Dawn of a new era?

New owners of the recently privatised electricity generation and distribution companies formed from the unbundled Power Holding Company of Nigeria, PHCN, finally take over, signaling the completion of a major milestone in the President Goodluck Jonathan administration’s power sector reform

Finally, the curtain was drawn on a major phase in the Federal Government’s power sector reform with the physical handover of the 14 of the 15 power Generation and Distribution Companies (GENCOS and DISCOs) to the new owners across the country last Friday.

The event, which technically marked the cessation of the Power Holding Company of Nigeria (PHCN) as a legal entity, had been threatened by rumours of planned disruption by electricity workers, who are still battling with the Federal Government on their severance packages, but last minute negotiations checkmated the workers’ planned onslaught.

Minister of Power, Prof. Chinedu Nebo, who spoke at the offi cial physical handover ceremony of the Abuja Electricity Distribution Company to its new owner, Kann Utility Consortium Nigeria Limited, stated that the government had paid N360bn to workers of the defunct PHCN.

The minister said “PHCN has essentially ceased to exist. We now have (electricity) distribution, generating and transmission companies. So it is no longer PHCN. For instance, this one is Abuja Electricity Distribution Company and is owned by Kann Consortium. So they are no longer PHCN and it is no longer business as usual, but business unusual because people are expected to deliver.”

Nebo said the Federal Government and the two key workers’ union leaders in the sector, the Senior Staff Association of Electricity and Allied Companies, and the National Union of Electricity Employees, reached an amicable agreement on Thursday to peacefully handover the power fi rms to their new owners.

“Agreements have been reached. Please never in the history of this country has a government kept its word in issues like this as has been demonstrated by the present administration.

“Already, N360bn has been paid out. The remaining N30bn or so is in the pipeline and all the issues of certifi cation, biometric capture and making sure that clearance is done are being completed. Government is on it and the date has been fi xed for some as November 15, while November 30 is for others. I have given my word and I am saying that no worker will be short-changed,” Nebo said.

Elsewhere in Jos, Plateau State, Jos Electricity Distribution Company (JEDC) was handed over to Aura Energy Limited, an international electricity company that bought the outfi t.

Managing Director of JEDC, Fidelis Obishai, described the development as a landmark feat in the quest for stable electricity, adding that “so many governments had tried to privatise the power sector without success, so we want to commend President Goodluck Jonathan for taking the bull by the horns.’’

He added that the decision to privatise the power outfi ts was to re-energise the sector and make it effective as he urged electricity workers to see the development as a challenge to put in their best toward stable power supply.

Obishai described the sale of the power outfi ts as a child of necessity, and thanked labour unions for ensuring that the exercise was concluded without labour casualties.

He advised the new owners to focus on training and retraining of workers for easy transition from the public to the private sector.

Tukur Modibbo, the Chairman, Aura Energy Limited, expressed happiness that electricity workers had embraced the power reforms, and particularly lauded their cooperation in the sale and takeover processes. “We learnt that PHCN workers are against the sale of the power outfi ts, but what I have seen here are workers who are ready to ensure its success. I want to advise the workers to brace up to work in a suitable environment that will reward merit, excellence and hard work, where promotion will be based on quality, rather than the number of years in service,’’ he said.

Modibbo said electricity workers had always endured dangerous environments with so much attacks and harassments by people who had no knowledge of the workers’ modus operandi.

Vice President Namadi Sambo, who also doubles as chairman of the National Council on Privatisation, (NCP), challenged core investors in Nigeria’s power sector to transform it into a world class industry in terms of quality of service and customer satisfaction.

Sambo, who was represented by John Jegede, the Permanent Secretary, Ministry of Solid Minerals at the hand-over of the Kano Electricity Distribution Company to the core investor, Sahelian Power SPV Ltd, said the Federal Government would not hesitate to sanction any investor found wanting.

“The Nigeria Electricity Regulatory Commission and the Bureau of Public Enterprises (BPE), will continually monitor the operations of the successor companies. It would not hesitate to sanction any core investor that does not deliver on the performance agreement that was executed with the government,” Sambo said.

Umaru Mutallab, Chairman of Sahelian Power, assured the general public of the company’s readiness to improve power distribution in the zone, which comprises Kano, Jigawa and Katsina States.

Sambo noted that the successful handover was made possible by President Goodluck Jonathan’s unparalleled leadership and commitment to ensure that there was provision of stable power by the present administration to people.

Sambo explained that the handover was borne out 14 years of painstaking efforts by NCP and the Bureau of Public Enterprises, noting that Nigeria would not attain its desired economic growth without adequate power supply.

Sambo said that the critical programme began in 1999 with the inauguration of the Electricity Power Implementation Committee which led to the development of the National Electricity Power Policy of 2001.

He explained that the enactment of the Electricity Power Sector Reforms Act of 2005, and the establishment of PHCN were to reinforce the repeal of the defunct NEPA Act.

Sambo said that the new Act made it possible to create 18 companies by unbundling PHCN into three categories namely generation six companies, transmission one company and the distribution 11 companies.

He said that 2005 Act changed the legal and regulatory environment for the power sector in Nigeria and sought to create a sustainable electricity supply industry to the country.

According to the Vice President, the reform is a necessary tool for laying a solid foundation for sustainable power generation and service effi ciency in the sector.

Sambo said that the opening of the industry to private hands would create job opportunities, improve effi ciency also engender private sector investment among others.

He said that the challenges facing the sector were enormous as well as its benefi ts, noting that government would create enabling environment that would suit the investors.

