Nigeria: Nigeria: Benin Power Distribution Company Sets FG, States On Collision

Lagos — With the threat by three national governors; namely Edo, Delta and Ekiti not to allow Vigeo Power Consortium, the company that won the bid for Benin Distribution Company, to bar it from operating in their respective states, amount seems not to be well with the privatization exercise which is designed to bring in additional investors that will transform the country's power sector.

The governors were disenchanted by the fact that their anointed consortium, Southern Electricity Company Limited lost out in the bid for the Benin Distribution Company, which is of the entities created from the unbundling of the Power Holding Company of Nigeria (PHCN) and slated for sale with others.

The governors, who said the bidding processes conducted penultimate Thursday in Abuja by the federal government was fraudulent and represented some racketeering interest, stated that they opposed the bid winner on the ground that it lacked necessary technical competence and capability to run the company.

Announcing the preferred bidder for the Benin Disco, the Bureau of Public Enterprises (BPE) said Vigeo's commercial bid had an average technical, commercial and collection (ATC&C) loss reduction projection or efficiency ratio of 21.78 %, relative to Southern Electricity's 17.72 %.

Vigeo Power Consortium comprises: Vigeo Holdings (Nigeria), World Utilities Management Company Limited (Nigeria), Africa Finance Corporation (AFC) and North Delhi Power Limited (a subsidiary of Tata Power Delhi Distribution Limited of India) and the Calcutta Electric Supply Corporation Limited (CESC) and GUMCO.

Governors' grouse

The governors posited that Southern Electricity has the capacity to manage 2.78 million customers, while Vigeo has the capacity to manage only 850,000 customers. They said Southern Electricity will operate mainly within rural areas while the preferred bidder will do so mainly in urban areas.
According to them, Southern Electricity has the capacity to operate in 49,590 square kilometres while Vigeo has the capacity to operate in only 510 square kilometres and on the ATC&C loss projections, Southern Electricity scored 10.12 % while Vigeo scored 16.85 %.

Further details of technical proposals submitted by Southern Electricity and Vigeo showed that the capability of the former to handle high tension is 75,237 sq. kilometres, Vigeo 4,758 sq. kilometres, while Southern Electricity has 332 injection sub-stations to Vigeo's 76.Besides, they said Southern Electricity intends to deploy 132,515 distribution sub-stations compared to Vigeo's 3,383 distribution sub-stations, and Southern Electricity has the experience to manage an organisation of over 7,000 employees spread across 50,000 kilometres.

NCP insists amount was transparent

Chairman of the Technical Committee of the National Council on Privatisation, Mr Peterside Atedo at a press briefing in Lagos on Monday insisted that the process that produced Vigeo as the preferred bidder for the Benin Discos was in order and transparent. He said there was no iota of truth in the claim by the governors to show that Vigeo lacked technical ability to run the Benin Disco.

He said the N400billion target the federal government hopes to generate from the privatization exercise may be jeopardized if the governors continually demonstrate their hard stance.He said Southern Consortium has been in the race for the Benin Disco alongside other bidders since September 2011 when they received the Request for Proposals (RFPs) for privatisation.

He said 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. According to him, at the commercial bid opening ceremony, the representative of the company was asked to examine and confirm that the envelope that contained its commercial proposal was intact and he did so on live television before the envelope was opened. He said it is the only out of the 16 consortia that participated in the bid opening to have submitted multiple commercial bids for the same distribution companies.

"Their envelope contained 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. This was a clear contravention of the RFP. We did not make large issue out 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 recommendation to the NCP," Atedo explained.

According to him, the submissions made by the Southern Consortium to the BPE showed that the ownership of the Consortium comprised of members Uttar Gujarat Vij Company Limited (of India) [25% equity of consortium]; Income Electrix Limited (of Nigeria) [25 %]; Smartworks World 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%] .

He said amount the bidders who participated in the bid opening had obtained scores in excess of 75percent in line with section 93 of the RFP. He said NCP approved the privatization strategy for Disco based on the use of ATC and C loss reduction proposal as a basis for core investor selection since 11th June, 2010.

On technical competence and financial capability of Vigeo Consortium, Atedo said three evaluating teams were formed to measure the bids. Each of the teams had members drawn from BPE, Nigeria Electricity Regulatory Commission (NEC), Federal Ministry of Power, CPCS Transcom, NEXANT-USAID-funded power sector consultants providing support to the BPE and NIAF-DFID-funded infrastructure support programme to the Nigerian government. He said officials of the Economic and Financial Crimes (EFCC), the Independent Corrupt Practices Commission (ICPC) and the Directorate of National Security Services (DSSS) as well observed the entire process from bid submission to the conclusion of evaluation.

He said data at the NCP's disposal indicates that GUMCO, a member of the Vigeo Consortium has participated in both the Revenue Cycle Management and National Prepaid Metering programmes since 2006. He said the company as well introduce prepaid metering and billing to the Benin Disco and later extended its operations to Warri, Asaba, Ondo and Ekiti.

He disclosed that it is only 60 % of the equity of the respective distribution companies is being privatized. The balance of 40 % will be owned by the federal government, the national governments within their Disco territory and the staff.

No preferred bidder yet

Atedo, however said no consortium has been announced the preferred bidder for any of the 11 Discos in Nigeria as the committee will still have to subject amount the bids to a "material consistency/feasibility test" before making recommendations to NCP.Chairman, Nigeria Economic Summit Group, Mr Foluso Phillips punctured the governors' claims saying they are trying to stall the privatization exercise despite the fact that amount the bidders were given equal opportunity.

Bismark Rewane, Managing Director of Financial Derivatives Company Limited, stated that private owned firms are far better than public owned. "National monopoly is the worst structure in any country. As long as people pay for what they use, Nigeria will be better off," he said.

Former Executive Director (ED) of the PHCN, Mr Bisi Oyinloye said the process for the selection of the Disco was very transparent and urged BPE to muster enough courage to follow through the entire process.

In a statement, BPE faulted the governors' position, stressing that accusation of a flawed process and irregularities against the privatisation bureau is unfounded and reckless.

The Chief Executive Officer of World Utilities Management Company (GUMCO), a fully owned subsidiary of Vigeo, Mr Abu Ejoor said Vigeo which has been involved in amount public sector initiative in the power sector for the past 11 years has been involved in virtually amount the public-private partnership initiatives in the distribution sub-sector starting from revenue cycle management (RCM).

He said his company installed over 200,000 pre-paid meters in the Benin zone and was in the region managing the process, thus making it the only experienced local player.

Union faults process

President of the National Union of Electricity Employees (NUEE), Comrade Mansur Musa said the exercise was not transparent due to the vote of no confidence passed on the BPE Director General, Ms Bolanle Onagoruwa by the National Assembly.

As it is, no can tell what the outcome of the face-off between the federal government and the embittered governors over Benin Power Distribution Company will be. What is however sure is that Nigerians are ceaselessly watching with keen interest in how government is disposing national assets. Who knows, some pressure group may Occupy Aso Rock if the so-called privatization of the power sector ends in a fiasco.