Power Sector: Resolving Fibre Optic Concession Agreement With TCN  

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By Ibrahim Yahaya

It is commendable that President Muhammadu Buhari is set to revisit thorny issues that have been responsible for the decrepit status of the power sector despite expending whopping sums of money to revive a sector whose performance has become the taunts of a worrisome public. Against the backdrop of incessant power outages made worrisome by unremitting collapse of the national grid, the Federal Government had on March 20, 2006,   facilitated the signing of $100 million Concession Agreement between the Transmission Company of Nigeria (TCN) and the Concessionaires, Alheri Engineering Services and Phase3 Telecom Ltd to Design, Build, Finance and Operate (DBFO) fibre optic network infrastructure in Nigeria.

The terms of the agreement also, among others, allow the concessionaires the exclusive use of TCN’s existing and future fibre optic network infrastructure; consideration for the rights granted the Concessionaires shall be $40 million each and Royalty of two-and-half percent of revenue payable in instalments to be agreed by parties (per articles 13:2 (a) and (b) of the Agreement and that concession duration shall be 15 years and renewable for another 5 years.

However, in recognition of unforeseen exigencies and other form of laws and regulations that may come into effect during the period under consideration, the agreement specifically notes that “…if as a result of any subsequent change or law or Regulations of any agency or body under the control of government of Nigeria relied upon  by the Concessionaire upon entering into the Agreement  affects Concessionaire’s reasonable expectation of economic returns on its investments, materially reduce, prejudiced or adversely affect same, then parties shall meet to agree on amendments to the Agreement, with a view to easing the burden of the change  in circumstances on Concessionaire…”.

In a determined effort to ensure the nation enjoyed an effective fibre optic network upon which SCADA was to be anchored for checking on real time national grid, the two companies involved in the building of the fibre optic networks discovered to their chagrin that TCN’s facilities were moribund and unfit for use, thus prompting Phase3 to spend additional $50 million, while Alheri spent $25 million in rolling out fibre optic infrastructure using TCN’s right of way.

Despite the liberalization of the National long-distance Fibre Optic landscape in Nigeria by the NCC that would later crash market prices and adversely affect revenue expectation, following the construction of data transmission terrestrial FOC networks by mobile network operators (MTN, Airtel, Glo and Etisalat), as at 2015, Phase3 had spent N9.6 billion in operating and maintaining the FOC network, while Alheri had expended N1.19 billion. Specifically, the concessionaires had supplied fibre optic cores for use by TCN for its SCADA monitoring valued in excess of $15 million and was supposed to be paid for by TCN. It was also envisaged by the Agreement that expansion of the FOC network by deployment of new power lines by TCN will be operated by the concessionaires never took place.

The release of a circular in 2013 by the Federal Ministry of Power to the TCN directing that “the price of Right of Way on Power Transmission Lines should not exceed N200 per linear meter, compared to about N2, 000, 00 demanded from Concessionaires by TCN”, clearly demonstrated the need for review of the contract terms.  Alarmed by the unexpected downturn in revenue expectation, the concessionaires approached TCN to review terms of the contract, especially as it relates to the concession fees payable to TCN. To ensure transparent process, the TCN invited the Infrastructure Concession Regulatory Commission (ICRC) who is the regulatory body over the matter to adjudicate. Both TCN and the concessionaires, under the watch of ICRC, agreed to engage an independent audit firm to evaluate the need for a thorough assessment.

After auditing the extent of the work, the audit firm – SIAO – called for a review of the concession fee and the tenure of the agreement in view of prevailing circumstances that had rendered terms of the agreement onerous.  While processes for review were being pursued, the Managing Director of TCN, Mr Usman Gur Mohammed, on 30th August 2017, summarily terminated the Concession Agreement with the two companies.

Criticising the TCN for unilaterally cancelling the Agreement without recourse to laid down rules, the ICRC reportedly noted in a letter on the matter that, “In addition, in line with the circular from office of the National Security Adviser (ONSA) in December 2016, any deliberate closure of telecoms sites or substations which results in disruption of services by anyone or organisation shall be treated as a breach of national security. TCN should therefore bear in mind that Telecoms infrastructure are critical national assets with high security implications, especially considering the importance attached to broadband services by the Federal Government.”

 In line with the ICRC report, the Attorney General of the Federation and Minister of Justice, Malam Abubakar Malami, SAN, in response to a demand for a legal advice from the Presidency, declared as illegal the termination of the $100 million concession agreement. Apart from calling on the TCN to revert back to the negotiating table, the AGF said the impasse over the purported cancellation constituted a breach of national security as observed by the office of the National Security Adviser (ONSA). The AGF further warned that “…the acts of TCN is capable of exposing the Federal Government to liabilities of humongous dimension. Thus, as the Chief Law Officer of the Federation, I am minded to ensure that TCN keeps faith with terms of the Agreement, and that TCN does not resort to acts of self-help (like locking the premises housing the Concessionaires equipment) which is tantamount to an act of executive recklessness which the Supreme Court vehemently condemned in the case of Ojukwu v. Military Administrator of Lagos State [1986] ANLR 233. More so, as the matter is before a Court of competent jurisdiction.”

It is heart-rending that despite the court order on TCN to allow the concessionaires access their shutdown substations, the order has not been carried out, an action the AGF describes as executive recklessness on the part of TCN. Both the AGF and ICRC have called on amicable resolution of the case, but the recalcitrance of the TCN Managing Director Mr. U.G. Mohammed has not allowed the matter to be resolved. Both Phase3 and Alheri have denied accusations of having violated the terms of contract. What is needed now is for all the concerned to deploy channels of dialogue towards the resolution of the disputes.

In the light of the current $9.6 billion court judgement awarded by a London Court against Nigeria over default in contractual obligations, the current impasse over the $100 million concession agreement may spiral into yet another embarrassing incident. TCN should be directed by the Federal Government to call the concessionaires for a review of the agreement in order to resolve outstanding issues out of the court. Denying the concessionaires access to their substations to continue their jobs of developing a fibre optic network constitutes a clog in the wheel of progress for the concessionaires who have so far completed 3,000-kilometre fibre optic network since 2015. The same is also a continual denial of revenue that could have accrued to the purse of the Federal Government from the Concession should the agreement remain in operation.

Malam Yahaya, a public commentator, wrote this piece from Kano