In Lagos, Dr. Olusegun Aganga, Minister of Industry, Trade and Investment who represented Sambo in handling over Egbin, Ikeja and Eko Electricity Distribution companies to the new owners, KEPCO Consortium and West Power & Gas, said that the participation of the private sector would bring about higher generation capacity.

Sambo said that the handing over would bring about cost effective power stations and improvement in electricity distribution. “The challenges facing the electricity sector in Nigeria are enormous, but we are equally convinced that the opportunities in the sector are enormous.

“The Federal Government is committed to create an enabling environment that will sensitise private investors to take on the challenges,’’ he said.

Sambo said that the power reform programme had become imperative to improve effi ciency, reduce losses and cost and stressed that the reform would lead to increased access to electricity. He however stressed that both the Nigerian Electricity Regulation Commission (NERC) and Bureau of Public Enterprises (BPE) will continually monitor the operations of the successor companies.

“These agencies will not hesitate to sanction any core investor that does not deliver on the performance agreement with the government,’’ Sambo added.

The Chief Executive Offi – cer, Eko Electricity Distribution Company, Oladele Amoda, said that the privitisation of the power sector was a good development. Amoda said the task ahead, no doubt might appear quite intimidating, but with the courage of the fi rst step being taken today, no doubt would succeed.

“We cannot but also congratulate the Federal Government for this landmark achievement. What appeared like an impossible task when it began almost a decade ago is today ending on a very happy and hopeful note. The transparency of the whole process left no one in doubt about the sincerity of government and its manifest adherence to global best practice,” Amoda said.

The Eko Disco Investor, Charles Momoh, said the company had the responsibility to light up Lagos and keep it, saying that “this is the task before us, which we must do and do profi tably’’.

According to him, the investor, West Power & Gas, is committed to spending over $250 million (about N38 billion) on the station in the next two years.

“We are going to invest in metering, cleaning up the system, cablings, transformers and making sure that everything is in line with what we have specifi ed. It’s not going to be enough, but we will start with that. Onestep at a time. Our strategy is to continue to improve the system and eventually we will get there,’’ Momoh said.

However, the Federal Government has given extended payment grace of three months to CMEC/Eurafric, the preferred bidder of Sapele Generation Company to pay up the balance of $21 out of the bid price of $201 million.

The extension, according to NCP, followed requests made by the company to allow it complete the payment after the deadline set by the government.

Samuel Ortom, the minister of state for trade and investment who spoke after the 7th NCP meeting held at the Presidential Villa, Abuja on Thursday, stated that government has granted the preferred bidder an extension of three months from October 31, 2013.

It would be recalled that the Sapele GenCo had encountered some challenges which made it impossible for the preferred bidders to receive certifi cates of ownership presented to the new owners by President Goodluck Jonathan.

The NCP had in October 2012 announced the winners for the 10 distribution companies and fi ve generation companies as preferred bidders for the purchase of 60 per cent of the distribution assets of the unbundled PHCN.

Vigeo Power Consortium emerged the preferred bidder for the Benin Distribution Company, while KANN Consortium Utility Company Ltd was approved as preferred bidder for the Abuja Distribution Company. West Power & Gas emerged beats Honeywell to emerged the preferred bidder for the lucrative Eko Disco.

Interstate Electrics Ltd emerged as the preferred bidder for Enugu Distribution Company with Eastern Electric Nigeria Ltd approved as the reserve bidder while the Ibadan Distribution Company went to Integrated Energy Distribution & Marketing Ltd as the preferred bidder.

New Electricity Distribution Company (NEDC)/KEPCO won the bid for Ikeja Distribution Company while Aura Energy Ltd won the Jos Distribution Company; even as the Kano Distribution Company went to Sahelian Power SPV Ltd.

4Power Consortium emerged the preferred bidder for Port Harcourt Distribution Company, while Yola Distribution Company also went to Integrated Energy Distribution & Marketing Ltd.

For the Gencos, Amperion Power Distribution Company Limited with a bid of $132 million was approved as the preferred bidder for the core investor sale of 51 per cent shares of Geregu Power Plc, while Mainstream Energy Solutions Limited, which offered an annual fee of $50,760,665.18 and a commencement fee of $257,000,000, was chosen as the preferred bidder for the concession of Kainji Hydro Power Plc.

The NCP also approved that North-South Power Ltd, which offered an annual fee of $23,602,484.87 and a commencement fee of $111,654,534, as the preferred bidder for the concession of Shiroro Hydro Power Plc.

The privatisation body also approved that Transcorp/ Woodrock/Sumbion/Medea/ PSL/Thomassen, with a bid of $300 million as the preferred bidder for the core investor sale of 100 per cent shares of Ughelli Power Plc; while CMEC/ EURAFRIC Energy JV Consortium with a bid of $201,000,000 was chosen as the preferred bidder for the core investor sale of 100 per cent shares of Sapele Power Plc.

For now, with the takeover by private investors, expectations of better and improved service delivery are high, as Nigerians which have lived under the yoke of perpetual epileptic power supply for years are seeing the new arrangement as the beginning of a new dawn.

However, analysts say the transition would not be totally smooth after all, as there are expectations that the new owners would have to contend with some teething problems, most of which were probably not envisaged at the due diligence stage.

In fact, Professor Nebo sounded a note of caution last week when he explained that there might be some teething issues such as an increase in electricity tariff as soon as the new power owners commenced operations in earnest.

Nebo said that the challenges will arise because the present billing system was not cost refl ective but assured that the problems would abate with time.

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