After successive snafus in privatising the national electricity sector controlled by the federal government through PHCN, it decided to go the whole hog to unbundle and sell off the unwieldy power giant. However, in executing this course, several competent bidders were shut out by a controversial deadline. LOUIS ACHI examines the core issues and the imperative of deadline extension as a rational, nationalistic option before the federal government and Bureau for Public Enterprises (BPE)
Human civilizations are power-driven. Over time, the discovery and domestication of electricity, the most popular energy source on the planet for powering domestic and business processes has proven its indispensability to societal progress and overall national development. It’s then little wonder that back home in Nigeria, the sheer passion and debate which new policy positions by government on the electricity sector customarily provoke considerable debate. This is a sure indication that the subject matter is an important socio-economic and even political issue. There is more.
For decades, the electricity sector has been plagued with a laundry list of problems; from low capacity generation of power, decaying facilities, corruption, leakages, poor distribution, non- collection of tariff amongst others. Against the background this opaque operations, inefficiency and lack of accountability, the nation’s electricity industry was unbundled into generation and distribution companies and a single transmission company with a view to encouraging private sector participation and attracting foreign and local investment into the Nigerian power sector to ensure economic and reliable electricity supply. This footing was adopted ahead of the privatisation process the government had settled for.
Last Wednesday, the deadline set by the Bureau for Public Enterprises (BPE) for the submission of bid document for Power Holding Company of Nigeria’s (PHCN) Generating Companies (GENCOs) and the Distribution Companies (DISCOs) shut out many competent, Nigerian companies from participating in the process because they allegedly submitted their bids a few minutes later than the deadline.
Some of the bidding firms who spoke to LEADERSHIP on anonymity said the bids for the sale of these companies were submitted in July but many of the Nigerian companies participating in the process were a few minutes late and could not submit their bids. The appeal of these firms to both the presidency and BPE comes against the background of the expressed position of the National Council on Privatisation (NCP) which affirmed it has decided to stick by the deadline.The NCP position was revealed by the Director-General of BPE Ms.BolanleOnagoruwa, after a meeting with Vice-President NamadiSambo at the Presidential Villa, Abuja, penultimate Monday.
According to Onagoruwa, the NCP met penultimate Monday to reiterate that last Wednesday’s 5.00 p.m deadline for the bid for the power distribution companies “is sacrosanct.” But three of the firms who spoke to LEADERSHIP questioned why they were disallowed submission their bids given that they came just within 10 minutes of the set deadline.
According to them, it would have been better if the BPE had a decentralised structure for the collation of the bids at different centres, a favourved format concerning comparable deals in foreign countries. They further stated that the BPE should have taken a cue from the Crude Oil Tender done this year.
Another reputable firm whose bid missed the cut-off time by a few minutes told LEADERSHIP that the federal government must not disallow credible Nigerian companies from participation on the illogical excuse of being 10 minutes behind schedule. In stressing their positions further, they stated that the BPE had severally altered the deadline previously because of the conditions for the bid, which they kept changing. They also stated that the bidders have kept faith with the BPE through all these despite the related difficulties.
LEADERSHIP reliably gathered that the bids would not be opened until August 14, 2012. The affected bidders who are aware of this scenario wondered why the BPE would not consider extension of the deadline by a week at least. From LEADERSHIP findings, only a few companies met the cut-off time out of 24 companies bidding for the DISCOs as at July 31, 2012 deadline. This situation automatically shuts out most of the companies from the bid process. According to the affected bidders, of the 111 pre-qualified bids for the 11 DISCOs in 11 cities across the country, only 54 were submitted within the timelines, representing a submission rate of only 49 per cent.
From LEADERSHIP findings, of the 76 pre-qualified bidders for the six GENCOs, only 25 firms met the deadline, which represents a low 32 per cent. This scenario raises the legitimate argument that the entire bids for both the DISCOs and the GENCOs stood at 42 per cent, which fell short of the global standards which stipulate that such process must hover between 50 and 60 per cent.
Further investigation revealed that, global standards suggest that for such a process to be considered effective, successful and truly competitive, at least a 60% submission rate should be recorded, in a best case scenario (worst case: 50%). In individual successor company terms, at least 5 bidding companies (worst case: 3) should be evaluated for positions of ‘preferred’, ‘reserved’ and ‘alternate’. This allows for allows for proper evaluation flexibility.
The emerging consensus from industry experts is that with such a high propensity of failure, the cost/benefit analysis of re-starting the process, even if in only select Successor Companies (SC’s) should be undertaken. From this prism, it is clear that the cost of a new process will far outweigh any costs of a week’s extension. Likewise the benefits recorded from a very possible increase in submission rate given a week’sextension will far justify its grant.”
Statistics of submissions…
Against the background of the negatives of holding onto the extant deadline, the emerging consensus of power sector stakeholders is that the Presidency, the National Council on Privatisation (the “NCP”) and the Bureau of Public Enterprises (the “BPE”) should jointly consider granting concessionary one week extension to give the pre-qualified bidders for the six Generating Companies and the 11 Distribution Companies as announced by the BPE at the pre-qualification stage, the opportunity to make and/or complete their submissions.
This position derives from a cursory review and analysis of the existing statistics of submissions. From LEADERSHIP findings, the low submission rate is a result of low submission turn-out for least 8 of the 11 DisCos (or 73%) which recorded individual submission rates of <60%. Submissions made for at least 4 DisCos (or 36%) were <5 in number, excluding those DisCos that had a total population in terms of EOI’s harvested of 3 or less.
Likewise, in the case of the GenCos, across board, each of the GenCos recorded a submission rate of <60%. The highest being UghelliGenCo at 56%. Submissions made for at least 4 DisCos (or 67%) were <5 in number.
Of the 25 bidders who submitted for the GenCos, it is speculated that at least 14 of them (or 56%) may be disqualified for lack of complete documentation, including but not limited to the required bid bonds. If such is the case, this may tentatively whittle down the submission rate to <18%. ShiroroGenCo recorded only one submission, by all regards, a failed bid ab-initio.
In summary, the total population of EOI’s harvested for both the Successor Generating and Distribution Companies amounted to 190, of which only 79 bidders submitting bids. This translates to a submission rate of 41.5%. Interestingly, global standards suggest that for such a process to be considered effective, successful and truly competitive, at least a 60% submission rate should be recorded, in a best case scenario (worst case: 50%).
In individual successor company terms, at least 5 bidding companies (worst case:3) should be evaluated for positions of ‘preferred’, ‘reserved’ and ‘alternate’. This allows for proper evaluation flexibility.