BPE, NERC Keep Power Investors on their Toes

Fri, Feb 7, 2014
By publisher


The Bureau of Public Enterprises and the Nigeria Electricity Regulatory Commission are to jointly monitor the new investors in the power sector to ensure that play by the rules to meet the expectation of Nigerians

|  By Maureen Chigbo  |  Feb. 17, 2014 @ 01:00 GMT

THE Bureau of Public Enterprises, BPE, and the Nigeria Electricity Regulatory Commission, NERC, are to ensure that the high expectation of Nigerians on the outcome of the privatisation of the power sector is not dashed. The BPE and NERC have put in place robust monitoring mechanisms to ensure that the new owners of PHCN successor companies were kept on their toes to fulfill their contractual obligations. The bureau recently trained its staff that will be involved in the monitoring exercise to enable them understand the issues at stake.

Benjamin Dikki, director-general of the BPE, in a presentation at the 6th Power Summit for Civil Society Organisations, CSO, forum held in Abuja from January 30 to 31, said that the agreements signed with the new owners contained some minimum performance standards to be achieved. “Since NERC and BPE had a common goal in ensuring that the companies achieved high standards in performance, both agencies have agreed to set up joint monitoring teams. The details of the monitoring framework are being finalised by a committee made up of representatives of both agencies,” Dikki said.

According to the director-general, the agreements and documents which provide the basis for monitoring the privatised power companies include the share sale and purchase agreement, SSPA,  performance agreements, PA, BPE’s post privatisation monitoring template, NERC’s reporting compliance regulation and NERC’s terms and conditions of licensing. The SSPA clearly spells out the terms and conditions of sale of shares to the investors while the PA contain terms of payment and post acquisition plans, PAP, implementation. It also stipulates clear milestones the investor must achieve within a specified period.

The NERC’s reporting compliance regulations clearly outlines the level of compliance to set standards by the companies and NERC’s license terms and conditions is the document that shows the mandatory requirements for acquiring a license and the violation of the terms will lead to NERC’s withdrawal of the license.

The compliance monitoring gives the BPE express right to enter and monitor privatised enterprises every six months after five days notice to the company. It also empowers the BPE to carry out an audit or review of the business once every six months.

Dikki said also that the performance obligations and liquidated damages mandates the purchaser to ensure the company achieves the minimum performance targets. Failure to do that makes the purchaser liable to pay liquidated damages for performance below agreed standards. The purchaser must comply with post acquisition plan and initial budget, Dikki said, adding that the consent of the BPE is required for annual revisions to budgets and plans for first five years and afterwards, BPE will have the veto rights regarding certain expenditures as provided in the reserved matters.

He listed some of the key objectives of the reform and privatisation of the sector as reducing the cost of doing business in Nigeria to attract new investments through provision of quality and dependable power supply to the economy for industrial, commercial and socio-domestic activities. The reform and privatisation of the sector was aimed at improving the overall efficiency of the distribution, generation and transmission network; provide Nigerians with basic and affordable infrastructure to enable them create employment for themselves and to attract massive investment across the value chain to expand electricity coverage in the country.

The other objectives of the reform, according to him, are the repeal of monopoly laws that restricted entry into the Nigeria Electricity Supply Industry, NESI, and the liberalisation of the sector to create an enabling environment for private sector investment in the sector. The reform was also to create an electricity market that is private sector-driven.

Another critical objective of the reform was to create a regulatory agency with full powers to regulate the sector and to ensure the separation of the roles of policy formulation, regulation and operations.