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By Adewale Sanyaolu
Efforts to improve access to electricity supply across the country may have run into a hitch with last week’s directive by the National Council on Privatisation (NCP) chaired by Vice President Yemi Osinbajo, for immediate and fresh privatisation of the Yola Electricity Distribution Company (Yola Disco).
In 2015, two years after it bought over the assets from the defunct Power Holding Company of Nigeria (PHCN), the core investors in Yola Disco, Integrated Energy and Distribution Marketing Company (IEDM), declared a force majeure and returned Yola Disco to the Federal Government on the grounds that it was impossible to operate and access the assets of the electricity distribution firm in the North-east due to the Boko Haram insurgency.
After a joint evaluation of the electricity asset as provided under the terms of the share purchase agreement, the Bureau of Public Enterprises (BPE) and Ministry of Power, in the twilight of the Goodluck Jonathan administration, had approved $186 million as the sum to be refunded to Integrated Energy.
But the payment of the sum was stalled over concerns that the $186 million was too high, forcing the parties to the transaction to renegotiate the compensation to be paid to Integrated Energy.
The Federal Government renegotiated and reached an agreement with IEDM on a payout of $87.8 million as against the $186 million earlier approved as compensation to the company after it returned YEDC to the Federal Government in 2015.
But beyond the declaration of a force majure by YEDC, which later compelled it to return the asset to the Federal Government, Discos were confronted with a plethora of challenges, which have further translated to inefficient and poor services on their part.
Some of the challenges include lack of access to foreign exchange, which has made metering an impossible task, absence of cost reflective tariff, energy theft and, low revenue collection, just to mention a few.
FG takes over YEDC from investors
The Federal Government, having taken over YEDC from IEDMC in 2015, also appointed Mr. Baba Mustapha, an engineer, to lead the company in the capacity of an acting Managing Director. Before the new appointment, Mustapha was a Deputy Director in the Ministry of Power.
YEDC covers Adamawa, Borno, Taraba and Yobe states. Except for Taraba State, the other three have been mostly affected by the activities of the Islamic insurgent group, Boko Haram, and the subsequent war against it.
Yola Disco is one of the 11 electricity distribution companies that were sold to private sector operators in a gale of reforms of the nation’s power industry that led to the unbundling of the defunct monopoly, PHCN.
But the coming on board of Mustapha did not translate to much gains for the company as he had to battle with most of the problems he inherited from the core investors.
BPE justifies N37bn payout to investors
The BPE had in 2015, justified Federal Government’s approval of $186 million (N37 billion) before it was renegotiated to $87.8 million to IEDM. The money included 20 per cent of five years projected profit by the core investors.
It, however, said it had no approving powers which are reserved for “the Vice President, who is the Chairman of NCP and President Muhammadu Buhari that have approval powers.”
The statement catalogued the processes that led to the approvals, saying the Yola Disco declared force majeure six times starting from November 10, 2013, just 10 days after the assets of the Disco were handed over to Integrated Energy. The last came on May 13, 2015, which all corroborated Daily Trust’s report of last Monday.
The BPE’s statement had read in part: “Force Majeure clause is a standard clause in most contracts and includes events like natural disasters, wars and other occurrences. So the existence of the clause in the contract is normal. It must also be stated that the Share Sales Agreement and Performance Agreements are standard Industry Agreements signed by all the Discos, so YEDC is not being given any special treatment.”
It concluded by defending the buy-back deal thus: “We also draw attention to the fact that like the telecommunications business, power sector business will last as long as human existence is sustained. So no investor gets into the power business with the intention to exit. This is despite all the challenges faced by the nascent private sector.
Re-privatisation to take some time
This may, however, not be good news for investors waiting on the standby to bid for the assets of Yola Disco as the BPE has said the exercise may not be carried out immediately.
Head of Corporate Communication at BPE, Mr. Chukwuma Nwokoh, told Daily Sun in a telephone interview that the bureau just received the approval to carry out a fresh privatisation exercise for the power utility firm two weeks ago.
He explained that the process of privatising a firm involves a lot, which include the composition of a technical committee, recruitment of technical advisers before the bid processes are advertised in the media, adding that the process will not be hidden from members of the public.
Experts react
Commenting on the development, a Director with Eko Electricity Distribution Company (EEDC), Mr. George Etomi, said there was no negative implication for the sector in relation to the re-privatisation of Yola Disco, saying it was simply a business decision guided by the clause of the force majure, which was in order.
He said what would have been a disaster for the industry was if the Federal Government considers a reversal of the privatisation of all the 11 Discos.
He said the fresh privatisation of YEDC was still in line with the vision of the Federal Government to ensure that the industry remains in private hands while keeping faith with its promise to privatise government entities.
Etomi maintained that the fear of new investors running into similar hitch as the core investors may not be an issue because they will be guided by the principle of force majure.
On his part, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, explained that the decision of the investors to pull out of the business from a legal standpoint, was valid and in order.
‘‘I also understand that IEDM has received some refunds, which sum was agreed to by both parties. Therefore, the Federal Government may validly put up the asset for sale once more,’’ he said.
