By Emma Ujah
The journey to the privatization of the 11 Distribution Companies created from the unbundling of the Power Holding Company of Nigeria, PHCN, a product of the defunct National Electric Power Authority, NEPA, started in December 2010 when the National Council on Privatisation, NCP, through its secretariat, the Bureau of Public Enterprises, BPE, advertised for Expressions of Interests by prospective investors willing to take up majority stakes in each of the companies.
180 EOIs were harvested in March, last year, in response to the advertisement. Only 80 were short-listed, after evaluation by the bureau and the Technical Committee on the NCP which currently has investment banker, Mr. Atedo Peterside as Chairman.
At the deadline for the payment of the data room access fees, 72 out of the 80 shortlisted bidders each paid the mandatory $20, 000 fee to purchase the Request for Proposals, RFP, in order to have access to the data room and proceed to the next stage of the transaction. The 72 bidders were eventually pre-qualified to bid.
This number was further whittled down to 16 bidders through a process which Mr. Peterside claimed was transparent.
According to him, “by the bid submission deadline of 5pm on 31st July 2012, the BPE received 54 proposals from pre-qualified bidders”.
The TC Chairman announced at the opening of the commercial bids for the DisCos on October 16, 2012, that three committees were formed to evaluate the bids that were received. Each of the committees had seven members drawn from the following agencies: BPE; Nigeria Electricity Regulatory Commission, NERC; Federal Ministry of Power; CPCS Transcom – advisers on the transaction; NEXANT/USAID-funded power sector consultants providing support to the BPE; and NIAF/DFID-funded infrastructure support programme to the Nigerian government.
According to him, the bidding process – from the receipt of EOIs to evaluation of proposals were observed by officials of the State Security Service, SSS, Economic and financial Crimes Commission, EFCC, Independent Corrupt Practices Commission, ICPC, as well as the National Electricity Regulatory Commission, NERC.
His words: “The 54 bids were assigned to the evaluating teams by balloting to ensure that no evaluator had any prior knowledge of which bid he/she would be evaluating. The evaluation proper was then carried out in two stages as follows:
“The first stage was to subject each bid to a test of completeness and responsiveness. At this stage, the bids were evaluated to ensure that they were compliant with the basic requirements of the RFP. For instance, the RFP provided that for a bid to qualify for evaluation the authorized representative of the bidder must execute the draft Share Sale and Purchase Agreement, Shareholders Agreement and Performance Agreement. Failure to execute any of these agreements would result in the rejection of the bid.
“The second stage involved detailed analyses of the compliant proposals. The main items being evaluated here were: 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.”
Out of the 54 bids that were received and evaluated, 10 of the bids failed the first test of completeness and responsiveness. The remaining 44 bids were then subjected to full technical evaluation. Out of the 44 bids, 32 bids submitted by 20 different bidders scored the minimum of 75% that was required to progress to the next stage in the process.
The bidders that scored 75% and above then were asked to submit the post-qualification bidders’ guarantee following the approval of the evaluation results by NCP. At the end 20 bids met the 75% and went into the final round. However, four failed a post-qualification security in the form of a bank guarantee or a letter of credit, as required, leaving 16 to slug it out.
Interstate Electrics Ltd won the bid for Abuja DisCo; VIGEO Power Consortium defeated Southern Electricity Distribution Company to clinch Benin. Eko and Ikeja went to Integrated Energy Distribution & Marketing Ltd; Enugu was won by Interstate Electrics Ltd, Ibadan went to Integrated Energy Distribution & Marketing Ltd.
Others were: Jos DisCo won by Aura Energy Ltd; Kano won by Sahelian Power SPV Ltd; Port-Harcourt by 4Power Consortium; and Yola by Integrated Energy Distribution & Marketing Ltd. Kaduna DisCo did not have a qualified bid after evaluation and is therefore to be re-advertised.
Oppiosition by governors
Everything seemed to have gone well with the privatization of the DisCos until the governors of the four states of Edo, Delta Ekiti and Ondo, under the Benin Disco rejected the decision of the BPE and the TC to give that company to Vigeo Power Consortium which has Mr. Victor Gbolade Osibodu as its major shareholder.
Govs Adams Oshiomhole of Edo, Olusegun Mimiko of Ondo, Emmanuel Uduaghan of Delta and Kayode Fayemi of Ejkiti held a joint press conference two days after the results were announced, in Abuja, to denounce the TC and insisted that they would not allow Vigeo take over the DisCo which they claimed to have invested in heavily.
The governors insisted that the process that produced Vigeo with heavy Indian backing was a fraud and unacceptable and argued that the company had no capacity to efficiently run the company and give the people of their states the desired results in power supply.
‘’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,’’ they claimed.
The Governors while wondering 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 that volatile area, “they (Vigeo) do 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 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 lamented what they termed an attempt by the BPE 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.
‘’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, communities 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,’’ the governors insisted.
However, handlers of the process have reacted to the position of the governors and insisted that the process was transparent.
The Minister of State for Power, Arc. Darius Dickson Ishaku, countered the governors the following day, October 20, when he debunked claims that the process was not transparent.
According to him, “the bidding process for the sale of the DisCos was very transparent and credible. The National Council on Privatisation, NCP and the Bureau for Public Enterprises, BPE, have overtime put together a process that is highly fraud-proof, reliable and efficient, and I can guarantee that the process was free, fair and transparent”.
Peterside’s and Onogoruwa’s defence
The two key actors in the privatization of Discos, the Director-General of the BPE Ms Bolane Onogoruwa and Mr. Peterside, held on joint press conference in Lagos to tell the public why Southern Electricity Distribution Ltd, the company promoted by the affected states governments, lost out. The duo explained that Southern Electricity Distribution Ltd submitted multiple commercial bids for the same DisCo, which was a violation of the rules of the process.
Mr. Peterside claimed that the company’s envelope contained two different commercial bids with one called primary bid and the second called alternate bid, all signed by one Matthew Edevbie, (but) both the primary and alternate fell below the bid submitted by Vigeo and so neither bid would alter Southern Consortium’s ranking”. Effectively the DisCo does not belong to only the federal government.