The Pre-Due Diligence Conference for the re-bid of Afam Power Plc and Kaduna Electricity Distribution Plc has further confirmed the resolve of the Federal Government of Nigeria to privatise all the successor generation and distribution companies of the Power Holding Company of Nigeria (PHCN). It would be recalled that both companies were among the 17 PHCN successor companies that were advertised for sale in December 2010. Both companies, along with the 15 others, went through a full competitive tender process which culminated in the submission of technical and financial proposals in July 2012. However, following the rigorous technical evaluation that all bids received were subjected to, none of the bids received for Afam Power Plc and Kaduna Electricity Distribution Plc scored the minimum 75 percent required to progress to the financial bid stage. This development compelled the National Council on Privatisation (NCP) to order a re-run of the entire transaction as it was not prepared to settle for a second best.
In order to fast-track the process, NCP directed that no fresh adverts would be made and that it is only those who had earlier expressed interest in the power privatisation process and paid $20,000 data room fees that would be allowed to participate in the exercise.
The Pre-Due Diligence Conference provides the bureau with an opportunity to speak directly to potential bidders, update them on recent developments and bring clarity to the transaction and its processes. The essence is also to familiarise the investors with the necessary arrangements for the opening of the physical data room and the commencement of site visits which commenced on Tuesday, March 5, 2013.
A lot of experience has been gained in conducting the transactions for the other five generation companies and 10 distribution companies. This transaction will definitely benefit from that experience. Some of the challenges already addressed include a new tariff order that is more cost-reflective than before, improvement in gas supply and gas infrastructure, finalisation of industry agreements covering gas supply and transportation, electricity transmission and distribution and bulk power purchase.
This does not mean that the electricity industry in Nigeria is out of the woods. It is still facing some challenges in all segments of the value chain. These challenges include low generation capacity, inadequate transmission and distribution infrastructures, poor operational performance, poor revenue collection, inadequate metering, poor billing and electricity theft. Others are poor maintenance culture, inappropriate industry and market structure, unclear delineation of roles and responsibilities. These are the issues that give rise to the reform initiatives that led us to the process we are undertaking today.
Though the challenges facing the electricity sector in Nigeria are many, the Federal Government is committed to resolving them. Hence the committed implementation of the power sector reform aimed at finding a lasting solution to the problems facing the sector at the least possible cost to the Nigerian electricity consumers. The Goodluck Jonathan administration is determined to keep its promise of taking Nigeria out of darkness within the shortest possible period.
It is important to re-state that the reform of the power sector presents enormous opportunities to transform the lives of Nigerians and provide reasonable returns to competent investors.
We want to use this opportunity to urge all participants to play fair and play by the rules. As amply demonstrated by the on-going transaction for the other 15 PHCN successor companies, the NCP/BPE has zero tolerance for non-compliance with the terms of the Request for Proposals (RFP). Bids that are submitted late will be rejected immediately and proposals not submitted in substantial compliance with the terms of the RFP will also be disregarded. Our philosophy is that only the very best is good enough for Nigeria.
Extracted from an address at the Pre-Due Diligence Conference for the Re-tender of Afam Power Plc and Kaduna Electricity Distribution Plc, Monday, March 4, 2013 in Abuja.
BENJAMIN E. DIKKI