With two days left until the deadline for the payment for the five generation and 10 distribution companies created out of the unbundling of Power Holding Company of Nigeria, the preferred bidders selected by the National Council on Privatisation (NCP) are rushing to ensure they do not miss the deadline.
Failure to meet the deadline would cost the bidders the 25 per cent deposit that they paid six months ago while reserve bidders who are on standby will be invited by NCP to take over the assets.
In instances where reserve bids were not submitted for a few of the power assets and the preferred bidders fail to pay by Wednesday, the Bureau of Public Enterprises (BPE) may be forced to restart the process for the privatisation of the affected assets.
Some of the preferred bidders, who spoke to newsmen in Lagos and Abuja at the weekend, said in spite of their reservations that government had not been able to meet the conditions precedent, they have decided to pay the outstanding 75 per cent balance to avoid being in default of the Share Sale Agreement (SSA) they executed with the BPE in March this year.
The bidders most likely to pay between today and Wednesday include Amperion Power Company Limited, which won the bid for the 414MW Geregu I power plant, and is fronted by businessman Femi Otedola; Integrated Energy Distribution and Marketing Company for Ibadan and Yola distribution companies (Discos), and is fronted by the trio of the Skye Bank chairman, Tunde Ayeni, businessman, Captain Osa Okunbor and Dr. Sola Ayandele; West Power and Gas for Eko Distribution Company fronted by Lagos contractor, Dr. Tunji Olowolafe, and businessmen Charles Momoh and Ernest Orji; and NEDC/KEPCO for Ikeja distribution company, which has Sahara Energy as its local partner.
Others expected to pay include Vigeo Consortium, which won the bid for Benin distribution company, and is fronted by businessman Victor Osibodu; the trio of Transcorp/Woodrock Consortium, which won the bid for Ughelli Power Plc and is promoted by foremost entrepreneur and former managing director of United Bank for Africa Plc, Tony Elemelu; and Mainstream Energy Ltd for Kainji Power Plc, which is fronted by another major entrepreneur, Col. Sani Bello.
One of the bidders for the Discos confirmed that they decided to pay up in spite of their meeting with the Minister of Power, Prof. Chinedu Nebo, last week in Abuja where they, amongst other demands, requested an extension of the payment deadline.
He however said they and their lenders remained concerned about unresolved issues, which include the vesting contracts that were signed between the current PHCN chief executive officers of the Discos and Nigerian Bulk Electricity Trading Company Plc (NBET), otherwise known as the bulk trader, which they will inherit.
Other developments, he mentioned, included the transition market operations arrangement that would pave the way for the establishment of a Market Operator (MO) to provide for the accounting settlement system between the bulk trader and the Gencos and Discos.
The MO, he explained, is supposed to put an accounting settlement process in place and serve as the interface between market operators, but he expressed concern that the software was not yet in place.
On the labour issues, he said: “Even though government has not finished payment of the severance benefits to PHCN workers, from my point of view, it is not really a major condition precedent and I told my colleagues (other bidders) that the federal government has started paying the severance benefits of the workers starting with the Gencos. And we expect them to move on to the Discos this week.”
However, another preferred bidder for one of the generation companies and who is likely to default on the payment deadline, kept insisting that the conditions precedent must be met and accused the BPE of defaulting on the terms of the agreement as contained in the SSA.
For example, he said the BPE was expected to have made it possible for lenders to gain access to the power assets they are acquiring for the lenders to conduct their own due diligence to ascertain that the assets they are providing money for are genuine.
“Unfortunately, the BPE did not create the leeway for the lenders to undertake the due diligence and because of that, some of the lenders have been reluctant to go ahead to fund the transactions.
“The reason stemmed from labour that made it clear that they will not allow anyone access to the assets except their severance package was paid by government ahead of the transfer of the assets to the bidders,” he said.
Another bidder likely to default, it was learnt, spent the weekend lobbying other bidders to write a letter to BPE to convince it to extend the payment deadline by 20 working days.
An email shown to newsmwn from the bidder to his colleagues said: “I understand BPE are (sic) meeting tomorrow (Monday) to determine whether to extend the Gencos payment deadline and we are expecting extension request letters from a few of the Gencos bidders.
“As a result, …. (name of bidder withheld) needs to write a letter addressed to BPE stating that the banks need some time to disburse and we as a result are asking for a 20-working day extension period from August 21st to settle our payment to BPE…
“I am trying desperately to reach Mr. (Benjamin) Dikki (DG of BPE) on his mobile and will revert as soon I have spoken to him. In the interim, we are pressing ahead for the disbursement process to commence on Monday.”
When contacted on the email, sources in BPE said they were aware of the request by some bidders to extend the payment deadline but it was likely their demands would be met.
Also, Chairman of the Technical Committee of the NCP, Mr. Atedo Peterside, informed newsmen that the bidders seeking for an extension of the payment deadline were being “clever by half”.
“I personally, will not listen to any request for an extension of the deadline as the Nigerian Electricity Regulatory Commission (NERC) has made it abundantly clear that most of their concerns will be addressed once they fully pay up for the companies.
“As soon as payment is made, NERC stand ready to resolve most of the technicalities they have raised. So my advice to them is to pay up by Wednesday,” Peterside said.
On concerns that Manitoba Hydro was still being frustrated from effectively running the Transmission Company of Nigeria and could affect incremental electricity output from producers, he said: “The centre of gravity of the industry has shifted to the private sector, so the federal government has no choice but to fall in line as far as TCN and the transmission grid is concerned.
“A lot of pressure will be brought to bear by private sector operators who have borrowed so much to acquire the assets and they will pressurize the federal government to allow TCN to operate efficiently.”
Following the execution of the SSA and the initial payment of 25 per cent, transition committees made up of the vendor, purchasers and incumbent CEOs of the privatized companies were established for the purpose of creating a seamless transition from public to private ownership by the longstop date.