PHCN Successor companies to start by March: More Jobs in Nigeria

IN March this year, the Power Holding Company of Nigeria (PHCN) successor companies will begin operation, raising hope of more jobs. DUPE OLAOYE-OSINKOLU reports

ARE you an engineer and in search of a job? Your worries may soon be over as the 18 firms that emerged from the Power Holding Company of Nigeria (PHCN) take off in March. Start dusting up your resume for the job opportunities that will arise from these new entities.

An engineer, Sola Adeniji, said the take off will be beneficial to job seekers, if the government disallows foreign investors from importing labour.

Chairman, Communications Committee, Presidential Task Force on Power, Dr Abimbola Agboluaje, said PHCN workers are already moving out of the company’s headquarters to the Ministry of Power and the successor companies. He said functions are already being transferred to individual successor companies.

"The eventual winding-up will be a legal or court-ordered formality, occurring when ongoing staff movements and transfer of assets and liabilities are concluded, probably during the first quarter of this year."

He said the goal of the power sector reform is to transform the sector from one that absorbs government funds every year without any improvement in service delivery to one that supplies electric power to Nigerians whenever they want to use it and also be a source of revenue that the government can spend on social services. The leadership of the National Assembly has reminded the Federal Government frequently of the imperative of continuing with the reform which has been mandated by law. The reform is therefore fully on course and has become irreversible."

The Presidential Task Force on Power, he said, is committed to replicating the success Nigeria recorded with the liberalisation of the telecommunications sector in the power sector, with all the potentials this has for a far more fundamental impact on job creation and economic growth in the country.

"Political support from the highest quarters of Government has notwaned. Indeed, regardless of the increased tempo of electioneering, there is continued pressure, not only from the government but also from manufacturers, the media, civil society groups and others on the Presidential Task Force on Power to deliver tangible results to Nigerians.

Agboluaje said the implementation of reform will continue and by mid-2011, an appreciable proportion of generating and distribution capacity would have been transferred to private sector hands, new private generating capacity would have been fully contracted, while, the transmission grid would be privately managed and a reinvigorated regulator would be actively ensuring long-term sustainability of a private sector-led Nigerian Electricity Supply Industry.

Towards ending government monopoly and attracting private investors, the Presidential Retreat for Nigerian and International investors in Power was held late last year. It was attended by investors and lenders such as Goldman Sachs, Siemens AG, Royce Rolls, JP Morgan and Suzlon Energy.

Essar said it is committed to investing $2 billion in Nigeria’s power sector . Investors under the auspices of the Commonwealth Business Council also expressed interest by promising investment of about $20 billon

Companies were invited to submit "Expressions of Interest" in taking up 51 per cent stake (or in the concession) of the six generation and 11 distribution PHCN successor companies. Interested companies are to submit Expressions of Interest by February 18, this year, while shortlisted companies will be invited to submit bids for the successor companies early in the second quarter of the year. Successful bidders will be expected to take over management of the companies by June.

A transaction adviser, CPSC Transcom, appointed in December 2010, is to assist the Bureau of Public Enterprises in undertaking the divestiture transactions.

Meanwhile, Power Grid of India, 　ESB International of Ireland and Manitoba Hydro of Canada, have been invited to submit technical and financial proposals for the management contract of the Transmission Company of Nigeria.

The Nigerian Bulk Electricity Trading Plc (NBET) was incorporated in July 2010 to address the concern of investors in the generation sector about the credit worthiness of the distribution companies; the NBET will purchase electricity on behalf of the distribution companies until they establish a track record of paying for the power they deliver to consumers by efficiently metering electricity consumers and collecting bills.

A World Bank Partial Risk Guarantee and a Federal Ministry of Finance Risk Guarantee to compensate against political and other risks and further give confidence to investors are being finalised. The risk guarantees will also cover contracts to supply gas to power plants.

Already, NBET has commenced negotiations with Nigerian Independent Power Plants to contract new generation capacity for the country, backed by these guarantees.

The only obstacle in the way of the reforms is the organised labour, but Agboluaje said the labour issue has been resolved.

"Arrears of monetisation benefits worth N57 billion have been paid to PHCN workers. The government also secured an additional N143 billion from the National Assembly as part of the supplementary budget of 2010 to compensate current PHCN workers for the severance of their current employment contracts with the government.

A Labour Committee chaired by the Minister of Labour, Mr. Chukwuemeka Wogu, has been established by the Presidential Action Committee on Power (PACP) to ensure that the government fully honours all obligations to the workers.

"The Nigerian Electricity Liability Management Company (NELMCO) will be legally obliged to settle any outstanding liabilities after the PHCN Successor Companies come under the management of new private sector investors. It is worth noting that Investors cannot afford to bring in expatriate staff to replace Nigerians who best understand the system; they will rely on the technical experts currently engaged in the sector to run the companies."

In anticipation of the competition and the related need for skilled manpower and expectations of higher levels of performance which the reform will expectedly bring to the sector, the National Assembly mandated the creation of the　National Power Training Institute of Nigeria (NAPTIN). The institution will train existing and new entrants in the sector so as to position them for the new but more demanding opportunities, greater investment that is expected to follow.

