Minister of Power, Bart Nnaji
By James Emejo
The Federal Government Tuesday expressed satisfaction with the emergence of Manitoba Hydro International (MHI) Limited as the management contractor for Transmission Company of Nigeria (TCN) following an initial financial bid opening for the contract.
MHI, an electric power and natural gas utility firm in Manitoba, Canada, had an easy way to victory as it became the sole bidder for the offer in the final analysis of the bid proposals. Two other companies had fallen out in the preliminary evaluations.
However, in its financial bid document addressed to the Director-General, Bureau of Public Enterprises (BPE), Ms Bolanle Onagoruwa, and which was opened by Chairman, Technical Committee, National Council on Privatisation (NCP), Mr. Atedo Peterside, MHI had demanded $23.7 million (about N3.68 billion) to cover contracting services to TCN within the first three years of the project.
But the Federal Government considered the amount, which is exclusive of local taxes, as costly and called for a downward review.
It also emerged that the money which is to be paid out as service fees to the contractor had already been included in the new electricity tariff to be paid by consumers.
Speaking in Abuja yesterday at the Financial Bid Opening for the Management Contract for TCN, Minister of Power, Prof. Barth Nnaji, expressed government’s satisfaction at the emergence of MHI as winner of the exercise but urged the company to consider a downward review of its cash proposal during the next stage of negotiations which would involve a six-member team approved by NCP to iron out issues with MHI.
Both Nnaji and Onagoruwa expressed firm hope that the current process would be completed successfully.
This is understandable given the barrage of public criticisms over the handling of the whole privatisation exercise, as no government official would want to see the entire programme restarted.
On the other hand, according to analysts, this could also give some bargaining power to MHI, knowing it is alone in the race.
The minister said the appointment of a management contractor for TCN was part of efforts to “transition” the management of public sector entities to the private sector and reduce the bureaucracy associated with public management of enterprises.
According to him, this would bring speed and ability to anticipate issues and address them in a proactive manner.
He said: “The unbundling of PHCN into successor companies, one of which is the TCN and it is the one that controls the entire grid. The management of the grid is therefore, one that we have to be rigorous about. The management of this grid is extraordinarily important to us especially now.”
He said MHI would be expected to commence work within a maximum period of two months after negotiations might have been concluded.
He also expressed optimism that the company would be able to get the power sector to work effectively going by its credentials.
Meanwhile, Onagoruwa has explained that the Federal Government’s decision to address the damning power situation has led to the restructuring of the Power Holding Company of Nigeria (PHCN) into 18 successor companies including six generation, one transmission and 11 distribution companies.
TCN is one of the 18 companies carved out of the PHCN and combines the function of transmission services provider, a system and market operator to achieve sustainability and development of the electricity sector.
TCN was scheduled for a management contract in order to transit the company into a financially sustainable, stable, self-sufficient and market-driven firm.
Although a preferred winner had emerged at an earlier process in 2007, the process was suspended following the Federal Government’s resolve to halt all reforms and privatisation activities in the electric power sector.
Hence, the current bidding process which produced MHI as winner was a continuation of the former following President Goodluck Jonathan’s directive that electric power reforms and privatisation be restarted.
That scenario necessitated the three pre-qualified firms - Power Grid of India Limited, Manitoba Hydro International of Canada and EBS International of Ireland to re-submit their technical and financial proposals.
Having qualified in the original management contractor engagement exercise in 2007, they were issued Requests for Proposals (RfPs) by the BPE in December 2011. However, ESBI opted out of the bidding process.
Moreover, Power Grid of India failed to measure up in the result of the evaluation of two technical proposals as according to Onagoruwa, “only Manitoba Hydro International was able to meet and exceed the benchmark which led to its emergence as the Management Contractor for TCN.” That effectively left MHI as the sole contender for the contract.
Under the management contract, MHI will however, be expected to among other things, reduce electricity losses during transmission; provide for the achievement of certain predetermined targets that would improve grid security and general performance; have reward and penalty clauses as incentives for success and provide efficient management of government instrument as well as provide for skills and expertise transfer to Nigerian counterparts who will serve in deputy and other positions to the management staff of the management contractor.
Meanwhile, Chairman, House Committee on Privatisation, Senator Olugbenga Obadara, while pledging government’s support for MHI to ensure that it succeeds in the country urged the company to be diligent in performance and leave up to expectation as a force to be reckoned with globally. He also called for a cut in the service charge.
He said: “We have seen situations where many people come to Nigeria - an example is Pentascope in NITEL - how they came and looted the country and left us worse than they met us.
“I believe, Manitoba, you’ll be able to diligently perform as you have written in your bids....A nation in darkness is not a developing nation in anyway; and we want to be developed and our target is year 20:2020. And with this, if we are able to do this right, I can assure you that we’ll get every other thing right.”
MHI’s financial proposal to BPE read in part: “The amount is exclusive of local taxes which shall be identified during negotiations and shall be added to the above amount.
“Our financial proposals shall be binding upon us subject to the modifications resulting from contract negotiations up to expiry of the validity period of the proposal.
“No commission or gratuity has been paid or are to be paid by us to agents related to this proposal and contract execution.”
The BPE boss added that: “The NCP, at its second meeting for 2012 which was held on Monday, March 26, at the Presidential Villa, Abuja, approved that Manitoba Hydro International, which alone exceeded the pass mark for technical score, be invited for simultaneous opening of its financial proposal and the commencement of contract negotiations as the management contractor for TCN. The duration of the management contract is for a minimum period of three years.”
Founded in 1961, MHI currently operates in 15 interconnected generating stations and has more than 527,000 electric power customers and over 263 natural gas customers.
Because most of the electrical energy is provided by hydroelectric power, the utility is said to have low electricity rates. It proposes to deploy a diverse range of experts with in-depth and expansive knowledge of all aspects of electricity utility operations, especially transmission.