PHCN BID: Govs accuse BPE of fraud, reject firm

By Clara Nwachukwu and Henry Umoru
ABUJA— Four states,  yesterday, rose against the award of Benin Electricity Distribution Company to an Indian Company, Vigeo, describing  it as  a total fraud and unacceptable.

Governors Adams Oshiomhole of Edo State, Emmanuel Uduaghan of Delta State; Kayode Fayemi of Ekiti State and Olusegun Mimiko of Ondo State said the privatisation process was a racket.

Emmanuel Uduaghan, Olusegun Mimiko, Adams Oshiomhole and Kayode Fayemi

Vigeo Power Consortium has, however, put up a strong defence, arguing that in view of the reputation of companies under the group, which included the African Finance Corporation, AFC, there was no way it could be involved in unethical transactions.

Speaking with journalists, yesterday, in Abuja, at a joint press conference, the governors, who faulted the entire bid exercise conducted by the Bureau for Public Enterprises, BPE, alleged that the process saw the company, which did not win, being given the distribution company to manage, adding that the  procedure was  fraudulent and failed credibility test.

As a result, the governors noted that since they were not considered in the process as host states, they were fully prepared to stop the bid winner, Vigeo Power Consortium from operating in their respective states.

Governors’ verdict

Edo, Ekiti, Delta and Ondo states bid for the Benin DISCO under the name, Southern Electricity Distribution Consortium, but Vigeo Power won  a process they  described as suspicious and lacked transparency, adding that it goes contrary to President Goodluck Jonathan’s talk about transparency, openness and rule of law.

According to them, “the entire process was a racket that’s inconsistent with running a transparent government. The BPE used a set of criteria that have never been used before.

“The figures put forward by Vigeo were shady and we observed that funny things started happening even before the bids were opened. We know the importance of power and we cannot allow a mediocre to take over the destiny of our people.

“A number of technical issues are at stake in this exercise. The winners of the bid have little knowledge about the environment in which they want to operate. The BPE manipulated the process in favour of the preferred bidder.”

According to the governors, besides lacking the technical know-how to operate the company, sponsors of Vigeo do not have the required financial capability to handle the project, adding that having invested huge taxpayers’ money from their various states in the electricity distribution projects, they are not going to sit by and watch their people’s investments go down the drain.

The governors  wondered how Vigeo’s technical partner, NDPL with operational scope of 510 square kilometres managed to win a bid to operate a 57, 000 square kilometres service territory in an area like the Niger Delta region without any knowledge of its volatility.

They said Vigeo does not even know the area, yet they want to do something in five years that they have not been able to do in 11 years in an urban 500 kilometre territory they are currently operating in.

“Our consortium(Uttar Gujarat Vij Company Ltd- India) is led by the industry leader in India covering 4328 villages and 43 towns. It won the Gold Shield Award for the Year 2011 for utility excellence, posting the highest loss reduction ever in Asia (6.6 percent in 2010) and (10.12 percent in 2011).”

The four state governors also accused the BPE of attempting to further cripple the power sector by manipulating the bid process in favour of individuals with the “right connection” but without the required financial muscle and technical know-how to operate the project.

The governors further alleged that the bid winners quoted forged figures and cooked up the books in order to win, and stressed that the people in their states would be made to suffer if the manipulation was allowed to stand and that the government of the day would also suffer the backlash.

They added: ‘’In our region, you cannot succeed in operating the utility without the participation of the state governments, knowledge of the environment and relationship with the different stakeholders like the youths, community leaders and others. Our consortium passed all these tests but others did not.

“Our states have invested heavily in power generation, transmission and distribution across the length and breadth of our respective states as we recognise the importance of power as the precondition for socio-economic growth and industrialisation of our states.

“It was for this reason that we participated in the bid process and came out as the most technically competent with the consortium that is most suited to the peculiarities of our region. The BPE should not play with our collective future.

Experts urge governors to lose gallantly

However, some experts who commended the transparency in the opening of the commercial financial bids conducted by the BPE on Tuesday urged the four state governors to adopt the spirit of sportsmanship with regard to the result of the bids.

