Fourteen preferred bidders for the successor generation and distribution companies from the unbundled Power Holding Company of Nigeria (PHCN) recently paid $1.975 billion being 75 per cent outstanding balance of bid prices for the assets. Two of the bidders, however, only made part payment.
But for Enugu Distribution Company Ltd. (Enugu DisCo), which has Interstate Electrics Ltd. promoted by Chief Emeka Offor as preferred bidder, a dark and ominous cloud has continued to hang, as the company failed to meet the August 21 deadline for payment.
This development, along with the failure of the Bureau of Public Enterprises (BPE) to facilitate a meeting of the Technical Committee of the National Council on Privatisation (NCP) to deliberate on the latest developments in the privatisation process, and possibly invite the reserved bidder for the Enugu Disco, Eastern Electric, to replace Interstate Electrics, is generating considerable concern across the South-East geo-political zone of the country.
The fear of the zone, which has been well articulated by some of its state governors and the Igbo socio-political group, Ohaneze, is that Interstate, which has found it difficult to pay the $93 million 75 per cent balance for the company, is unlikely to be able to muster the financial and technical muscle required to manage and upgrade the facility.
The argument has been made that in the likely event of non-performance of Interstate, the entire South-East region and some parts of the South-South, which rely on the facility for electricity supply, may be shortchanged and continue to suffer outages, while other facilities bought by companies with the required capabilities, would upgrade their facilities and improve power supply in the other geo-political zones of the country. This is a genuine concern that deserves the attention and immediate intervention of President Goodluck Jonathan.
While we commend the Federal Government for the successes recorded so far on the privatisation programme of the power sector, we think the interest of the South-East will be better served with the sale of Enugu Disco to a firm which has the technical and financial clout to put the distribution company on a sound footing, to ensure regular electricity supply that is badly needed to boost industrialisation in the South-East.
Since major stakeholders in the South-East, which the Enugu Disco will serve, have expressed preference for the reserved bidder, Eastern Electric, which has the five South-East State Governments and other notable international and local companies from the zone as promoters, it is important that the Federal Government intervenes, and mandates the BPE to facilitate a meeting of the NCP Technical Committee to consider the unfolding developments, and call up the reserve bidder to pay for the Enugu Disco, in the best interest of the region.
Failure to do this may well be a tacit confirmation of the fear that has been expressed in some quarters that the government, and the BPE, are unduly interested in selling the Enugu DisCo to Interstate Electrics because its promoter, Emeka Offor, is a leading member of the ruling Peoples Democratic Party (PDP).
Electricity supply is too important to be trifled with. It is the fulcrum for the industrial and economic development of any society. The government should not lay itself open to accusations of lack of transparency and foot-dragging on the glaring need to call up the reserved bidder for the Enugu Disco. It must do the best for the South-East zone and ensure the sale of Enugu Disco to a competent buyer. It will be tragic to sell the critical facility to a company that may lack the capacity to run it efficiently.
Already, the Atedo Peterside-led Technical Committee of the NCP has been reported to be keen on meeting to take a decision on the transactions and possibly decide the fate of bidders, but the BPE leadership is reportedly stalling the meeting. Newspaper reports say the NCP Committee chairman, Peterside, has written a letter to its 22 members, on its inability to meet because the BPE “surreptitiously” vetoed all his efforts to convene a meeting.
Meanwhile, some reports have indicated that Interstate Electrics and one other defaulter have been given till September 18, which is 20 working days after the initial deadline, to pay up, ostensibly in line with the rules of the transaction approved by NCP and signed by all the bidders. But, a close look at the Share Sale Agreement (SSA) between BPE, MOFI and Interstate dated February 21, 2013, clearly shows that the BPE is not at liberty to grant this 20-day extension because Interstate failed to abide by the terms of several clauses in the Agreement. These clauses, which partly deal with the conditions for completion of the agreement and the penalties for failing to meet them, require that Interstate ought to have obtained Regulatory Consents issued by the Nigerian Electricity Regulatory Council (Clause 4.1.2), while the BPE, under Clause 4.1.3 ought to have provided written approval of the financing arrangements Interstate (identified as the Purchaser) proposes to enter into with third party financial institutions. Although Clause 4.3 states that the BPE may waive the aforementioned conditions in whole or in part, the agreement states that such waiver must be granted on or before the August 21 deadline. Clause 4.8, under Failure to Satisfy Conditions, provides unequivocally that “if any of the conditions remain unsatisfied on August 21, 2013, and have not been waived in accordance with Clause 4.1.2 and 4.1.3…” BPE will “transfer, within 60 days of August 21, 2013, the Initial Deposit to the Purchaser (Interstate) Account, and this Agreement (Clause 4.8.2) shall automatically terminate once that transfer has been made.” From this clause, it is clear that the agreement has no room for an extension or a waiver to be granted to the Purchaser (Interstate) after the August 21 deadline. It also does not provide for payment of the additional deposit of $12 million reportedly paid by Interstate on August 29, which is eight days after the August 21 deadline.
Under this circumstance, the BPE, by the provisions of the agreement ought to refund the Interstate deposits and call up the reserve bidder, Eastern Electric, to buy the firm in line with the wishes of the people of the South East. This is necessary if it is not to stand accused of unilaterally bending the terms of the Agreement to favour Interstate Electrics. This is more so now that Eastern Electric has pledged its readiness to pay the reserve price of $126 million.
Whatever the circumstances, however, the demand of the governments and people of the South-East for a competent buyer for the Enugu Disco is paramount. The nation’s privatisation authorities must not allow the zone to be shortchanged with the sale of this power utility to a company whose capability to muster the resources required to upgrade the facility and ensure regular electricity supply is suspect. There is no debating the fact that it makes more economic and political sense to sell Enugu Disco to Eastern Electrics, which belongs to the entire people of the South East.
More importantly, we are worried about the need to protect the integrity of the entire privatisation process. Shifting of the goal post for any preferred bidder who has found it difficult to meet up with the financial requirements for the purchase of any power utility can only threaten the objective of the sale and shake the confidence of Nigerians and the international financial institutions which recently commended the handling of the process.
The authorities have done well on the privatisation of the successor companies from the unbundled PHCN so far. They should not mess up the laudable initiative now that it is in its last lap.
(Sun News rightly reports)
ADICHIE
ONYEKA ONWENU
GENEVIEVE
CAST CREW
