Against the backdrop of fears in some quarters that the power sector reforms being put in place by the President Goodluck Jonathan administration may be discontinued by another administration, MARTIN AYANKOLA writes that the Federal Government is putting machinery in motion to ensure that the reforms are permanent.
In spite of fears over the continuity of the power reform programme, it has emerged that some power firms may be sold to core investors come May, next year.
This is part of the efforts by the President Goodluck Jonathan administration to make the power reform programme irreversible by its successor.
A Presidency source, who said that government‘s agencies and task forces implementing the power road map were currently redoubling efforts to keep faith with the May deadline, however, insisted that some of the firms would not be ready by then.
The Director-General, Bureau of Public Enterprises, Ms Bolanle Onagoruwa, had earlier said that all the firms would be privatised by May, 2011.
Investigation by our correspondent on Sunday revealed that only a few transactions might be concluded by that date.
The President had on August 26, 2010, inaugurated the road map for the reform of the power sector.
According to the programme, the Federal Government will sell 51 per cent of its stake in the electricity distribution companies and thermal power stations to private investors, and grant concession to private companies to run the three hydro- electric power stations.
However, the transmission grid will still be owned by government, but it will be managed by the private sector.
Our correspondent gathered that because of the quantum of work needed to be done before the companies are sold, the Federal Government would have to work extra hard to sell some of the firms before the tenure of this administration expires in May, 2011.
The Chairman, Presidential Task Force on Power, Prof. Barth Nnaji, told our correspondent on the telephone on Sunday, that the Federal Government was working hard to ensure that some electricity companies were sold in the lifetime of this administration.
He said, ”Some of the transactions should be concluded in the lifetime of this administration. In the next few weeks, it shall be clear when some of the transactions will be concluded.”
A source close to the BPE also told our correspondent on Sunday that some of the firms might be sold by May, while the transactions for the others would have reached an advanced stage by then.
”We want to ensure that the transactions get to irreversible points so that whoever becomes the next President will not tamper with the process afterwards,” the source added.
Nnaji said that transparency and due process would be diligently followed in the sale of the companies to ensure that the reforms were irreversible.
He said, “The review of the electricity tariffs by the Nigerian Electricity Regulatory Commission should be completed by December, while the new retail tariffs should be made public by July. Wholesale tariffs may be in operation before July.”
He said investors were already showing substantial interest, adding that the tariff plan that would come into effect in July would not discourage them.
A deputy director of the BPE, Mr. Amaechi Aloke, told our correspondent on Sunday that investors would be requested to express interest in the electricity companies by the first week of December, and that the exercise, being the first stage in the privatisation process, should be concluded by the end of January, 2011.
According to the BPE, the starting point in the identification of strategic/core investors is to place advertisements in local and international journals and magazines, inviting strategic investors to submit their expressions of interest in specified public enterprises.
The agency added, “They are then supplied with copies of laws and regulations on privatisation in the country and an information memorandum on the affected enterprise.
“At the same time, they are given a specific period, depending on the enterprise, within which to undertake due diligence studies on the subject enterprise and submit economic bids to the implementation agency for evaluation.”
A source close to one of the companies willing to invest in the power sector, Oando Plc, said investors were excited about participating in the privatisation process.
Although he said the process, so far, was good, he, however, warned, “The Federal Government and Nigerians should know that no big international company will do it. We must build our privatisation strategy around local companies, which may work with foreign partners.
“We are expressing an interest in the distribution companies. It won‘t be okay for me now to tell you the companies we are interested in, but basically, we are going to be seriously involved in bidding for the companies. To foreign companies, Nigeria is still seen as a high risk country.”
The source also said that putting appropriate commercial tariffs in place would buoy investors confidence to participate in the exercise.
“No investor will make any substantial investment without commercial tariffs being in place,” he said.
The Country President, Schneider Electric Nigeria Limited, one of the foreign firms showing interest in the nation‘s power industry, Mr. Michael Hochet, told our correspondent in an interview recently, “Foreign investors are very careful and I know what I am talking because I am managing investment for my company, so they will assess the risks and the environment.
“As far as the risks are concerned, we know that the state of the distribution network is very poor but this can be overcome with the right private investor partnering with a technical firm.”
He added, ”What is important is that the NERC should play its role, which is very important. The tariff has to be elaborated and put in place, because if the tariff does not allow the distribution companies to sell at higher than production cost, it will be a bad business and nobody will be able to sustain such a business.”
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