DISCOS’ Conditions Before Final Payment


THE ongoing privatisation of the power sector is facing a threat as winners of the 11 distribution companies of the Power Holding Company of Nigeria, PHCN, have given the federal government fresh conditions before completing the balance of 75 percent of the bid’s value.

The bidders under the auspices of the Roundtable of Distribution Companies, have demanded that the federal government must fulfil its own part of the bargain. They also requested for an additional one month extension to the payment deadline with just about two weeks to the expiration of deadline set by the National Council on Privatisation, NCP, for payment of the outstanding 75 percent bid price.

Other demands of the Disco Roundtable are that the government must hand over the assets free of all legacy liabilities. It thus asked the government to quicken its payment of severance benefits to employees of the defunct PHCN companies to enable the bidders access finances to pay up its 75 percent balance.

Ransome Owan, chairman of the Disco Roundtable, which met Chinedu Nebo, minister of power, said that government’s interactions with labour unions of PHCN have remained a source of concern to financial institutions willing to lend monies to the preferred bidders. He explained that it was necessary for government to finalise payment of severance benefits of the workers before the stipulated August 21, 2013 long stop date, adding that lenders, indeed, expect evidence of these payments before funds for completion of the payments can be drawn down.

According to him, considering this situation, government should consider an extension of the payment deadline to September 21, 2013, perhaps, to allow for government’s completion of payment of the severance benefits. “By March 21, 2013, all the 10 bidders paid the 25 percent down payment and the balance is to be made by August 21, 2013. It is a condition precedent that the DISCOS would be handed over free from all legacy liabilities. Our lenders are mindful of this and are reluctant to approve loans and condition draw-down. Therefore, it is vital for full payment obligations to the current PHCN employees be finalised before the long stop date of August 21. Lenders expect evidence of these payments before we can draw down on funds to complete our payments. As at now, the DISCOS operate at a loss and buyers would quickly deploy their respective turnaround plans. Therefore, we pray the minister to convene a stakeholders’ meeting before August 21 to check the progress before the long stop date,” he said.

Demand of Ondo Oil Communities

OIL producing communities in Ondo State have threatened to embark on a mass action, if their request for the direct payment of 13 percent derivation funds is not acceded to. In a letter written to President Goodluck Jonathan and signed by leaders of the communities, they posited that the 13 percent derivation fund belongs exclusively to the oil and gas producing communities, which are the source of the derivation.

They noted that the oil facilities, flow stations and installations are located in the oil and gas producing communities, where oil exploration, exploitation and production are being carried out. These activities, according to them, result in monumental degradation, pollution, health hazards among others, causing abject poverty in these communities.

According to the group, the Supreme Court of Nigeria has ruled that the 13 percent derivation fund is not part of the state’s consolidated revenue or that of the local government, adding that the Revenue Mobilization Allocation and Fiscal Commission, RMAFC, also agreed with the above position that the fund is not part of the consolidated revenue of any tier of government. It insisted that 13 percent derivation fund is a compensation and reparation for the loss of fishing rights and productive farmlands.

“Our position is that the 13 percent being managed by the governors in the oil and gas producing states is an aberration. Thus, it is clearly an implementation tragedy to pay the funds to any of the state government’s accounts. The RMAFC, in its submission on the new revenue formula to the 6th National Assembly, stated unequivocally that the 13 percent fund was not part of the fund of any tier of government. RMAFC went further and recommended the creation of state derivation boards for the oil and gas communities to access the 13 percent derivation fund,” the group said.

Scramble for Rural Electrification Projects

Chinedu Nebo, minister of power
Chinedu Nebo, minister of power

MORE than 7,000 firms have submitted bids for 360 lots of rural electrification projects in Nigeria. Kenneth Achugbu, chief executive officer, Rural Electrification Agency, REA, said that the deadline for bids submission was extended twice to give opportunity to the wider public to participate in the process. And this means that on the average, only one out of every 20 competing bidders would win a lot.

“Our agency has had a sordid and unpalatable history of being closed down because of an improperly conducted procurement process. It is only a fool who doesn’t learn from mistakes of his predecessors. We are therefore committed to playing the procurement game strictly in accordance with rules.”

He said that the next step in the process will be the evaluation of the bids by a committee to determine the selection of bids that meet the required terms and conditions. Achugbu warned the bidding companies not to mount pressures on the REA for favours related to the procurement because the agency has none to offer. “You don’t need a letter from powers and principalities to get a contract award from the REA if you have done the right things in your submissions.”

The REA is saddled with the responsibility of providing electricity to rural communities not on the national grid. In 2009, the agency was enmeshed in corruption scandal involving the then leadership. It was subsequently suspended but reactivated in 2011 by the federal government.

Compiled by Anayo Ezugwu 

— Aug. 26, 2013 @ 01:00 GMT

One thought on “DISCOS’ Conditions Before Final Payment

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