Why Nigeria is yet to hand over privatized power firms to new investors

The inability of the Federal Government to conclude the ongoing payment of benefits to workers of the Power Holding Company of Nigeria (PHCN) and the failure of the National Electricity Regulatory Commission (NERC) to proclaim the Transition Electricity Market (TEM) arrangements, are causing delay in handing over the privatized power plants to their new owners.

Pwer distribution network in Nigeria

The privatisation guidelines require that successful investors that paid the 25 per cent deposit should complete payment of the remaining 75 per cent by August 21 before they are handed over the assets.

An estimated N304.82 billion ($1.957 billion) was paid into the coffers of the Nigerian government by the 14 of the preferred bidders that met the deadline, bringing the total money realised from the sale of the assets to N425.830 billion.

However, three weeks after the investors fulfilled their own part of the deal, the Bureau of Public Enterprises (BPE) is yet to hand over the assets to the new owners.

Sources familiar with the transactions said the delay is being caused by failure of government to conclude payment for benefits and gratuities of the workers of the PHCN as promised before final handing over of the distributions companies to the new core investors.

A staff of the PHCN said though the government has commenced the payment of some workers benefits, the issue of severance pay, gratuity and pensions are yet to be attended to as part of conditions precedent before the handover of the privatised assets of the power holding company.

 “The government only paid part of the severance package and gratuities but has not paid any of the pensions to PHCN’s pension scheme. Besides, the calculation done by the government used June 2012 as the cut-off date. However, the electricity union is saying that the period July 2012 to September 2013 should be factored in,” a source said

According to the source, the non-payment of workers’ benefits has made it impossible for the investors to take over and commence shadow management operations, which was supposed to last for six months before they finally take full control of the assets.
The BPE source also said the stalemate over the sale of the Enugu Disco had put the privatisation agency in a very tight corner.

“They are also delaying the handover so as to resolve the issues on Enugu Disco. But how can they delay the other investors that borrowed the money to acquire the assets just because they deliberately put themselves in a difficult position by bending the rules to favour one investor? This is unfair to the other successful investors.

“it was also alleged that the National Electricity Regulatory Commission (NERC) was also not ready for the Transition Electricity Market (TEM) arrangements, post-privatisation.

“NERC promised to act after the investors had made full payment. But up till now, they are yet to come up with a number of things, including the methodology for defining tariffs and the transition market arrangements, among other issues. They are yet to conclude these processes and have no interim solutions on how to operate,” the source said.