NationalMirror Privatisation: FG insists power bidders must pay N258bn tomorrow by UDEME AKPAN on Aug 20, 2013 | Posted under: Highlights, News, news PHCN workers get N119bn benefits The Federal Government has insisted that August 21 remains the deadline for payment of the outstanding $1.67 billion (N258.5bn) or 75 per cent of the bid value of the 15 electricity generation companies, GENCOs, and electricity distribution companies DISCOs put up for sale under the power sector privatisation programme. The Bureau of Public Enterprises, BPE, which made this known yesterday, stated that the deadline was already stipulated in the Request for Proposal, RFP, which the preferred bidders were familiar with. BPE’s Head of Public Communications, Mr. Chigbo Anichebe, in a statement yesterday said: “The deadline for payment of the remaining 75 per cent remains Wednesday, August 21, 2013 as stipulated in the Request for Proposal, RFP. He said that in compliance with the tenets of transparency and accountability, the bureau would continue to strictly abide by the terms and conditions in the RFP and instead that “the power sector reform process is on course.” The BPE stressed that President Goodluck Jonathan revived the reform and privatisation of the power sector with the launching of the Power Sector Reform Roadmap in August 2010 “as a major plank of the Transformation Agenda of his administration.” BPE noted that all the preferred bidders for the 15 Power Holding Company of Nigeria, PHCN, successor companies had earlier met the deadline for the payment of the mandatory 25 per cent of the offer value of their bids as at the deadline date of March 21, 2013. It said a total of $559,445,573.96 representing 25 per cent of the bid value had been received from 14 bidders for 15 successor companies. Anichebe noted that in line with the agreement reached with the PHCN labour unions dated December 12, 2012; the Federal Government commenced payment of benefits due to the staff on August 1, 2013. He said that as at Friday, August 16, 20,304 of the 40,000 staff of PHCN had been cleared and paid their severance benefits totaling N119, 176, 731,492.88k. Anichebe explained that the payment was being handled by the Office of the Accountant-General of the Federation, OAGF. The preferred bidders for the DISCOs had a few days ago threatened that they would not pay the outstanding 75 per cent of the bid price until the Federal Government settled all liabilities to the PHCN employees, triggering fears that the privatisation programme would run into a hitch. The bidders were also asking government to subsidise the operations and grant them tax holidays to help cover anticipated losses due to certain “structural problems” that would prevent them from operating profitably during the initial post-privatisation period. PHCN workers had threatened to scuttle the privatisation process if their severance benefits were not paid in full. However, the Ministry of Power has begun payments to PHCN staff, starting with workers of the generating companies and PHCN headquarters. But there are fears that this will not be concluded by tomorrow when the bidders are expected to pay the 75 per cent balance and take over the companies. Speaking during a roundtable with the Minister of Power, Prof. Chinedu Nebo, last week, the DISCO bidders, led by Dr. Ransome Owan, had insited that one of the conditions precedent for the conclusion of the privatisation was 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 drawdown. Therefore, it is vital for full payment obligations to the current PHCN employees be finalised by the long stop date of August 21, 2013. “Lenders expect evidence of these payments before we can draw down on funds to complete our payments”, he had said. The investors had also expressed concern over the Transition Electricity Market, TEM, which they said would herald the start of contractual arrangements in the power sector and the automation of billing and metering operations of the market operator in line with market rules. They had also said that the conditions precedent that were yet to be fulfilled include the completion of metering of the grid interface points; testing of the market operators settlement systems and processes and constitution of dispute resolution panel without which the Nigerian Electricity Regulatory Commission, NERC, could not advise the Minister of Power to declare the start of TEM. The group had noted that the industry agreements, including power purchase agreements, vesting contracts and transmission network agreements, which underpinned industry revenue, would be deemed illegal and a nullity until the declaration was made by the minister. They had noted that the policy “makes it very challenging for local and international lenders to support our effort financially.” Owan had pointed out that at the moment, DISCOs were operating at a loss and buyers would quickly deploy their respective turnaround plans, but a cost reflective tariff, which guarantees regulated return and covers all industry payments, was not yet producing the desired results due to systemic and structural problems. He had , therefore, obsereved that if the DISCOs were unable to cover the cost of the energy delivered by the bulk trader, the Transmission Company of Nigeria, TCN, and the generation companies, would be adversely affected. Owan had also called for the release of the subsidy contained in the Multi-Year Tariff Order, MYTO, model for each DISCO. The group had called for adequate funding of the TCN to enable it to adequately evacuate power produced for DISCOs. They had also urged the Federal Government to grant them five to 10 years special tax holidays for electricity and consider extension of the long stop date (payment deadline) to September 21, 2013 to allow for full satisfaction of all condition precedent items by the government. Nebo had however said that though some of the conditions precedent were outstanding, government would ensure that the conditions were fully met before the declaration of the TEM. He had said: “I would like to share with you that the Federal Ministry of Power is fully aligned with your dream to light up Nigeria. We are not unaware of the challenges that are on the way. These issues raised we have been mulling for the past several weeks, especially with the issue of the Transmission Company of Nigeria. “We also realised that some of the conditions precedent are outstanding and we are working assiduously to make the sure that these conditions precedent are fully met before the declaration of the TEM. “We understand the challenges that you have raised and we realised we are all learning in this process. And because it is still in the infancy stage, we need to nurse the infancy to maturity and one of the things we need to is to ensure that we present an enabling environment and where necessary to inject the adrenaline needed by the preferred bidders to ensure that they realise their dream, which we are all hopeful with the reform agenda. “We understand that you are supposed to inherit companies that indeed free from all legacies liabilities and we are working on that. We also want to assure you that at the rate that these payments are being made to staff of the various PHCN successor companies that you are acquiring, by the end of this week almost all the GENCOs would have been paid, and then, we begin with the DISCOs. “There are obvious reasons that we have chosen to settle the GENCOs and the PHCN headquarters and then move on the distribution companies. I will not delve into this, until the stakeholders meeting which we have already decided to hold within the next couple of days. “With regard to the transition electricity market, three conditions precedent that you mentioned metering of the grid, constitution of a dispute resolution panel receiving attention, be rest assured that we not oblivious of these things.”
Posted on: Tue, 20 Aug 2013 08:23:24 +0000
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