SALE OF PHCN: Abdulsalami beats Tinubu, Otudeko

tinubu abdulsalam

•Wins 4 power distribution companies in Ikeja, Eko, Ibadan, Yola •As FG rakes in N197bn from sales

tinubu abdulsalamFORMER head of state, General Abdulsalami Abubakar’s company, Integrated Energy Distribution and Marketing Limited, won four distribution companies that were created out of the Power Holding Company of Nigeria (PHCN).

They are Ibadan, Eko and Ikeja distribution companies with 17.46 per cent, 21.43 per cent and 22.51 per cent respectively.

Also, the company, as the sole bidder, won the Yola distribution company with 18.58 per cent.

Interstate Electrics, owned by Emeka Offor, won the bid for Abuja Distribution Company with 21.62 per cent, while Gbolade Osibodu’s Vigeo Power Consortium won Benin Disco with 21.78 per cent.

Others on the winning side include Aura Energy Limited, which won Jos Disco; Sahelian Power SPV Limited won Kano Disco, whereas Port Harcourt Disco was won by Power Consortium with 19.55 per cent.

Action Congress of Nigeria (ACN) national leader, Senator Bola Ahmed Tinubu’s Oando Consortium and Oba Otudeko’s Honeywell Energy Resources which bid for Eko Disco and Ikeja Disco lost to Integrated Energy Distribution and Marketing Limited in the two competitions.

The chairman, Technical Committee, National Privatisation Council (NCP), Mr Atedo Peterside, noted in his speech that the bids for the four distribution companies were not like the usual bids as the Federal Government would not be placing much emphasis on money, even though certain amount of money would still be paid.

According to him, the ranking of the bidders would be based on the Aggregate Technical Commercial and Collection (ATC&C) loss reduction proposals submitted to the BPE along with technical proposals and the amount to be paid by each distribution company had been determined by the Nigeria Electricity Regulatory Commission (NERC) and included in the Multi Year Tarrif Order that became effective on June 1, 2012.

He said the council would use a fit and proper examination to identify serious companies which not only wants to make profit but wants to provide services.

“The use of this method for the selection of core investors for distribution companies is a clear departure from the NCP’s usual practice of awarding companies to the bidder who makes the highest financial offer to purchase an asset after being technically qualified,” he said.

“Furthermore, ATC & C loss levels will provide Nigerian consumers and other stakeholders with specific parameters with which to measure the outcome of the power sector reform and privatisation.

“Indeed, successful bidders are contractually bound to deliver on the ATC&C loss reduction levels they have submitted. Accordingly, the bidder offering the highest ATC & C loss reduction is in a leading position subject to the ground rules.

“The regulator will not adjust tariffs upwards to accommodate the inability of a Disco operator to deliver on the ATC & C levels that they commit to. Rather tariffs will be adjusted downward annually to reflect the agreed ATC & C loss levels irrespective of the operator’s ability to meet its contractual obligation,” he said.

Peterside also disclosed that the envisaged total proceeds from the sale of 60 per cent of the 10 Discos being offered for sale is N197.25 billion, adding that the NCP, as a matter of deliberate strategic choice, raised the qualification bar to ensure that only operators who were technically qualified and financially sound could make it to the finishing line.

“The NCP is fairly confident that this process will produce the most appropriate core investors and fulfill the government’s objectives of rapid transformation of the sector,” he said.

Earlier, Director-General of Bureau of Public Enterprises (BPE), Ms Bolanle Onagoruwa, had said that in transmission, BPE has retained 100 per cent ownership of the Transmission Company of Nigeria but with a management contract in place that would bring in Manitoba Hydro International as a management contractor, which would be supervised by a capable Board of Directors from both the public and private sectors. Also, in the distribution sector, the council had focused on adopting a method that would maximise rapid infrastructure improvement.

“In essence, we have focused less on proceeds from asset sales, even though we will receive substantial proceeds. Instead, we have emphasised the need for preferred bidders to display the ability to immediately bring in investments that will remove the very high loss profiles of all the 11 distribution companies. In other words, preferred bidders will be selected on the basis of efficiency improvements, that is, the reduction of Aggregate Technical, Commercial and Collection (ATC&C) losses that they can achieve over a five-year period.

“In designing the model for the selection of the preferred bidder, BPE has taken into consideration the fact that the current Aggregate Technical, Commercial and Collection (ATC&C) losses sustained by the various distribution companies are estimated at between 35 and 40 per cent of the power wheeled to them. This level of losses is unsustainable, and if not halted will continue to make the Nigerian Electricity Supply Industry absolutely unviable for full and unsubsidised private sector participation.

Furthermore, this privatisation strategy is built around the Multi Year Tariff Order (MYTO 2) issued by the Nigeria Electricity Regulatory Commission (NERC), which essentially sets out the commercial and economic indices that provide the financial model for the entire sector. MYTO 2 stipulates the annual investment requirement, allowable operational expenditure approved rate of return on equity and other allowable expenses for each distribution company. In addition, the valuation of the distribution companies’ regulated asset base, as determined by NERC, is the basis for the equity payments to be paid by the preferred bidder for each company,” she noted.

Culled from Nigerian Tribune