FG seeks to avert legal battle over PHCN Assets

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B2507212-PHCN-HeadquartersThe federal government is said to be making frantic efforts to avert potential legal tussles with preferred bidders of 15 of the 17 successor generation and distribution companies of the Power Holding Company of Nigeria (PHCN) over the final operational conditions of the assets scheduled to be handed over to the investors soon.

It was gathered that government in the light of its zero budgetary allocation to the 11 distribution companies and five generation successor companies of PHCN, whose operations were allegedly being affected by paucity of funds, had resolved to source for newer ways of funding operations of the companies to at least keep them afloat and fit till their eventual takeover.

Sources within the presidency argued that apart from the necessity of keeping stable nationwide power supply, another reason why government has decided to seek alternative funding for the companies was because of possible legal suits against it by successful PHCN investors over the operational conditions of the assets after takeover.

The government, according to the sources, had expressed fears that investors might likely disapprove the states of the assets after their takeover on the ground that their operational conditions had dropped below their standards during their respective evaluation.

The Nigerian Electricity Regulatory Commission (NERC), which though dispelled threats of potential suits, stated however that the electricity market had in place adequate regulatory processes to deal with such issues if they occur. But a source at the regulatory agency posited that in the event a generation plant that had been duly privatised was found by its investor upon taking over, to be operating below its capacity at the evaluation stage, the investor might likely sue the government for breach of trust.

The source stated that it was in that regard and for other necessities that the government approved the use of funds from the Multi Year Tariff Order (MYTO-2) to keep the companies afloat.

“As you know, we have gotten the presidential approval for use of the MYTO funds to fund operations of the PHCN companies in the interim, we need to take these funds in advance otherwise the whole sector will collapse on us.

“These companies cannot even operate optimally at this stage; Ughelli power plant for example was operating at about 300 megawatts when it was evaluated for privatisation by the BPE but now it is not at that level, it has to be upgraded quickly before handover otherwise we could see successful investors of these companies begin to initiate legal actions against government for allowing the assets wear out beyond their initial values when they were evaluated,” the source said.

The government had in its privatisation timeline anticipated an earlier handover of the privatised PHCN assets to successful investors; it had in this regard left out funding for capital expenditures of these companies.

However, Chairman of NERC, Dr. Sam Amadi, stated that the procedures adopted in the sale of PHCN assets were such that provides good incentives to investors in the sector.

Amadi said: “I must repeat this, the transactions must be fair and valuable to Nigerians. The assets were evaluated; we depreciated and optimised these assets before selling them, they were not sold based on megawatts per hour.

“As long as the government keeps the level of efficiency in these assets good, which is what they are doing now, there is really nothing to worry about because the market has regulatory processes to take care of that; the investors know all these but what the sector requires is to constantly keep in touch with NERC to provide key guidance.”

The NERC boss also hinted that the commission would eventually audit the administration of MYTO funds expended in the sector. He added that the process has been designed to be self-executory with minimal bureaucratic bottleneck but meticulous procedures involving the ministry of finance, power, market operator and NERC.

Meanwhile, it was gathered that the long anticipated appointment of a supervisory board for the Rural Electrification Agency (REA) by the government may not happen so soon following the lack of approval of considered board members by President Goodluck Jonathan.

A source disclosed that there were subtle controversies about the composition of the board, thus, confirming the papers initial report of intrigues marring the process leading to the composition of a board for REA, which statutory responsibilities as provided in the Electric Power Sector Reform (EPSR) Act 2005, include provision of sustainable electricity supply to Nigeria’s rural communities.

“I think the Minister of Power, Prof. Nebo, is being careful with the composition of a substantive board for REA. It was discovered that the board, which was initially scheduled for appointment some weeks after he came on board was not actually sanctioned by the president through the office of the SSG and up till now, the SSG is yet to give directives to the appointment and inauguration of a supervisory board for REA.

“The minister would have made the mistake of inaugurating that board which I learnt excluded the Managing Director of REA, Kenneth Achugbu, and so, the board is still awaiting presidential approval,” added the source.

 

Information from ThisDay was used in this report.