They noted that other state governments, which also participated and lost in the bids, have not condemned the process because they lost.

A former Executive Director, Power Holding Company of Nigeria, PHCN, Mr Bisi Oyinloye, told journalists in Lagos that the selection process for the winners of the DISCOs was very transparent, and urged the BPE not to be daunted by the governors’ criticism and see the process to the end.

He said: “From what I saw on the television, the process couldn’t have been more transparent; the guidelines were given to everybody and they also took a risk. Some quoted low loss rates, while others quoted high loss rates. So, I don’t know why the people that lost out are kicking against the process.

“Nigerians will always be critical, but the truth is that everyone was given the guidelines and they all had equal opportunities.”

In his opinion, what the BPE and governors should worry about is whether the bid winners will be able to meet their loss rates.

Also speaking, the Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, commended the Federal Government for opening up the power sector to private firms.

He argued that “Private owned firms are far better than public owned ones. State monopoly is the worst structure in any country. As long as people are paying for what they are using, Nigeria will be better off.”

A former Head, Transmission and Systems Operations, PHCN, Mr. Abayomi Adekunle, expressed surprise at the governors’ attack, saying, “I am surprised that some of the governors are raising eyebrows over the selection process. There is no way anybody could have gone behind to influence the process. The exercise couldn’t have been more transparent. You have to be an entrepreneur to commit funds to be able to meet the loss target used in judging the top bidders. This is what will guarantee good staff and remuneration that will reduce the loss ratio.

“The governors lost because they did not want to commit funds to be able to accommodate the loss. But they still have 30 per cent, so I don’t see any reason why they should be worried,” he said.

Promoters of Vigeo Consortium

Vigeo Power is chaired by Mr. Victor Gbolade Osibodu, husband of the Managing Director, Union Bank Plc, Mrs. Funke Osibodu, with Mr. Abu Ismail Ejoor, as Business Head, Power Division, and has the following members:

*Vigeo Holdings Limited (‘VIGEO’)   Consortium Lead and Equity member

*Global Utilities Management Co. Ltd (‘GUMCO’) Equity member (Local)

*African Finance Corporation (‘AFC’)  Equity member

Technical Partners

*TATA Power Delhi Distribution Limited (‘TPDDL’), Technical Service Providers for Benin DISCo

*The Calcutta Electric Supply Corporation Limited (‘CESC’) Technical Service Providers for Ikeja DisCo

*Global Utilities Management Company Limited (GUMCO) providing Technical Service Provider on the commercial side.

Consultants/Advisers

PWC, India – Transaction Advisers

Banwo & Ighodalo – Legal Advisers Advisers.

Accusation reckless, unfounded — BPE

Reacting sharply to the governors’ accusation, a spokesman of the BPE, Mr. Chukwuma Nwokoh, said the accusations of a flawed process and irregularities were unfounded and reckless, adding that the process was transparent and credible.

“The accusation of a flawed process and irregularities against the BPE in the privatization of PHCN distribution companies by the governors are unfounded and reckless. Our process was transparent and we were guided by the provisions of the request of proposals for the transaction.”

Vigeo insists on capacity

Vigeo Power said it could not be lacking in technical capacity as being accused because the consortium is made up companies with track record of successful performance.

Global Utilities Management Company(GUMCO) which is its local technical partner has been involved in virtually all the Public Private Partnership initiative in the Distribution Sub sector starting from Revenue Cycle Management, an outsourced Management Contract  which the company participated and ran Shomolu, Ikorodu and Ojodu District  of Ikeja Disco between 2002 and 2007. During this period the company was involved in the entire revenue cycle management from metering to revenue collection, assisting the zone to boost its revenue collection and reducing commercial losses.

In 2006, GUMCO under the National Prepaid Metering Program introduced Prepaid Metering and Billing to Benin Electricity Distribution Company. It started from Benin City and later extends its operations to Warri,  Asaba,  Ondo and Ekiti. Today GUMCI has presence in all the 4 states in Benin DisCo helping PHCN in the management of its commercial operations including vending management.  What the company does it to bring management and investment into improving the billing and collection of discos.