WHY TOP BIDDERS LOST POWER FIRMS - NCP
A power plant
Some firms that emerged as leaders in the race to acquire controlling stakes in the electricity distribution companies during the bid opening eventually lost out at the final hurdle because they failed to meet the stringent requirements put in place by privatisation agencies.
The control mechanisms were put in place by the National Council on Privatisation, Bureau of Public Enterprises and the Nigerian Electricity Regulatory Commission.
The Chairman, Technical Committee, NCP, Mr. Atedo Peterside, who disclosed this in an exclusive telephone interview with our correspondent on Tuesday, said the bids for the Power Holding Company of Nigeria's successor generation and distribution companies were subjected to three levels of control.
According to him, for every level, there was more than one check.
'This is targeted at ensuring that the most qualified firm emerged winner,' he told our correspondent.
He said a sub-committee on power and a NERC committee re-examined the process at every level.
'It was the final result that got to the NCP,' he added.
Peterside likened the process to being cross-examined by an external examiner, saying it did not matter who was found wanting at a point, but the final result was what mattered for the firms that participated in the bid process.
When asked why the preferred bidders were given six months to pay for the acquisition of the power companies, he said, 'Payment terms were fixed in 2010 and nobody complained.
'After paying 25 per cent, additional six months will ensure that any credible bidder can organise financing for the balance of 75 per cent. Any money that you cannot raise in six months, you probably cannot raise in six or 60 years.'
Responding to the controversy that Interstate Consortium ought not to have won the bid for the Enugu Electricity Distribution Company because it had allegedly failed in two areas of the bid, Peterside said the firm and others were subjected to the same control mechanisms, which resulted in Interstate losing out on the Abuja Disco where it was the leading bidder during the bid opening.
The Chairman, NERC, Dr. Sam Amadi, also corroborated the NCP Technical Committee chairman, saying, 'The firm (Interstate) failed the initial test because there was a problem of decimal point in its figures.
'This was corrected, and it passed. Its new figures were consistent with the business plan and I reviewed it myself through my staff and confirmed that it deserves to be the preferred bidder for Enugu Disco.'
In the result of the bidding process announced on Monday after the meeting of the NCP, the firm being backed by a former Head of State, Gen, Abdusalami Abubakar, Integrated Energy Distribution and Marketing Limited, emerged the preferred bidder for the Ibadan Electricity Distribution Company.
The company had led other bidders for the Eko, Ikeja and Ibadan distribution companies, considered to be the biggest and most commercially viable in the country, when the bids were earlier opened on October 16, 2012.
However, the NCP, in approving the outcome of the financial bid opening for the PHCN successor companies, had named Integrated Energy as the winner for the Ibadan Electricity Distribution Company, with NEDC/KEPCO approved as the reserve bidder.
Significantly, the consortium being backed by the Ekiti, Delta, Edo and Ondo state governments to acquire 60 per cent stake in the Benin Distribution Company, Southern Electricity Distribution Company, was disqualified for submitting two different bids in violation of the rules.
Instead, the company went to Vigeo Power Consortium.
One of the rules guiding the privatisation process states that no company can be allowed to win more than two bids.
Instead of giving the Abuja Electricity Distribution Company to Interstate Electronics Limited, being promoted by business mogul, Mr. Emeka Ofor, which emerged the top bidder by offering Average Technical, Commercial and Collection loss reduction of 21.62 per cent, NCP awarded the company to Kann Consortium Utility Company Limited.
The Eko Distribution Company went to West Power & Gas, which came third behind Integrated Energy and New Electricity Distribution Company Consortium, while Honeywell Energy Resources International Limited, which came fourth in the bid opening round, was approved as the reserve bidder.
For the Enugu Distribution Company, Interstate Electrics Limited was named as the preferred bidder, while Eastern Electric Nigeria Limited was approved as the reserve bidder.
For the Ikeja Distribution Company, New Electricity Distribution Company/KEPCO emerged as the preferred bidder, while Vigeo Power Consortium was approved as the reserve bidder.
The Jos Distribution Company had Aura Energy Limited as the preferred bidder.
Sahelian Power SPV Limited was named as the preferred bidder for the Kano Distribution Company; 4Power Consortium emerged as the preferred bidder for the Port Harcourt Distribution Company.
For the Yola Distribution Company, Integrated Energy Distribution & Marketing Limited was named as the preferred bidder.
However, the bidders that offered the highest amounts of money for the electricity generation companies were approved as the winners.
With the approval, the highest ranked bidder for each of the companies was required to post an additional bid security (Preferred Bidder's Bank Guarantee) in the form of a Letter of Credit or bank guarantee for 15 of the transaction values within 15 business days of notification by the BPE.
Peterside had said on Monday, 'Within 15 business days after signing of the Sale and Purchase Agreement, the Shareholders' Agreement or the Performance Agreement, whichever is earlier, or at a mutually agreed earlier time, the bidder shall make a down payment of 25 per cent of the share purchase price.
'Within six months after signing of the Sale and Purchase Agreement or the Shareholders' Agreement, whichever is earlier or mutually agreed upon time, the bidder will be required to pay the outstanding 75 per cent of the share purchase price to complete the transaction.
It added, 'Upon receipt of payment, the preferred bidder's bank guarantee will be returned to the bidder within a maximum of four weeks.
'After the completion of payment, the handover of the successor company to the preferred bidder will conclude the transaction.'