The industry currently suffers from a shortage of engineers and other skilled technical staff, a gap which has to be closed to secure maximum benefits from new investment in the power sector. NAPTIN is already fully operational.

The Nigerian Electricity Liability Management Company (NELMCO) was established in September 2010, to assume the liabilities of the PHCN successor companies, thus neutralising operational and financial risks of investors and new managers of the companies such as the settlement of arrears of salaries, pensions and other benefits of current sector workers

The Nigerian Electricity Regulatory Commission (NERC) has however initiated studies and consultations to determine a level of tariffs that will stimulate investment by making it possible for investors to recover their costs. New commissioners were sworn-in on December 22, last year.

NERC will announce new tariffs by April this year.

The PHCN Successor Companies will also be corporatised. The 11 distribution, six generation and one transmission companies now have individual budgets. The companies are now de facto independent entities, thus putting the PHCN in winding-up mode. All of the PHCN successor companies are set to enter the "Transition Stage" of the reform when they will buy and sell electricity based on contracts agreed with each other and stop operating as parts of a government monopoly financed through a common budget and obliged to provide power or electricity evacuation services to each other without payment. This will create incentives for the power companies to provide service to as many Nigerians as possible as frequently as possible so they can earn money to pay for their inputs and operational costs.

The companies, according to Agboluaje, will also operate in accordance with the Market Rules and Grid Code overseen by the Market Operator and System Operator under the regulatory supervision of the Nigeria Electricity Regulatory Commission (NERC). In this way, adherence to the Market Rules ensures that distribution companies meet their obligations to generating companies for power purchased, which in turn enables the generating companies to maintain their plant and expand their available capacity to meet the massive demand from Nigerians. Furthermore, under the Grid Code, the national grid will be operated in a technically efficient manner that greatly minimises the incidence of system collapses, which Nigeria greatly suffers from.

On August 26 2010, President Goodluck Jonathan launched the Roadmap For Power Sector Reform to fast-track the implementation of the Electric Power Sector Reform (EPSR) Act. This law that was passed by the National Assembly in 2005 expresses the sovereign will of Nigerians to end decades of unproductive investment, averaging $ 2 billion per annum, in the electric power sector.

Since the launch of the Roadmap, Nigerians across a broad spectrum of social and professional backgrounds have expressed support for the view that the government should not continue to invest in providing a service that the private sector can manage far more efficiently.

Agboluaje said the Roadmap sought to turn "words into action" by creating efficient, transparent and goal-driven institutions to achieve the goal of mobilising private sector investment and managerial competence for the task of transforming Nigeria’s electric power sector into a dynamic industry that can meet the demand of long-frustrated Nigerians, create jobs and boost economic growth.

The Presidential Action Committee on Power (PACP) sets policy guidelines and fast-tracks approvals on power-related projects while the Presidential Task Force on Power (PTFP) has coordinated the activities of Ministries and Agencies involved in implementing the Roadmap to ensure efficiency and consistency .

The Reform Pre-Roadmap brought about the creation of the Power Holding Company of Nigeria (PHCN) to assume the assets, liabilities and employees of Nigeria Electric Power Authority (NEPA)

Agboluaje said the PHCN was meant to be a transitional entity, and that delays to the implementation of the reform resulted in many Nigerians considering it a replacement for the National Electric Power Authority (NEPA) without any improvement in service

The pre-roadmap also include breaking up of PHCN into 18 different companies (six generation, 11 distribution and one transmission firm) and the partial transfer thereto of the assets, liabilities and staff of PHCN to these companies

"The purpose was to transform the entities into independent, more efficiently managed units and eventually into companies that the private sector could invest in and manage; delays in implementing the reform slackened the momentum towards efficiency.

The Nigerian Regulatory Commission (NERC) was established. Independent Power Producers were granted licences. Lack of progress in announcing cost-reflective and fairer tariffs by NERC that would give investors the confidence that they would be able to recover their costs greatly hampered private sector investment in new power plants.

The organised labour however said increase in tariff before improved service delivery was wrong, and therefore campaigned against it.

The Presidential Task Force on Power is committed to replicating the success Nigeria recorded with the liberalisation of telecommunications in the power sector with all the potentials this has for a far more fundamental impact on job creation and economic growth in Nigeria. Political support from the highest quarters of Government has not flagged. Indeed, regardless of the increased tempo of electioneering, there is continued pressure not only from the government but also from manufacturers, the media, civil society groups and others on the Presidential Task Force on Power to deliver tangible results to Nigerians.

Therefore, the implementation of reform will continue apace and by mid-2011, an appreciable proportion of generating and distribution capacity would have been transferred to private sector hands, new private generating capacity would have been fully contracted and under procurement, the transmission grid would be privately managed and a reinvigorated regulator would be actively ensuring long-term sustainability of a private sector-led Nigerian Electricity Supply Industry.