Power Privatization Collapse Imminent As BPE Say Discos Pulling Out Of Deal

power-black-outNigeria’s Bureau of Public Enterprises (BPE) on Tuesday acknowledged that some private electricity power distribution firms that took over the privatised PHCN units in 2013 had applied to the government to pull out of the deal, but that no approval had been given.

In fact, Yola Electricity Distribution Company (YEDC) was confirmed to have given notices of declaration of Force Majeure on six occasions since Integrated Energy Distribution and Marketing Company Limited (IEDMCL) acquired it in 2013.

IEDMCL is chaired by Gen Abdulsalami Abubakar (rtd) a  former Military Head of State.

The BPE while reacting to stories published by a national daily, Daily Trust, that ‘BPE Okays Billions For Power DISCOs’ as ‘As Firms Opt Out Of Privatisation’ and ‘FG Pays DISCO $186Million In Last Minute Deal, said no such payment was made, but confirmed that some DISCOs at different time after the privatisation issued notice of a declaration of a Force Majeure over lowering of tariffs by the Nigerian Electricity Regulatory Commission (NERC).

The Daily Trust publication reported that “The BPE has approved the payment of $146.8million (about N29.2billion) to Integrated Energy Distribution and Marketing Company (IEDMCL) in a share buy-back deal”.

Further, the paper informed that “The Company (IEDMCL) has invoked the force majeure clause in the contract agreement and applied to BPE to opt out” and that “eight other DISCOs apart from Kano and Kaduna have also declared force majeure in their operations citing the lowering of tariffs by the Nigerian Electricity Regulatory Commission (NERC)”.

In another publication, the paper reported that “The Federal Government has approved additional payment of $38.7Million to the core investors of the Yola Electricity Distribution Company bringing the total to $186m in a controversial share buy-back deal”.

In its reaction, BPE said while it did not have the powers to approve disbursement of funds as insinuated by the newspaper, but there were two notices of declarations of Force Majeure; namely political Force Majeure by some DISCOs occasioned by change in tariff.

It said this political Force Majeure was reported to the NCP meeting held on Thursday, April 16, 2015.

It said, “NCP deliberated on the matter and set up a committee chaired by the Minister of Power to engage the DISCOs and resolve the matter. Membership of the Committee comprised representative of the Ministry of Power, NERC and BPE. Series of meetings have been held and the DISCOs have already indicated their willingness to withdraw the notices of Force Majeure based on the progress made in resolving the tariff issues.

“It should be noted that giving of notice of a declaration of a Force Majeure does not automatically result in the acceptance of such a declaration. A process of validation of the claims has to be followed to determine the genuineness of such claim.

“The second notice of declaration of Force Majeure is that of Yola Electricity Distribution Company (YEDC). YEDC had on six occasions (November 10, 2013, August 27, 2014, October 15, 2014, April 9, 2015, April 30, 2015 and May 13, 2015) given notice of Force Majeure. Consequently, the matter was tabled before the Technical Committee Power sub-Committee at one of its meetings. The TC Power Sub- Committee recognized the reality of the Force Majeure which is in line with Clause 7 in the Share Purchase Agreement and made recommendations to the TC. Clause 7 states that in a war situation where the core investor cannot operate, it can invoke Force Majeure on issues beyond its control.

“The recommendations of the TC Power Sub- Committee were deliberated on by the Technical Committee (TC) of the NCP at its meeting of Tuesday, April 14, 2015 and it also acknowledged the basis for the declaration of Force Majeure. The TC made its recommendations to the NCP which at its first meeting for 2015 held at the Presidential Villa, Abuja on Thursday, April 16, 2015; set up a committee comprising the Permanent Secretary, Ministry of Power (Chairman); a representative of the Nigerian Electricity Regulatory Commission (NERC) and the Director-General of the BPE to explore the implementation of the Force Majeure terms contained in the provisions of the Share Purchase and Performance Agreements.

“The Committee held meetings and appointed a consultant- Messrs SEWA West Africa Limited (SEWA) that toured areas of operations of the DISCO and submitted a report to the Committee on its findings. The report of SEWA was reviewed by the committee and recommendations were made to the Vice-President for subsequent approval of Mr. President.

“The Force Majeure clause is a standard clause in most contracts and includes events like natural disasters, wars and other occurrences not within the power or control of the executing party that makes implementation of the contract impossible. 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.

“We also draw the 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 in spite of all the challenges faced by the nascent private sector led power sector.

“It is also imperative that if Nigeria is to continue to attract investments into the economy, it must uphold the sanctity of contracts. Investors in the power sector did not invest to declare Force Majeure; they invested to have a life time of profitable returns as demand for power will remain for as long as life exists.”

BPE spokesperson Alex E. Okoh who spoke to WorldStage Newsonline on whether the payment claimed by the Daily Trust must have been made after recommendations on the report of SEWA were tabled before President Goodluck Jonathan, said he was not aware of any payment.