PHCN BID: Crying govs’ firm cheated – Atedo

By Clara Nwachukwu
LAGOS—It was alleged, yesterday, that Southern Electricity Distribution Company, the consortium floated by four governors, to bid for the Benin Electricity Distribution Company, DISCO, cheated by submitting two bids during the commercial bid opening ceremony.

Also, despite emerging the highest bidder for four  of the DISCOs, Integrated Energy Distribution and Marketing Company, promoted by former President Abdulsalami Abubakar, will only have access to two of the companies after passing the stress test or consistency test.

The governors were said to have submitted a “primary bid” and an “alternate bid” for the same Benin DISCO, apparently to give them a better chance of winning the bid, which failed as the two bids fell short of what was presented by Vigeo Power Consortium, which clinched the bid.

Addressing journalists in Lagos, yesterday, on the unfolding drama now trailing the bid process, the Chairman, Technical Committee, National Council on Privatisation, Mr. Atedo Peterside, said decision on the governor’s alleged fraud will be decided by the NCP before month end, during which it would also announce the bid winners for the respective DISCOs.

Emmanuel Uduaghan, Olusegun Mimiko, Adams Oshiomhole and Kayode Fayemi

At the opening of the commercial bids in Abuja, last week, six firms emerged bid winners for 10 DISCOs  created from the unbundling of the Power Holding Company of Nigeria, PHCN. The development signalled another era in Federal Government’s efforts to hand over the electricity sector to private investors in order to make them more efficient.

Flouting the rules

Peterside, who explained that his team needed to clarify on the four allegations made by the governors, noted that “Southern Consortium is the only one of the 16 consortia that participated in the bid opening to have submitted multiple commercial bids for the same Disco.

“Their envelope contained two different commercial bids, both of which were signed by a Mr. Matthew Edevbie. The first bid was dubbed the ‘primary’ bid, while the other was dubbed an ‘alternate’ bid.”

Atedo Peterside

The committee chair added that the alleged fraud was “a clear contravention of the Request for Proposal, RFP. We did not make a big issue of this on live TV because both the primary and the alternate bids fell below the bid submitted by Vigeo, and so neither bid would alter Southern Consortium’s ranking on the large screen. Instead, this matter was brought to the attention of the Technical Committee of NCP, which considered the breach and made recommendations to the NCP.”

Governors’ allegations

Four state governors- Adams Oshiomhole of Edo State; Emmanuel Uduaghan of Delta State; Kayode Fayemi of Ekiti State and Olusegun Mimiko of Ondo State, last week, described the award of the Benin DISCO to Vigeo, as a total fraud and unacceptable.

However, the NCP classified the governor’s declaration into four issues bothering on transparency, the use of Aggregate Technical, Commercial and Collection, ATC&C loss reduction strategy as a criteria, the technical and financial competence of Vigeo Power, and investments by the respective states in the Benin DISCO.

Changing the rules of the game

Peterside, flanked by  other NCP members, including the Director General, Bureau of Public Enterprises, BPE, Ms. Bolanle Onagoruwa, responded to each of the allegations. He said that the governors’ actions  were tantamount to wanting to change the rules after the game had been played, especially as the rules were set two years ago and were accepted by all.

“They had ample opportunity to participate in the various investors’ fora that BPE held to communicate with potential bidders and obtain feedback. Following the release of RFPs, Southern Consortium undertook due diligence on Benin Disco, met with various officials of BPE and asked questions that were promptly and comprehensively answered. They never made any allegations of lack of transparency until after the race had been run via the commercial bid opening ceremony, which was televised live.”

He added: “Before the bids were opened, the ground rules of the bid opening were read out and circulated and it was made clear to all that the ground rules were in accordance with the RFP, which all the bidders were given the opportunity to comment upon and accept before they submitted their technical and commercial proposals.”

With regard to the use of the ATC&C loss reduction strategy, the committee chairman explained it was a deliberate policy of the NCP, “aimed at addressing the identified problems within the distribution segment of the sector,” in view of the very high loss rations of the DISCOs, which was put at between 35 and 40 per cent.

Furthermore, he said, “bidders were told from the onset that they would compete on the basis of a trajectory of technical, commercial and collection loss improvements for the first five years of operation. Furthermore, this method is built around the Multi Year Tariff Order (MYTO) 2 issued by the NERC – the industry regulator.”

He added that the “NCP approved the privatisation strategy for the Discos, based on the use of ATC&C loss reduction proposal as a basis for core investor selection, as far back as 11th June, 2010. The advertisements that ran in December 2010 soliciting for Expressions of Interest (EOIs) from prospective core investors emphasised that the BPE would use this strategy.”

Also, he recalled that the BPE solicited for feedback from investors on the policy, and governors’ consortium did not raise any objections on it until now.

The committee chairman further noted that apart from the bid process being very transparent and in line with due process, the governors’ remark on the competence of the Indian company was ironical, considering that they were also relying on the expertise of another Indian company to run the DISCO.

He explained that pre-qualification was done on the basis of the following:

* Experience in operation and maintenance of distribution companies

* Experience in developing countries;

* Technical and investment plan;

* Management and staffing—human resources; and

* Financing plan and ability to raise finance.

“Incidentally both Southern Consortium and Vigeo had competent technical partners from India,” he added.

In the NCP records, the ownership of the Consortium is comprised of seven members, including:

*Uttar Gujarat Vij Company Limited (of India) [25% equity of consortium,

*Income Electrix Limited (of Nigeria) (25 %)

*Smartworks Global Resources Ltd (of Nigeria)(8.3%)

*Pinnacle Power Projects & Services Ltd (of Nigeria) [31.7%]

*Fountain Holdings Limited (of Nigeria)[3.33%]

*Citadel Nominees (of Nigeria)[3.33%], and,

*NJ Services (of Nigeria)[3.33%] .

From the above equity composition, Peterside calculated that the state governors own only about 10 per cent of the consortium, while the larger percentage of close to 90% is owned by private sector companies that were not owned directly or indirectly by them.

Finally, with regard to investments by the respective states, he reiterated that the essence of the privatisation is not to transfer assets from one level of government to another, but from public sector to private sector to enhance efficiency.

Besides, he noted all the state governments were already part owners of the respective DISCOs in their domains by virtue of the fact that only 60 per cent of the DISCO’s equity were put up for sale, while the remaining 40 per cent would be shared among the Federal, State and PHCN workers.

“The valuation will be determined by the electricity regulator, NERC, working in collaboration with the state governments,” he said and for the states it will be done on pro-rata basis.

Two DISCOs per bidder

Peterside noted that no matter the bid results, only the NCP chaired by Vice President Namadi Sambo, reserved the right to declare bid winners.

He also used the opportunity to clarify growing concerns that Integrated Energy won four of the bids. He said:  “The rules made it clear that you can bid for more than one DISCO, but you cannot win more than two even if you won in all the bids.”

Accordingly, Integrated Energy will only have two of the DISCOs if it passes the stress test. Furthermore, even if it passed the test, it cannot have both the Eko and Ikeja DISCOs, because according to the committee boss, “we do not want Lagos to come under monopoly, so the same bidder cannot win the two because they are also congruent.”

Not denying that some bidders may have had an idea that they would win the bid, Peterside noted that based on the ATC&C pre-qualification, those who scored above the 75 per cent cut off mark like in Yola and Port Harcourt DISCOs and who were sole bidders, knew they had won the bid and indulged in premature celebrations.