Minister of State for Power, Mr. Darius Ishaku
Chuks Okocha and Chineme Okafor
A looming threat to the power privatisation programme emerged Thursday as three governors whose consortium – Southern Electricity Distribution Company Limited – lost out in the bid for power distribution companies (discos), have opposed the emergence of Vigeo Power Consortium as the preferred bidder for the Benin Distribution Company Limited.
The Benin Disco is one of 11 distribution utilities created from the unbundling of the Power Holding Company of Nigeria (PHCN), and was slated for sale alongside others under the power reform and privatisation programme.
In addition, the Minister of State for Power, Mr. Darius Ishaku, Thursday sparred with the National Union of Electricity Employees (NUEE), which has vehemently opposed the reform measures over the credibility of the power privatisation programme.
The governors – Adams Oshiomhole (Edo), Emmanuel Uduaghan (Delta) and Kayode Fayemi (Ekiti) – at a joint news conference in Abuja faulted the process and threatened not to allow Vigeo Power to operate in their states.
But in a swift reaction, the Bureau of Public Enterprises (BPE), in a statement last night, faulted the governors’ position, stating that accusation of a flawed process and irregularities against the privatisation bureau was unfounded and reckless.
Vigeo Power, partly owned by Mr. Victor Gbolade Osibodu, a businessman and husband of the Managing Director/CEO of Union Bank of Nigeria Plc, Mrs. Funke Osibodu, had edged out Southern Electricity, promoted by Edo, Delta, Ekiti and Ondo States, to emerge the preferred bidder at the unveiling of the commercial bids submitted by investors.
The prospective investors had been prequalified to have their bids opened for the 10 distribution companies in Abuja last Tuesday.
In announcing the preferred bidder for the Benin Disco, the BPE said that Vigeo’s commercial bid had an average technical, commercial and collection (ATC&C) loss reduction projection or efficiency ratio of 21.78 per cent, relative to Southern Electricity’s 17.72 per cent.
The Vigeo Consortium comprises Vigeo Holdings Limited, Global Utilities Management Company Limited (GUMCO) and a private equity firm, African Finance Corporation. Its technical partners include Indian-based Tata Power Distribution Limited (TPDDL), the Calcutta Electric Supply Corporation Limited (CESC) and GUMCO.
However, the governors rejected the company as the preferred bidder for the disco and described the bidding processes organised by the BPE as “highly fraudulent, not transparent and representing some racketeering interest”.
They said at the joint press conference, held at the private home of Oshiomhole in Abuja that they would not allow Vigeo Power to operate in their respective states because the company lacked the necessary technical competence and capability to run the Benin Disco.
Uduaghan, who was the first to speak, dubbed the exercise as lacking in transparency.
“Before the opening of the bid process, funny things that are not transparent took place... The process is full of fraud and it is not acceptable to our people and therefore, we will not allow the company that so claimed to win the bid process to operate in our states.
“The state governments involved have invested in the power generation process. The process was full of fraud and therefore we will not allow the company to operate in our states,” he said.
Curiously, Oshiomhole, in making his allegation, failed to clarify or provide details on the “funny things” that took place before the bid process.
Continuing, the Edo State Governor said the process was rigged to favour Vigeo as Southern Electricity scored 898 points to Vigeo’s 847 points during the technical evaluation of the bid process and ought to have emerged the preferred bidder.
“The BPE has corrupted the process. The company that was supposedly awarded the preferred bid has no technical competence, experience and the financial capability to manage such an extensive territorial area like the Benin distribution area,” he said.
In his comment, Fayemi said: “Our major complaint is competence. We are disappointed that the company that was awarded the preferred bid has no technical competence and the process by the BPE was not transparent.
“We are not going to sit idly and show lack of concern because the process was not transparent. We will take that up with those concerned. This is the handiwork of a racket.”
The three governors said that they had made their complaints known to President Goodluck Jonathan.
Documents distributed by aides of the three governors showed that Southern Electricity has the capacity to manage 2.78 million customers, while Vigeo has the capacity to manage only 850,000 customers.
Also, Southern Electricity will operate mainly within rural areas while the preferred bidder will do so mainly in urban areas.
Southern Electricity has the capacity to operate in 49,590 square kilometres and Vigeo has the capacity to operate in only 510 square kilometres and on the ATC&C loss projections, Southern Electricity scored 10.12 per cent and Vigeo 16.85 per cent.
