plant was installed in the city of Lagos in 1898. Available records showed that from 1898 till 1950, the pattern of electricity development was in the form of individual electricity power undertaking located all over the towns. Some of the undertakings were Federal Government bodies under the Public Works Department while some were controlled by native and municipal authorities.

By 1950, the British colonial government passed the ECN ordinance No. 15, thus placing the undertakings under Electricity Corporation of Nigeria, ECN. From April 1, 1972, the ECN and the Niger Dam Authority, NDA were merged to become the National Electric Power Authority, NEPA. Evidence abounds to show that NEPA made efforts to construct some infrastructure to boost generation, transmission and distribution of electricity in different parts of the nation. But it failed to accomplish much because of many problems, especially bureaucracy, inadequate funding, corruption and external influence in the workings of the institution.

These and other factors compelled the Federal Government to not only change its name from NEPA to PHCN but also unbundled it into different companies. Specifically, the 2005 Electric Power Sector Reform Act (EPSR Act) called for unbundling of the firm into 18 successor companies: six generation companies and 11 distribution companies and one national power transmission company. It was the unbundling that culminated in the present privatisation of the GENCOs and DISCOs. The Director General of the Bureau of Public Enterprises, BPE, Mr. Benjamin Dikki, who is optimistic about the privatisation process stated that prior to 1999, the sector was at the lowest point. He stated that of the nation’s 79 generation units, only 19 were in operation, while average daily generation stood at 1,750 megawatts. He commended President Jonathan for embarking on the transformation of the sector through the introduction of new measures, including the creation of the Presidential Action Committee on Power, PACP, which consisted of ministers and heads of agencies that have important roles to develop policy and grant instant approvals for critical decisions.

The PACP, which acts like a dedicated Federal Executive Council, FEC for the power sector, was structured to drive the implementation of the reform of Nigeria’s power sector. In other words, PACP brought together all relevant agencies together to assist in executing its mandates, including the planning and execution of various short-term projects in generation, transmission, distribution and fuelto- power that are critical to meeting the stated service delivery targets of the power reform roadmap.

The government further established Presidential Task Force on Power, PTFP to accelerate the delivery of all the milestones provided in the Power Sector Reform Roadmap (PSRR), which Jonathan launched in August 2010. The PTFP, with the responsibility of developing, monitoring, facilitating and fast-tracking the power sector roadmap delivery targets, set the stage for the irreversible transformation of the power sector from a moribund sector to a viral, self-sustaining and largely privatised Nigerian Electricity Supply Industry.

For effective operations, the PTFP collaborated closely with the Federal Ministry of Power, the Federal Ministry of Finance, the Bureau of Public Enterprises, BPE, the Nigerian Electricity Regulatory Agency (NERC), the Nigerian National Petroleum Corporation, NNPC, the Bureau of Public Procurement, National Gas Company Limited, NGC and the PHCN, among others. The Chairman of PTFP, Engr. Beks Dagogo-Jack, said: “The truth of the matter is that until you have moved the ownership and the management of the sector into the private hands and until the private people have configured their business agenda, created the additional capital that they need to recover the lost capacities in our grid, changed manpower, retooled Information Communication Technology (ICT), start to do those business the way private people do business instead of government, those things cannot be catapulted; there is so much speed you can run that space.”

The Federal Government launched power sector roadmap, which set out a clear implementation plan of the Electricity Power Sector Reform Act (2005). This reaffirmed its commitment to resolve the power crises and set the path for power sector improvement. The government, sequel to this reform agenda, strengthened the Nigerian Electricity Regulatory Commission (NERC), the regulatory body in the industry, for the purpose of providing appropriate regulatory functions for the electricity market in Nigeria. More than that, the Federal Government also held a retreat for potential investors before embarking on road shows in various cities, including London, South Africa, United States of America and other countries to generate interest in the industry. The policies, structures and bold steps generated interest from stakeholders, especially local and foreign investors in the privatisation process, which, a source said, gave hope to Nigerians and inspire confidence in President Jonathan’s Transformation Agenda.

The breakdown of the preferred bidders for the DISCOs as approved by the National Council of Privatisation (NCP), indicated that Kann Consortium won Abuja Distribution Company at $164 million; Vigeo Power Consortium for Benin at $129 million; West Power & Gas for Eko at $135 million; Interstate Electrics Limited for Enugu at $126 million; Integrated Energy for Ibadan at $169 million; NEDC/ KEPCO for Ikeja at $131 million; Aura Energy Limited for Jos at $82 million; Sahelian Power SPV Limited for Kano at $137 million; 4Power Consortium for Port Harcourt at $124 million and Integrated Energy Distribution and Marketing for Yola at $59 million.

For the GENCOs, the preferred bidders included Amperion for Geregu Plant at $132 million; Mainstream for Kainji Plant at $50.76 million with commencement fee of $237,870,000; North-South for Shiroro Plant at $23.60 million with commencement fee of $111 million; Transcorp/ Woodwork for Ughelli Plant at $300 million and CMEC/Eurafric for Sapele Plant at $201 million. Others that scaled through were Integrated Energy Distribution and Marketing Company, the preferred bidder for both the Ibadan and Yola Distribution Companies; Sahelian Power, Kano Distribution Company; Transcorp/ Woodrock Consortium, Ughelli Power Plc; Amperion, Geregu Power Plc; Mainstream Energy Limited, Kainji Power Plc; and CMEC/EUAFRIC Energy JV, which made part-payment for the acquisition of Sapele Power Plc.

At present, the Federal Government seems almost set to handover the privatized firms to preferred bidders. Investigations showed that it has already paid severance benefit to 32,860 personnel of the Power Holding Company of Nigeria, PHCN, representing 69 per cent of 47,913 cleared for the exercise. This is part of the measures aimed at ensuring that the GENCOs and DISCOs are successfully handed over to preferred bidders. The data of the Ministry of Power, which confirmed the development, showed that the government through the Office of the Accountant General of the Federation, OAGF, has paid 32,860 PHCN workers.

The document showed that efforts were still being made to resolve issues concerning about four per cent of the workers who had audit queries, corrections and those with regularisation related issues. It added: “Those with biometric related issues are also being attended to. Their non-capture during the biometric exercise was because they did not make themselves available for capture. It was not government’s fault. However, government is making concerted effort to ensure their capture. They are about 3,000 workers, cutting across all the SCs.

More than that, efforts are also ongoing to test the market operators’ settlement systems and processes, constitute dispute-resolution panel and declare the TEM in the sector. The Minister of Power, in anticipation to the resolution of issues, stated that he would soon formally declare the TEM to enable the investors commence business in different parts of the nation. Nebo reassured all Nigerians and investors of government’s resolve to pursue the transformation agenda to the end and monitor the emerging transition market in order to protect the interest of consumers and investors.

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