Anxiety as new owners take over electricity firms today about 11 hours ago • Investors allegedly shopping for buyers • Lament N15m daily interest on loans over delay • Firm regulation required, says World Bank chief • Govt, Labour reach truce BEYOND the euphoria of the handover in Abuja today, fresh worry pervaded the energy sector last night over the ability of the new owners of the nation’s electricity generation and distribution utilities to muster the huge technical and financial resources required to turn around the facilities in the post-privatisation era. The fear that Labour would disrupt the handover was dispelled as government and representatives of electricity workers last night agreed that the event should proceed. The Minister of Power, Prof Chinedu Nebo, had earlier urged agitated electricity workers who had threatened to disrupt the handover to allow the process to be completed. Shortly after the statement from Nebo, Permanent Secretary of the Ministry of Power, Ambassador Goodknows Igali, emerged from a late meeting with Labour to resolve the ongoing impasse with electricity workers over their severance pay, to announce that the parley was successful and that the handover would proceed uninterrupted. Nebo said that the payment of severance entitlements to the workers was 90 per cent completed and the rest would be done soon. He said the payment process “was irreversible, and could only roll to a natural completion point.” Some stakeholders at the weekend described the electricity privatisation as a huge scam, after all. A stakeholder, who did not want to be named but has sufficient intelligence about what is going on in the electricity sector, alleged at the weekend: “The plants were sold at giveaway prices to same old foxes who are now searching for real investors to buy from them.” There have been strong allegations that some of the new owners are merely fronting for some “politically exposed persons (PEP)” who will either later sell off the plants, collect huge amounts and hands off, or give monthly revenue targets to the fronts and remain behind the scene and continue to have robust bank accounts. But some of the new owners dismissed the fear over resale last night as they were upbeat over the takeover prospects today as confirmed by the Director-General of the Bureau of Public Enterprises, Mr. Benjamin Dikki. Vice President Mohammed Namadi Sambo, who doubles as Chairman, National Council on Privatisation (NCP), will this morning at the headquarters of the Power Holding Company of Nigeria (PHCN) hand over successor companies to new owners. There was fear last week that the handover might be delayed for government officials in PHCN to get some funds from PHCN while the new owners would be counting their losses. Information made available to The Guardian at the weekend indicated that the investors are already incurring a huge interest on loans they collected to finance investment in the corporations. While labour settlement is given in official circles as the major reason for the repeated delay in handover, there is the fear that the daily revenue still going into government and personal coffers may be playing a “spoiler role.” For the Executive Director, Citizens Centre for Integrated Development and Social Rights, Emeka Ononamadu, it would be too much to expect any miracle from the new owners. He, however, called for a regime of strong regulation to be led by the people to avoid hitches that have always followed this kind of exercise. He said in an interview: “I think this handover is being done in low key, which breeds suspicion. First, not much was done, as promised, to raise the level of power production and distribution before the sale. Second, the opaque nature of this privatisation clearly shows how unaccountable those who have been saddled with the business of the sale have gone about it. “What I do know is that Nigerians are weeping now more than before, not because the privatisation is entirely wrong, but because the policy experts at NERC (Nigerian Electricity Regulatory Commission) have decided to betray Nigerians by forcing every electricity consumer to pay a fixed rate whether they are supplied with any electricity or not. This is in addition to the way private electricity property have been forcefully (through lawmaking) taken away from them and handed to the rich buyers without any compensation. Nothing built on nothing will stand. This means the exploitation of communities, citizens and residents will continue after the takeover, I mean, on a larger scale.” He added: “I have the feeling that the greatest sabotage this government may face is in electricity. They have to watch it by getting Nigerians to become monitors and regulators. I have the feeling that government does not know that they need the support of every Nigerian, whether at home or abroad, to make out success and stem the tide of sabotage from the power sector.” A lot of firms, including Daily Times Nigeria Limited, Oku-Iboku Newsprint Company, and Aluminium Smelter Company, Ikot Ekpene, have been bought and ruined by new owners and nothing has happened to the latter who did not adhere to performance agreement despite the provision of sanctions in the BPE purchase agreement clauses. But to douse tension and hold their heads high, some of the new owners have dismissed the fear about the resale of the utilities, promising, instead, that they would turn them around in the nearest future. The Managing Director of Kann Consortium Utility Company Ltd, the new owners of the Abuja Distribution Company, Mr. Neil Croucher, assured stakeholders of the ability of his firm to live up to expectation. Croucher told The Guardian: “We are ready and prepared. Also, we are committed to a long-term involvement, so no plans to sell.” The Chairman of the Distribution Companies Roundtable, the umbrella body of the new owners of the nation’s distribution company, Dr. Ransome Owan, the pioneer Chairman of NERC, stressed that though the agreements permitted them to sell to an extent, such moves must be approved by the Bureau of Public Enterprises (BPE) and the regulator. He also ruled out any plans to sell off. He said in an interview: “...no one plans to offload their assets. The share sale agreement does provide