Sunday, 4 November 2012

The high level intrigues scuttling Manitoba’s takeover of TCN

High level intrigue at the Ministry of Power is preventing   Canadian based Manitoba Electric to formally take over the management of the Transmission Company of Nigeria (TCN).

The Intrigues have led to Nigeria’s Minister of State of Power redeployed to the Ministry of the Niger Delta while the Minister of State for Niger Delta was brought in to oversee the power sector.  The Vice President, who sit atop the National Council for Privatization (NCP) is also said have grown  cold feet over the deal despite being head of the NCP that approved it earlier in the year.
Namadi Sambo, Nigeria's vice President and Chairman of the National Council on Privatization (NCP)

 The Minister of State for Power and the permanent secretary at the Ministry, Dere Awosika, are said to be putting bottlenecks in the pathway of Manitoba from taking over TCN threatening the Federal Government’s reform programme in the sector. The Minister is said to have declined to sign the necessary documents that will formalize the handover of TCN to Manitoba two months after TCN should have been handed over to the company.  The Minister is insisting that the Bureau for Public Enterprises (BPE) should have obtained a no objection notice from the Bureau for Public Procurement (BPP).

There is no explanation on why the NCP that approved the deal did not ask the BPE to obtain the approval of the BPP before signing the concession deal with Manitoba.  Now that Manitoba signed the deal and moved in to begin the work of transforming Nigeria’s power sector, suddenly the due process argument is being used to block the company.

The President is said to have been told that TCN has been sold to Manitoba and that due process was not followed in the emergence of Manitoba. Following the allegation, the President has directed that the matter be looked into. Acting on the President’s order, the Permanent secretary is said to have issued a memo to the Bureau for Public Enterprises (BPE) demanding an explanation of the process that led to the emergence of Manitoba as the management contractor for TCN.

BPE is however at a loss on how to respond to the memo since the Minister of State for Power, who the Permanent Secretary reports to is a member of the National Council of Privatisation (NCP) that approved Manitoba’s bid to manage TCN and therefore actively participated in the process that led to the emergence of Manitoba that a subordinate is now questioning.

TCN is currently operating under two CEOs. One appointed by the Government and the other by Manitoba. 
The current situation could force Manitoba to declare a Force Majeure on the contract to manage TCN, said a legal practitioner familiar with the terms of the contract between the Federal Government and the TCN.  According to the lawyer, the terms of the contract are one of the best the Federal Government could have gotten from the deal. 

If Manitoba declares a Force Majeure it will delay Nigeria’s dream of stable power supply if not resolved as the independence of the transmission company is critical to the power reform programme of the government.  
A non-autonomous TCN will impact negatively on the business plans and projections of the winners of the five Generation Companies and 10 Distribution companies unveiled recently by the National Council on Privatisation (NCP), said our sources.

The TCN will act as an independent arbiter between the Generation Companies and the Distribution Companies, confirming actual power that is purchased by the Distribution Companies from the Generating Companies.  “You cannot have that company controlled by the Government or being dictated to by the Minister of Power which will be like the Ministry of Finance asking commercial banks what businesses to fun and not fund. No one is going to invest in power generation under such circumstances,” our source said. Investors are highly concerned about the current impasse. 

The Ministry is however keen on delaying the process because TCN is the last control they have over the power sector. If TCN goes, they will no longer have any form of control over the sector, depriving them of a source of revenue that they have milked in the past.

“We are aware that Manitoba Electric has not fully taken over TCN. There are issues that have to do with process and the issues are receiving the attention of the President and Attorney General is involved in the resolution” said Sam Amadi , Chairman Nigeria Electricity Regulation Commission (NERC). 

Atedo Peterside, Chairman, Technical Committee of the NCP, also acknowledged that there appear to be some bottlenecks but would not be dragged into a debate over which government department or official is responsible for the logjam.

“NCP’s work is to decide on who is to take up a government asset and then it moves on” He said.
Nigeria is estimated to currently have the capacity to transmit just 5,838MVA with a transmission backbone of just 4534km. This means significant investments will be needed in the transmission sector to boost transmission capacity if the government target of 10,000MW by 2015 is to be achieved.

Manitoba is said to be considering withdrawing from the management contract it signed with the Federal Government if the situation persists, sources say. The situation as it is today is that Manitoba is not legally in charge of TCN until the Minister signs the necessary documents. This has made Manitoba’s continuous stay in the process untenable, said sources.

If Manitoba is forced out of the TCN contract, it will be the third company that has had to be dropped from a management contract with TCN. Initial efforts to get Eskom of South Africa and an Indian company to manage TCN also failed.  This will further add to the perception of the high political risk of doing business in Nigeria with consistent failure by government functionaries to adhere to the terms of contracts willingly entered into.

But Amadi says that there is no fear of Manitoba exiting. “In a few days, I expect there will be some clarity on the issues.  Our concern was that the TCN should have a board, and the Federal Government has agreed to set it up”

BusinessDay reports that a former banker with many years of experience has been appointed as the chairman of the proposed board. The President is said to have given the ministry to go ahead to announce the board but the Ministry is delaying the announcement on the pretext that they are still investigating the process that led to the emergence of Manitoba as the management company for TCN.

Atedo Peterside also expressed similar optimism that Manitoba Electric will not leave saying he was confident that the President was working on a quick resolution of the impasse.

Manitoba had earlier in the year signed a US$23 million three year contract to manage TCN.
“MHI expects to turn TCN into a technically and financially efficient, stable, and sustainable company; a company that will be market-driven and capable of utilizing its maximum generation capacity and then distributing the energy throughout Nigeria 24 hours a day, 365 days a year,”  the company’s website stated after the deal was signed.
Canada based MHI comes with a strong pedigree in the electricity sector. It is a wholly-owned subsidiary of one of the largest and longest-standing electric power utilities in Canada, Manitoba Hydro. Manitoba Hydro was established in 1880 and currently holds assets approaching $13 billion, with $2.4 billion in annual revenues, and over 6,200 employees.

It is a major power utility, involved in the planning, design, construction, operation, and maintenance of all elements of power infrastructure, according to the statement obtained from the company’s website.
 As a utility operator, Manitoba Hydro serves over 537,000 electricity customers and 265,000 natural gas customers. In addition, Manitoba Hydro exports up to 40% of its energy production to the North American marketplace, which includes over 35 utilities and marketers in the mid-western USA, Ontario, and Saskatchewan. 

 MHI has provided utility and asset management; consulting; and training solutions to over 70 countries worldwide.  In Africa, MHI has electricity projects in Ghana, Liberia, and Uganda among other countries.

A slightly different version of this story has been published in BusinessDay

This blogger had earlier written on the challenges that Manitoba is likely to face  managing TCN. Click the link below to read my earlier post.  

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