Another major feat was on Monday recorded by the Federal Government in its ongoing privatization of Power Holding Company of Nigeria’s (PHCN’s) successor companies with the opening of commercial bids for the Distribution Companies in which 10 bidders were pencilled down for final ratification of the National Council of Privatisation’s (NCP’s) final approval.
At the end of the opening of the companies/consortia commercial bids in which Aggregate Technical, Commercial and Collection loss reduction proposal was used as a basis for core investor selection , Integrated Energy Distribution and Marketing Company Limited, appeared to have a sweeping stake as it emerged the highest bidder for at least four of the major Discos, namely Eko, Ikeja, Ibadan, and Yola Distribution companies.
Although details of the owners of the consortia are yet to be known publicly, except for the relatively unknown one Dr. Olusola Ayandele, rumours are rife that a former Military Head of State, General Abdusalami Abubakar, may well be the big ‘masquerade’ behind the big multi-billion dollar investment deal.
The Federal Governmentis expected to realise N197.25billion as total proceeds from the sale of 60 per cent of the 10 distribution companies, Discos being offered for sale
Analysing further the performance of the bidding consortia for the Discos are Aura Energy Ltd with 16.22 percent for Jos Disco, Sahelian Power SPV Ltd with 21.21 percent for Kano Disco, 4Power Consortium with 19.55 per cent for Port Harcourt Disco.
Others are Integrated Energy Distribution and Marketing Ltd with 18.58 per cent for Yola Disco, Interstate Electrics Ltd 21.62 per cent for Abuja Discos, and Vigeo Power Consortium with 21.78 per cent for Benin Disco.
Others are Interstate Electrics that emerged the preferred bidder with 20.83 per cent for Enugu Disco, Integrated Energy Distribution and Marketing Limited preferred bidder with 17.46 per cent for Ibadan Disco, Integrated Energy and Marketing Limited with 21.43 per cent for Eko Disco and Integrated Energy Distribution and Marketing Ltd with 22.51 per cent for Ikeja Disco.
The bid for Kaduna Disco was not opened as none of the two bids received was technically qualified.
The percentages are Loss deduction estimates which are supposed to be passed back to the consumers so that the person offering the highest percentage loss reduction will pass back the best package to consumers because he will automatically translate into the one that will pass the highest discount to consumers.
Justifying the reason for using the ATC & C, method at the ceremony, the Chairman of the Technical Committee of the National Council on Privatization, (NCP), Atedo Peterside, disclosed that the Council decided to use the ATC&C method for the selection of core investors for distribution companies because ATC& C loss levels will provide Nigerian consumers and other stakeholders with specific parameters with which to measure the outcome of the power sector reform and privatisation.
He hinted further that the Technical Committee do the follow-up processed on the bids including, carrying out some tests for consistency and then the result will be announced very soon by the NCP to conclude the rigorous and technically tasking process.
“Evaluation process will be carried out by relevant agencies and coordinated by BPE, the result of which will be sub,it ted to NCP for appropriate decision making in accordance with the provisions of the RFP. They will be subjected to consistency tests and divided into two categories: bids in which ATC&C loss reduction proposal is less than 50 per cent and those where it is 50 per cent or more.
“Bidders in the second category will be subjected to a further review, while where there is only one bidder who has passed the Consistency Tests, the 50 per cent rule does not apply. All bidders will be ranked to aid NCP to decide according to the provisions of RFP” Peterside said.
However, despite what appears its superlative outing at the exercise, Integrated Energy Distribution and marketing Limited which emerged top bidder for the four major Discos would have to opt out of two of them and the two preferred by them must not include both Ikeja and Eko Discos based on based on the guidelines of the exercise.
This is so because Part C, Step 11 of the Ground Rules for the commercial bid states that a bidder is not allowed to win more than two Discos, and in addition, no bidder is allowed to win both Eko and Ikeja Discos in accordance with the requests for proposals.
While making clarification on this, Peterside said “the rules are very clear, here there is something called order of preference, if someone wins two things that he will not be allowed to pay for, he would be given the option of choosing the one that he would prefer”
The Chairman of the NCP Technical Committee explained further that in the evaluation of the applications, 80 bidders were short listed and at the deadline for the payment of data room access fees, 72 out of the 80 short listed bidders each paid the mandatory $20,000 fee to purchase the Request for Proposal, RFP, have access to the data room and proceeded to the next stage of the transaction and were subsequently referred to by the Bureau for Public Enterprise, BPE as pre-qualified bidders.
“By the submission deadline of 5pm on 31st July 2012, the BPE received 54 proposals from pre-qualified bidders and out of the number, they evaluated and 10 of the bids failed the first test of completeness and responsiveness. The remaining 44 bids were then subjected to full technical evaluation and 32 submitted by different bidders scored the minimum of 75 per cent that was required to progress to the next stage in the process
“The bidders that scored 75 per cent and above and who were asked to submit the post-qualification bidders guarantee following the approval of the evaluation results by the NCP as the 20 that are bidding for the 10 Discos” Peterside stated.
Speaking earlier, the Director General of BPE, Bolanle Onagoruwa said in designing the model for the selection of the preferred bidder, BPE considered the fact that the current ATC&T losses sustained by the various distribution companies are estimated at between 35 and 40 per cent of the power wheeled to them, pointing out that the level of loss is unsustainable, and if not halted it will continue to make the Nigerian Electricity Supply industry absolutely unviable for full and un-subsidised private sector-led participation.
The BPE boss explained further that the privatisation strategy was anchored on the Multi Year Tariff Order, MYTO 2 which essentially sets out the commercial and economic indices that provide the financial model for the entire sector, adding that
“MYTO 2 stipulates the annual investment requirement, allowable operational expenditure, approved rate of return on equity and other allowable expenses for each distribution companies”.