for them to sell incrementally up to nine per cent in five years subject to the approval of the BPE. After that, new market realities would come to play with the oversight of the regulator as well.” Government officials were not very definite on the issue at press time. The Head of Public Communications, BPE, Mr. Chigbo Anichebe, in response to The Guardian’s inquiries said: “What some of the investors paid for are shares in the companies and I would imagine that they would be governed by CAMA (Companies and Allied Matters Act) and EPSRA (Electricity Power Sector Reform Act).” Responding to a question on whether the law permits the new owners to sell, Nebo, told The Guardian: “I do not think so, since government stills own a good percentage of the assets.” The new owners’ anxiety rose last night as there was hope that the handover could take place despite initial cynicism. Citing what he described as a huge interest, which the new owners are paying on the loans they collected for the firms, Owan hoped that the November 1 handover date would not become a moving target. He told The Guardian at the weekend: “Based on my understanding as the Disco Roundtable Chairman, the buyers, both Discos and Gencos, are quite eager to take over the assets. The enlargement of time by the seller to hand over beyond August 21, 2013, which was the Long-stop-Date when payment in full was due and paid, has created serious problems for the new owners and enormous financial burden. “It is also not clear how the government/seller and the regulator will treat the huge interest expense and cost for no fault of the new owners. If handover holds on November 1, that would be about two and a half months of interest payment and no revenue for the buyers. Some are paying over N10 million and N15 million per day on interest alone, among other carrying cost.” He went on: “What would be fair and equitable is for the seller and all parties to recognise the extra cost as prudent and recoverable since the assets have not been handed over according to the contract terms due to yet-to-be completed condition precedent items such as full payment of labour demands. This is a key regulatory bargain or compact that the buyers entered into, that is their ability to expect a guaranteed rate of return for their investment from the approved electricity tariffs for wholesale and retail power in the nation. “That can only be achieved where buyers take over and control both cost and revenue. Neither of which has happened. And that is where the problem arises. In my humble opinion, this is a position of merit, and buyers would be correct to make affirmative appeals where they would be heard. “While government has made heroic strides in paying enormous sums to settle labour issues, one would expect some reciprocity. One more major outstanding issue is when the Transition Electricity Market would become effective. But that could be worked out while owners gain access and arrest the situation with the business turnaround plans approved by government. Further delay is dangerous to the already fragile and precarious state of the power sector.” Meanwhile, Lead Energy Specialist at the World Bank, Erik Fernstrom, has called on the NERC to seriously supervise the loss reduction plans of the new distribution companies, and a better response rate for consumers’ complaints. He told The Guardian in an interview: “We have been actually supporting NERC as they started off five to seven years ago and I must say that I am impressed with how far they have come. We have to keep in mind that even in developed markets, I come from Sweden, the deregulation of the power market even 20 years on raises a lot of debates about how the market should be operated, what should be the pressure point on the operator, and so on. This will not go away, you will still be debating the power sector and regulation, I promise you years from now. “But what NERC has done right and what we expect from them is to deploy the best applicable experience to the Nigerian context. You cannot take regulations from the UK, or Sweden or the U.S. and just apply them to Nigeria.” He continued: “You have to look at where we are in terms of the grid and the performance of the grid and try to find applicable experience. So, the focus on loss reduction, which is the focus of the bid for the disco, would be something that NERC will supervise in terms of distribution companies’ performance. We believe that it is the right one at this stage. We also believe that NERC’s focus on customer service is the right one. There will be challenges short-term in terms of living up to those standards for distribution companies. But I see that the customers, if they see the right direction and the willingness of these companies to improve, they will be patient with them coming through up to standard. But we need to see much better response rate for complaint. We need to be faster in terms of connecting people that are paying the fees and wanting to better their businesses and households. We need to hold distribution companies accountable. “If you increase the tariff, why are you increasing it? Are you putting in more investment? Are you giving much better service? Are the fuels and input materials costing more? In that case, yes, it is fair to pay higher price. We pay higher price for other goods that we buy in the market when it costs more to produce them. There is nothing different with electricity. But I think that NERC was nominated a few days again as one of the most transparent institutions in Nigeria by some agency, and I can say that from an observer point of view that the fact that the module, even the excel sheet for how the tariff was calculated was put on the web for anybody to look into in detail by the regulator is very commendable and shows a level of openness that I don’t think that we might have seen in the power sector and I don’t think that we have seen it in many sectors.” The Guardian confirmed that in July this year, many operatives of the NERC were at the University of Florida, U.S. where they undertook an intensive training for weeks on the intricacies of regulating the electricity sector.
Posted on: Fri, 01 Nov 2013 09:27:38 +0000
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