Others details of technical proposals submitted by Sothern Electricity and Vigeo showed that the capability of the former to handle high tension is 75,237 sq. kilometres, Vigeo 4,758 sq. kilometres, while Southern Electricity has 332 injection sub-stations to Vigeo’s 76.
In addition, Southern Electricity intends to deploy 132,515 distribution sub-stations compared to Vigeo’s 3,383 distribution sub-stations, and Southern Electricity has the experience to manage an organisation of over 7,000 employees spread across 50,000 kilometres.
According to the governors, conditions to be considered before the Benin Disco is awarded are the states’ participation, locals on the ground, knowledge, current size of the service territory, financial capability and a realistic loss reduction plan.
“In our region, you cannot succeed in operating the utility without the participation of the state governments on the ground and relations with the different stakeholders such as the youths, communities, leadership and our consortium possesses all these.
“Our consortium boasts of the industry leader in India covering 4,328 sq. kilometres and 43 towns and was the gold shield award winner in 2011 for utility excellence, and posted the highest loss reduction ever in Asia of 6.6 per cent in 2010 and 10.12 per cent in 2011,” they said.
In view of the technical competence of Southern Electricity and Vigeo, Fayemi said: “We feel that our company should be considered as the preferred bidder on technical, financial and experience on the job.”
However, the BPE Head of Public Communications, Chukwuma Nwokoh, said the accusation of a flawed process and irregularities against the BPE was unfounded and reckless.
He stated that the process was transparent and credible, adding “Our process was guided by the provisions of the request for proposals for the transaction.”
Also reacting to the governors’ statement, the Chief Executive Officer of GUMCO, Mr. Abu Ejoor, said yesterday that his company, which is Vigeo’s local technical partner, has been involved in virtually all the public-private partnership initiatives in the distribution sub-sector starting from revenue cycle management (RCM).
He said RCM is an outsourced management contract, which the company participated and ran in the Shomolu, Ikorodu and Ojodu district of Ikeja Disco between 2002 and 2007.
“During this period, the company was involved in the entire revenue cycle management from metering to revenue collection, assisting the zone to boost its revenue collection and reducing commercial losses.
“In 2006, GUMCO, under the National Prepaid Metering Programme, introduced prepaid metering and billing to Benin Electricity Distribution Company. It started from Benin City and later extended its operations to Warri, Asaba, Ondo and Ekiti.
“Today GUMCO has presence in all the four states in Benin Disco, helping PHCN in the management of its commercial operations, including vending management. What the company does is to bring management and investment into improving the billing and collection of discos,” he said.
Ejoor added that his company also installed over 200,000 pre-paid meters in the Benin zone and was in the region managing the process, thus making it the only experienced local player.
“Of all the companies that bided, only Vigeo Power has local experience in utility management through its local partner GUMCO,” he added.
On Vigeo’s foreign technical partner, he said the success of the Delhi model in the consortium is NDPL, a Tata Power Delhi distribution company providing efficiency.
“We believe in the transparency of the process of BPE, the integrity of the members of the bid process, and the trust the president has in them to have given them this herculean task.
“So it is wrong for anybody to allege that we don’t have experience to run distribution companies,” he said.
In a related development, the minister and the labour union were locked in a war of words yesterday over the privatisation exercise.
While the NUEE described the privatisation process as opaque, Ishaku debunked such a claim.
NUEE National President, Mr. Mansur Musa, told THISDAY during a telephone conversation that the whole exercise could not be adjudged transparent in view of an existing vote of no confidence passed on the BPE Director General, Ms. Bolanle Onagoruwa, by the National Assembly.
Musa, who also criticised last Tuesday’s opening of commercial bids for PHCN successor distribution companies, explained that the exercise had been marred by the verdict on Onagoruwa.
However, Ishaku at a separate forum said the Federal Government in its bid to ensure transparency in the exercise had involved independent consultants to evaluate PHCN assets.
He added that it was wrong for anybody to conclude that the process, which has so far garnered commendations from far and near, was fraught with inconsistencies.
“It is not correct; the bids have been done transparently in an accurate manner. Consultants were involved in the assessment of PHCN assets and all that we did and I don’t think it is correct to assume that,” the minister said.