Power firm bidders may not meet payment deadline

Prof Chinelo Nebo14 August 2013, Abuja – The hope of an early completion of the privatisation of the power sector is being threatened by the inability of the Federal Government to settle all outstanding labour issues at the Power Holding Company of Nigeria, PHCN, and the subsidiary companies unbundled from the utility firm.

The preferred bidders of the 10 electricity distribution companies slated for privatisation on Tuesday demanded that the Federal Government must complete the payment of the severance benefits of the workers of the PHCN before August 21.

Speaking under the aegis of the Roundtable of Distribution Companies, a trade association formed by the successful bidders, they said they might not pay the outstanding 75 per cent of the bid sums for the Discos before the August 21 deadline if outstanding labour liabilities were not cleared.

However, the Federal Government has said it is not feasible for it to clear the N400bn entitlement of the PHCN workers before the stipulated date.

The Chairman, RDC, Dr. Ransome Owan, said the face-off between the government and the labour unions over the payment of the workers’ severance package was making lenders to the preferred bidders apprehensive.

He spoke at the Federal Ministry of Power in Abuja.

Owan said, “It is a condition precedent 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 to be finalised before 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.”

On March 21, 2013, all the qualified bidders for the 11 electricity distribution companies paid the 25 per cent of their respective bid values as down payment for the firms.

The government through the Bureau of Public Enterprises and the National Council on Privatisation had stated that the balance must be paid by August 21, 2013.

Owan, who led other bidders to the ministry, noted that members of the RDC were working assiduously to meet their obligations, but stressed that the incomplete payment of the PHCN workers was a challenge to the body.

The RDC also demanded the declaration of the Transition Electricity Market by the government, saying this 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.

Owan said, “The three condition precedents remain thus: metering of the grid interface point; testing of the Market Operators settlement systems and processes; and constitution of a dispute resolution panel.

“Without the completion of the CPs, NERC cannot advise the Minister of Power to declare the start of the TEM. In essence, the industry agreements (Power Purchase Agreement, Vesting Contracts, and Transmission Network Agreements), which underpin industry revenue, will be deemed illegal and a nullity until the declaration is made by the minister.”

He added that the policy risks made it very challenging for the capital markets inside and outside of Nigeria to support the Discos financially.

Owan urged the government to convene a stakeholders’ meeting before August 21 to check the progress made before the payment due date.

He appealed to the Power minister to assist the bidders with the release of the subsidy contained in the Multi Year Tariff Order model for each of the Discos.

He urged the government to ensure adequate funding of the Transmission Company of Nigeria so that it could efficiently evacuate power produced for delivery to the Discos and avoid stranded investment and little benefit to the customers.

“The government should consider extending the long stop date to September 21, 2013 to allow for the full satisfaction of all condition precedent items by the government,” the RDC chairman added.

In his response, the Minister of Power, Prof. Chinedu Nebo, said the government was not unaware of the challenges confronting the preferred bidders and had started paying off the PHCN workers.

He said, “We want to assure you that at the rate that these payments are being made; by the end of this week, almost all the workers of the electricity generation companies would have been paid. And then we will begin with the Discos.

“We will do whatever we can, but there’s no way we can ensure full payment by August 21. Though we have started payment, the August 21 date may not be possible and we will discuss that at the stakeholders’ meeting.”

Nebo said the government had resolved to adequately fund TCN and assured that funding for the company would not be a problem.

“Part of the proceeds of the 10 NIPP projects, as much as $1.6bn, is being dedicated for the improvement and funding of the TCN so as to give a well-deserved transmission of power in the country,” he said.

Nebo said the Federal Government would from next Monday commence the payment of the workers of the Discos, adding that it decided not to pay in block so that the development would not have a run-off on the economy.

“We don’t want a situation where kidnappers and robbers will start attacking these workers for some of them have even received threatening letters from these men,” the minister added.

Nebo further stated that it was not in his powers to extend the closing date for the payment of the 75 per cent balance by the preferred bidders, but that he would convey the demands of the association to the appropriate quarters.

– Okechukwu Nnodim, The Punch

About the Author